Emerging markets like India present exciting investment opportunities for investors and companies looking to expand their global footprints and enter in to high returns growth markets. In addition to fast growing economy, investment opportunities in India are enormous due to its large consumption base, increasing industrialisation and surge in spending capacity. Companies who open their offices or nvest in India are able to participate in high-growth prospects and get access to qualified & cheaper resources to run the operations. Like other countries, to tap the investment opportunities in India, it requires a detailed ground work and research to capture the pre-investment parameters for investors and their shareholders. Foreign companies and investors typically require support of Financial advisors in India to carry out an analysis on their business plan and adaptability of such plan under current market scenario. Financial advisors in India, also ensure that such investment is directed & managed suitably to satisfy the needs of the investors who invest in India. Pre-emptive analysis on yield & desired returns is one of the other supports which could be expected from Financial advisors in India before while exploring Investment opportunities in India . Post investment, the services of financial advisors in India are typically obtained to ensure timely compliances and to be conversant with changes in law. Assistance could also be sought from the financial advisors in India to make appropriate structure for the taxes in India and to overcome any surprises and bumps that may come along the way that companies may not even have thought of before they invest in India . We at GM corporate Solutions are a team of professionals providing pragmatic solutions to enable our clients to gain a competitive edge in challenging market environment. As market entry specialists , we render end-to-end long-term support framework. Our typical engagement starts at a level when companies are contemplating India as a new market, through to the point where they are fully established and on their growth trajectory in the ongoing years. We specialize in corporate finance and strategic advisory services and act as trusted advisors to our clients in domestic and cross border M&A deals across diversified sectors/industries. Our team supports through all phases of the process – from identification of buyer or seller to closeout and post deal integration.

India has been one of the fastest growing economy in the world in last few years and has seen a surge in international investors setting up their operations in India. Budding relations with other nations, ease of doing business along with liberalized foreign exchange policies has made India a lucrative destination for international investors. Foreign investors and companies, typically face certain challenges while setting up a company in India with respect to the regulation and processes. Some of the key points of consideration are enumerated in following paras. Regulatory Matters Foreign investments in India are governed by Foreign Direct Investment (FDI) Policy and is governed by its central bank “RBI”. FDI policy defines the sectors allowed to be invested by foreign investors and percentage of shareholding which could be owned with or without any permission of Government. It is very important for foreign investors to understand these requirements before setting up a company in India. Though, India has liberalized most of the sectors which are allowed to be invested by foreign investors without seeking any prior permission, however, a thorough review and advice on FDI policy is recommended before setting up of a company in India. Selection of Right Format of Entity As an international investor looking to endow, there are few options to choose from while setting up a type of entity in India: Wholly owned Indian subsidiary Company: Corporate format which could be 100% owned by international investor is treated as Indian resident for taxation and regulatory purposes. This entity format is ideal for multiple objectives and flexibility of operations. While setting up a company in India various process are involved which needs attention and advisory by experts. Limited Liability Partnership (LLP): Indian government has permitted foreign investment in LLPs in the sectors where 100% FDI is allowed via automatic route and there are no performance conditions linked to such FDI. Provisions in relation to board meetings, distribution of profits and CSR are also liberal for such LLPs thus making it one of the best format for an international investor setting up a company in India. Branch, Liaison or Project office in India: These options are suitable only if the investor is having limited activities or a short-term projects or specific objective in India. Any of these setups typically have restrictions on certain activities and chosen only for a specific purpose or term. Tax Regime Even after simplifications year by year, Indian direct tax regime is still bit complex with number of adjustments. Further, the annual finance act brings up amendments in various provisions based on industry demands etc. While setting up a company in India, it becomes relevant to understand the direct as well as indirect tax implications on business, tax incentives in the form of deductions, tax holidays, subsidies, special provisions under SEZ schemes and so on to take appropriate judgement. Further, India has signed Double Tax Avoidance Agreements (DTAA) with various countries. Such DTAAs and tax benefits could be availed by structuring the investments right before setting up a company in India Registrations and compliances Setting up a company in India , has been made very simple by the Government, however this still requires necessary documentation. The registration process may be simple to look at from outside though it still needs a systematic approach to complete the procedural aspects. GM Corporate Solutions We at GMC have been practicing the incorporation processes of various forms of entities for years. Our experts come with abundant knowledge to deal with situations with various Government departments and depending upon the requirements of international investors, have successfully found desired solutions while setting up a company in India .

