M&A Critique


GSS Infotech Limited (GSS) has filed an application with the stock exchange for getting observation letter for the proposed scheme of merger by absorption of Polimeraas Agro LLP (LLP) post its conversion into Private Limited with GSS Infotech Limited

GSS is engaged in the business of IT consulting and Software Development having its offices in Hyderabad and USA. GSS has achieved a turnover of Rs. 18.21 Crores and Rs.27.12 crores in the Financial Year 2020-2021 and 2019-2020.

Polimeraas has its presence in the states of Telangana & Karnataka with more than 75 location stations. Polimeraas’ primary business is sale of agricultural products, semi and fully processed food and other home consumption products.

The main purpose of scheme of merger is to get 100% ownership of Polimeraas which is having a substantial revenue-generating capability. Polimeraas has achieved turnover of Rs. 27.03 Crores in FY 19-20 and Rs. 251 Crores in FY 20-21.

Proposed Transaction

In the first part of Transaction, GSS will invest Rs. 25 Crores in the Polimeraas. As of now, GSS has invested Rs. 15 Crores into Polimeraas Limited. Though Company has stated about the investment in the scheme, Polimeraas has not been made a part of the scheme.

In the second part, there will be merger of LLP with the GSS. LLP is into the process of its conversion into a Private Limited Company. All the existing partners of the LLP will get shares of the Private Limited Company in the same proportion of the contribution (Fixed + Current) made by the partners in the LLP.  Unlike the Limited Liability Partnership Act, 2008 which requires the members of the private limited company to be the partners, Companies Act, 2013 is silent about the partners which will become the members and directors of the Private Limited Company.

As a part of consideration, GSS will issue Equity Shares worth Rs. Rs.117.91 crores and Compulsory Redeemable Preference Shares, 0.1% (yearly coupon) worth Rs. 132.61 crores which can be redeemed in 12 months after the allotment at the option of the GSS.

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Sanket Joshi