Question

Describe a project that you are most proud of?

be descriptive please.

Answer 1

This particular project was encountered during my job in a corporate in the field of Transfer Pricing.

A US based pharmaceutical group had a research and development (R&D) centre in India. The Indian R&D centre had developed a topical gel based formulation which could treat acne. Soon they realised that the product, once completed and marketed, would be a blockbuster product. The group did not want to keep the profits into India, hence, decided to transfer the Intellectual property in India, hence, approached us for developing a restructuring strategy that would hold good from a transfer pricing perspective.

In this regard, we conducted a thorough analysis of the entire situation by holding extensive discussions with the management of the Indian as well as US company. We researched on the transfer pricing laws of both India and US and suggested the following three alternatives to the group:

1. Outright sale of Intellectual property – Wherein a valuation of the Intellectual property was required to be carried out as on date and then the legal and economic ownership of the Intellectual property would be transferred to the US entity through outright sale at the valuation so derived. However, this option would entail a considerable amount of cash outflow in the hands of the US entity which would also be taxed in India as Capital Gains. Hence, the option was not considered to be very efficient.

2. Licensing of Intellectual property – Wherein the product would be licensed to the US entity and the US entity would pay an arm’s length royalty to the Indian entity for the right to use so granted. For the determination of such arm’s length royalty rate, we conducted extensive benchmarking analyses of comparable agreements. However, since the product was a very distinct one, not many comparable agreements could be found in the market.

3. Profit Spilt – Wherein the US entity would commercialise the Intellectual property in the US market and the revenues that would be earned by it would be split between the Indian and US entity on the basis of functional contribution made by the respective entities. This was the most dynamic option, which was finally approved by the group.

The entire project was very challenging but helped me gain a lot of knowledge on business restructurings. I am proud of this project in particular.