Foreign investors including US-based private equity (PE) firms are looking at India as an investment-friendly country. The Indian Government has been liberalizing FDI Caps on various sectors and cutting back the list of prohibited sectors. Private equity accounted for 58% of the capital inflow with FDI crossing 43 USD in financial year 2017. The interest of foreign investors has also been piqued by Indian reforms like Digital India, Startup India, Make in India and Smart Cities. The development of 100 smart cities with a population of 1 million each would lead to job creation and rural to urban migration which would propel the economy. Thus, if there is a question: Is it the right time to enter India market? We would say YES! The introduction of a single system of taxes under Goods and Services Tax (GST) has eliminated the need for multiple taxes which has resulted in making India a single common market. Over the last five fiscals, the cumulative inflows from United States have been less than USD 10 million . In India, major US-based PE firms have established a strong presence. With India offering a lot of opportunities in several sectors, funds from the US continues to grow in India. In sectors such as infrastructure, education, manufacturing and technology, many US players are looking to partner with Indian companies and are currently considering the impacts of GST implementation. Few challenges to be taken care of are – Currently, major investors are in the wait-and-watch mode wherein they are monitoring the impact of GST implementation in the performance of Indian companies in the years ahead. The performance is said to impact the sentiments of the investors towards the Indian economy. Another reason that investors generally look out for is global political volatility in emerging markets. A potential challenge for PE Investments is a sequential rise in the public market valuations in key PE investments. Dealing with an optimistic market for deals, PE investors have to compete which means that deals will continue under watchful eyes. Contact us for more information on this subject or to know how we can assist you in your plans to enter India.

Agriculture is the backbone of the Indian economy with 58% of the rural population employed in the sector. In financial year 2016, agriculture and allied sectors contributed USD 244.74 billions and continued to grow at 6.64% during financial years 2007-16. In fact, India holds the second largest share of agriculture land with 157.35 million hectares of land. India is also a leading contributor to global food market. For instance, when it comes to spices and spice products, India is the largest producer, consumer and exporter. It is also the second largest fruit producer in the world as its fruit production has grown faster than vegetable production. How to enter India’s farmtech sector in a the right way? With agricultural products constituting nearly 10% of the exports of the country, India is one among 15 leading exporters of agricultural products world-wide. In financial year 2016, the total agricultural exports grew at a CAGR of 19% to reach USD 32.08 million. Given the quintessential importance of agriculture for the Indian economy, the Government of India in Budget of financial year 2017-18 has given due regards to sustainable development measures. On a year-to-year basis, the total allocation for the agricultural, allied and rural sectors has been increased by 24% to INR 187,223 crore or USD 28.10 billion. National Bank for Agriculture and Rural Development (NABARD) will set up a micro-irrigation fund with a corpus of INR 5,000 crore or USD 750 million. With an initial corpus of INR 2,000 crore or USD 300 million, a dairy processing fund of INR 8,000 crore or USD 1.2 billion will be set up over a period of three (3) years. The allocation to Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has increased to INR 48,000 crore or USD 7.2 billion in the current financial year. The participation of women in the scheme has also been increased to 55%. At a subsidized interest rate of 7% per annum, short-term crop loans up to INR 3 lakh or USD 4,500 will be provided to farmers. For timely repayments of loans, an additional incentive of 3% will be provided to farmers, thereby reducing the interest rate to 4%. Contact us for more information on how to enter India’s farmtech sector or to know how we can assist you in your plans to enter the Indian market

You’re killing me Smalls! If we’ve said it once, we’ve said it a thousand times: “Time kills all deals.” Essentially the longer it takes an M&A transaction to reach the closing table, the more likely that deal is to fizzle and die a painful death. A lot of it just comes down to human nature. At the start of a deal, people are invested and motivated. As the process drags on, tensions rise. Small issues are more likely to snowball into big issues. So what are some of the prime culprits slowing down a deal? Inattentive, overburdened advisors and/or buyer agents can be to blame. It’s essential that everyone on your deal team sticks to a schedule and keeps the transaction moving forward. You can do your part too by ensuring financial and other business information is up to date. Ideally, you and your advisor will have gathered most relevant due diligence information before you even go to market. That way, buyers see an organized, committed team ready to move forward. Market Pulse Survey – Quarter 3, 2020 Presented by IBBA & M&A Source M&A buyers may need to move quickly in 2021 One year ago, buyers were looking for talent. Every company we talked to was up against the same problem – there was so much opportunity to be had, but none of the employees to make it happen. It’s amazing how much can change in year. Business buyers today are coming to the table for a host of reasons. The fortunate ones who benefitted from a “COVID-windfall” (e.g., tech, grocery, janitorial…and now, dry ice manufacturers) will be looking to capitalize on that success with acquisitions to drive long-term growth. Other businesses who weren’t as fortunate may be looking for opportunities to add resilience and diversification in their business models. Innovators and technology leaders will be snapped up as buyers look for help pivoting in the COVID-19 economy. And as uncertainty continues to upset consumer behaviors, some businesses will see acquisition as their most likely path to growth. When organizations can’t grow organically, acquisition becomes a means to get there, with the plus-side that economies of scale should drop a higher percentage of profits to the bottom line. Here’s what’s going on in the market and what it means for organizations contemplating an acquisition: Growing pool of M&A targets: President Biden’s campaign tax plan included a sizable increase in the capital gains tax – nearly double today’s rate. While those plans may not come to full fruition, many sellers are entering the market now to get ahead of potential tax increases. Those sellers, as well as businesses distressed by the pandemic, will create a growing pool of M&A targets. Analysts are predicting 2021 will be a banner year for M&A activity. Seller urgency: A rush to complete deals by year-end 2021 (to get ahead of possible tax changes) means deal teams who have locked in their strategy and are prepared to act fast will have the advantage over buyer teams taking a more relaxed “we’ll know it when we see it” approach. At the same time, seller urgency could provide a logistical challenge for deal teams who still haven’t returned to pre-pandemic due diligence habits. We’re still months out from widespread vaccination in the U.S., and that means deal teams will need to rely on virtual processes for due diligence and negotiation. Owner fatigue: When trying to hire new talent, recruiters reach out to passive job seekers, that is individuals who are employed and not looking for a job. The same dynamic can happen in M&A when a company launches an acquisition search. They reach out to “passive sellers” who are running their company and not on the open M&A market. Right now, we’re getting a much stronger response to acquisition inquiries. Concerns about employee health and supply chain issues weighed heavily on business owners in 2020, and we’re seeing an uptick in people who simply want to move on. Buyer competition: It’s estimated that private equity alone has $1.5 trillion in dry powder, aka cash they need to put to work for their investors. Private equity demand helped keep valuations strong in 2020, and should help us maintain a seller’s market in 2021, even if we see a boom in businesses coming to market. And according to the PwC US Pulse Survey, 53% of US executives said their companies plan to increase M&A investment in 2021. The takeaway: If you’re planning to grow through acquisition, you won’t be the only one looking. Valuations holding for COVID-proof businesses : There may be deals to be had for businesses distressed by the pandemic. But businesses unaffected by the pandemic, or those that bounced back quickly, are still selling near peak multiples – or even at a premium. Banks have pulled back on lending just a bit, so buyers are filling out the capital stack with more of their own equity. We’re also seeing an increase in retained equity, in which the seller or their management team maintain a partial ownership stake in the new organization. Likewise, we’re seeing an uptick in buyers who aren’t taking the full debt load available. By backing off on their leverage, they can keep themselves in a stronger financial position – just in case the pandemic would get worse yet before it gets better. This update is presented by GM Corporate Solutions in association with our partner Cornerstone International Alliance

Cybersecurity a buyer priority New research from Datasite reveals that cybersecurity is the leading issue that causes buyers to withdraw from a deal in due diligence. When asked how often a deal does not progress due to an issue uncovered in due diligence, deal makers said about 1 in 10 deals fell through. Among the problem areas most likely to kill a deal, cybersecurity issues led the pack at 36%, followed by financial weakness, excessive valuation, financial irregularities, and leadership issues. Talk to your technology advisors about data security issues and consider securing an external audit from a third-party firm (ask your CPA for a referral) to ensure your information management practices are up to snuff. Market Pulse Survey – Quarter 4, 2020 Presented by IBBA & M&A Source Financing M&A in a pandemic One year ago, buyers were looking for talent. Every company we talked to was up against the same problem – there was so much opportunity to be had, but none of the employees to make it happen. It’s amazing how much can change in year. Business buyers today are coming to the table for a host of reasons. The fortunate ones who benefitted from a “COVID-windfall” (e.g., tech, grocery, janitorial…and now, dry ice manufacturers) will be looking to capitalize on that success with acquisitions to drive long-term growth. Banks are willing to lend, but they have pulled back slightly. Traditionally, lower middle market deals have senior debt at an average of 3x EBITDA. Now that’s down to 2.5 or 2.75x, according to GF Data. In 2020, senior lending in M&A hit the lowest we’ve seen in five years. To compensate, the capital stack is being filled in through increased buyer equity and increased rollover equity. Rollover equity is when the business owner or management team retain a stake in the enterprise. Buyers like it when sellers keep some skin in the game. It shows they have faith in the business and are committed to its ongoing success. For businesses valued between $10 million and $25 million, rollover equity accounted for 13.2% of deal funding through November 2020. We saw an uptick in buyer equity in Q2 2020, likely stemming from buyers who were committed to getting deals done, even during the initial chaos after the pandemic hit. In the first nine months of 2020, equity share on platform deals averaged 54.5%. The quarterly splits, though, are notable: 1Q-53.2%; 2Q-61.6%; 3Q-51.4%. We are still seeing buyers bringing a greater share of capital to the table in Q4. Anecdotally, in one recent Wisconsin deal we managed, the buyer opted not to take all of the debt available to them. They’re financing the deal with senior debt at just over 2x EBITDA with the balance in buyer equity and management team rollover equity. In this case, the buyer is acquiring a manufacturer running at capacity. By not fully leveraging themselves in the transaction, they’ll have a strong equity position to support significant new investments to increase production. Similarly, other buyers are pulling back on leverage in order to maintain some breathing room in case the pandemic gets worse before it gets better. At the start of the pandemic most industry experts would have told you to expect an increase in earnouts in order to get deals done, but that hasn’t happened. Sellers typically don’t like earnouts, and because the demand for COVID-proof businesses remained strong in 2020, sellers were generally able to avoid those deal terms. As risk and uncertainty subside in the months ahead, we may see a return to more typical funding trends. Interest rates are at historic lows and cheap debt will help more buyers and sellers bridge their valuations gaps. This update is presented by GM Corporate Solutions in association with our partner Cornerstone International Alliance

A buyback refers to a company repurchasing its own shares from shareholders. It reduces the available shares in the market, potentially increasing the value of remaining shares. Buy-back also consolidates ownership among existing shareholders, enhances control, and provides an exit mechanism for investors. Additionally, companies often use buybacks to distribute surplus cash due to tax arbitrage. Presently, an Indian company pays approx. 23.3% tax on the difference between the buy-back price and the initial share issuance price, regardless of the market prices. Since the proceeds of buy-back are taxed in the hands of the company, these are exempt for shareholders. Legislative History and Rationale of the Amendment Earlier, shareholders were subjected to capital gains tax on the proceeds from buy-back. There is lesser tax impact on capital gains versus DDT on dividends. Thus, several companies started distributing profits via buy-back. This was utilized by foreign companies in Mauritius, Singapore, etc. who would claim treaty benefits on the resulting capital gains arising from their investees in India  (these treaty benefits have since been eliminated from 2017 onwards) . To counter this, in 2013 the Government introduced buy-back tax on unlisted companies. Further clarifications were provided in 2016 by specifying rules to compute the amount of taxable income. In 2019, the tax on buy-back was extended to listed companies as well. DDT was abolished in 2020 and dividends became taxable at the hands of shareholders at their applicable slab rates. The amendment in buy-back tax is proposed on similar footing. The proposed amendment also resolves the incidence of double taxation that arises in case of listed companies undertaking buy-back under open-market route. Transactions in open-market route are reported like other share trades and the seller is not aware about buyer’s identity. This was leading to double taxation as the seller would pay capital gains tax on share transfer despite the company having already paid buy-back tax. Proposed amendment: It is proposed in the Finance (No. 2) Bill, 2024 that: No tax will be payable by companies on buy back Proceeds arising from buy-back will be deemed as dividend. Companies will deduct TDS @ 10% and shareholders will pay tax on the deemed dividend as per the slab rates. No deduction of any expenses will be allowed for such dividend income. Shareholders will be allowed a capital loss equivalent to the cost of the shares. The capital loss will be classified as either long-term or short-term, depending on period of holding. This loss can be offset against other capital gains or carried forward for up to 8 years. These amendments are proposed to take effect from October 1, 2024, and will apply to any buyback of shares that takes place on or after this date. Impact: The proposed amendments have brought tax neutrality for distribution of surplus profits. The taxation of buyback as dividends may potentially increase tax burden on investors as those in higher tax bracket will faces higher taxes. Hence, for ownership restructuring or providing exit to investors as well, buy-back may no longer be the preferred route. The shareholders may face delays in realizing tax benefits of the capital losses in the absence of capital gains during the year of buy-back.