Friday, May 25, 2007

RSM Equico on the prowl for acquirers

RSM Equico, an investment banking arm of US-based H&R Block, a $7 billion, Fortune 500 financial services company, is seeking local participants to join its “buyers’ pool”. A buyers pool refers to the collection of potential acquirers.

Hector J Cuellar, president, RSM Equico, is now making pitches to five dozen local industrialists in five days in a bid to enlist them into the buyers pool for close to 200 mergers & acquisition proposals from US medium-sized companies they have in the pipeline.

So far, RSM Equico has never had an Indian in its buyers pool till one of its accounting and consulting units operating in India informed that Batlilboi Ltd, the machine-tool maker and engineering services firm, was on the lookout. RSM Equico steered Batliboi’s acquisition of Quickmill Inc, a Canadian CNC lathe machine maker, for Rs 22 crore on March 27.

Source: DNA Money

IFC to invest US $500 million in India by June

World Bank's private equity arm, International Finance Corporation, aims to cross 500-million-dollar mark in new investments by June 07. IFC's currently-held portfolio is 1.3 billion dollar (as of June 2006) making India its fourth-largest country of operations.

During the last year, IFC invested over Rs 91.71 crore in a subsidiary of Moser Baer and infused about Rs 82 crore for assisting Kanoria Chemicals in its expansion plan. It has also picked up 11.48 percent stake in Granules India for around Rs 26 crore and has committed a 50-million- dollar loan to Orissa-based cement manufacturer OCL India Ltd. IFC would also invest over Rs 101.37 crore (25 million dollars) to help expansion of the production capacity of electronic bikes marker Electrotherm India in Gujarat.

IFC focuses on supporting companies that do not have easy access to long term funding. In the past, IFC had invested in companies such as Bharat Forge and Titan Watches, which later grew into global brands, in their early stages. The list also includes industrial giants like Tata Steel, Larsen and Toubro, Bajaj Scooters and Arvind Mills. In the financial sector, IFC played an institution- building role and was a founding investor in key financial institutions such as HDFC and IDFC and continues to be their partner.

As of financial year 2006, IFC has the largest exposure in the manufacturing sector, followed by financial sector. Pulp and paper, steel products and chemicals formed a large part of the manufacturing portfolio of the institution.

Source: Hindustan Times
Related Stories: IFC, DEG planning to acquire a stake in SICOM

Thursday, May 24, 2007

Central Bank plan to tap the Capital Markets:plans an IPO of 1000 cr.

Central Bank of India, one of the few government-controlled banks yet to tap the capital market, has filed its draft prospectus for an initial public offering with the capital markets regulator Sebi to raise close to Rs 1,000 crore.
The bank, which is planning to launch a public offering of eight crore shares, is likely to price its issue at close to Rs 110 per share. Central Bank, like other banks in the country, needs funds to bolster its capital base to feed rising demand in an economy which has recorded an average growth of 8% during the last four years.
The public offer will help the bank bolster its capital adequacy ratio now at 10.4%. The beefing up of its capital base will also aid the bank in fulfiling regulatory norms for banks with overseas operations.

Source: Economic Times

ITC Hotels acquire 100 % stake in King maker Marketing Inc. (KMM)

ITC Ltd on Thursday said it has acquired the balance 49.02 per cent shareholding of King Maker Marketing Inc (KMM) for an undisclosed amount. After the said acquisition, KMM has become a wholly-owned subsidiary of ITC with effect from May 9, ITC said in a communique to the Bombay Stock Exchange. Earlier on November 6, ITC had consolidated its stake to 50.98 per cent, after which KMM became a subsidiary company of ITC. KMM is engaged in the business of distribution of tobacco products and all its brands are made exclusively by ITC.

Jain Irrigation to acquire an Israeli co.

The Indian agriculture conglomerate Jain Irrigation Systems is buying 50% of Israel's Na'an Dan Irrigation at a company valuation of NIS 140 million.

Sources in Israel's agriculture sector say that Na'an Dan preferred the Indian offer, even though Israeli company Netafim's offer was more attractive in many respects. The reason for rejection is believed to be that Netafim demanded a controlling share in the company, raising concerns that Netafim would take steps to integrate the management activities of the two companies, sending Na'an Dan's management home.

Source: Haaretz.com
Related News: Jain Irrigation to acquire US-based Aquarius Brands for $21.5 mn

Restrictions on Realty VCs

The real estate sector has been on the radar of regulators for a while now. The fear of an asset bubble being formed due to increased interest in the sector, especially by the ever growing realty funds, has been sensed by one and all.

As per an article in the Business Standard, the government is reviewing norms for investments by foreign venture capital funds in real estate, after the Reserve Bank of India coming round to the view that such funding is helping create an asset bubble in the sector.

The government had recently clamped down on the use of external commercial borrowing by real estate companies in order to check capital inflow, which, it feels, is fuelling inflation in the country.

With stock market sentiments too turning against the sector, real estate developers were looking at private equity funds as their last hope. But that source too could suffer if the proposed clampdown on venture capital funds takes place.

Under current norms, foreign venture capitalists invest in real estate through private equity firms in the form of foreign direct investment.

While market regulator Securities & Exchange Board of India has cleared the decks for registration of such VCs, the Reserve Bank of India has opposed their operation and not allowed them to open foreign exchange accounts. If the Reserve Bank gives the green signal, such investments will be clubbed under institutional investments.

Read more

Whats up at Old Lane?

Old Lane is a New York based Hedge Fund with a $500 million India fund. The firm was set up by former Morgan Stanley executives Vikram Pandit, John Havens and Guru Ramakrishnan.

13 months into existence, Old Lane was bought by Citigroup for a reported sum of $800 million. Pandit now heads Citi’s alternative investment business, while Ramkarishnan, a co-founder, has taken over as the CEO. By next month around 40% of the India fund will be invested

Read more about Old Lane, its investments and its plans in the Mint

RBI to allow Temasek, Singapore Invt. arm to buy ICICI stake

The Reserve Bank of India (RBI) will allow Temasek and Government of Singapore Investment Corporation (GIC) to acquire 10% equity each in the country’s largest private sector lender ICICI Bank as a “one-off case”, as reported by Economic Times.

The regulator has taken a stand that this cannot be “quoted as a precedence” for the Singapore government’s investment arms and any other foreign investor to pick up stakes in other private sector banks, sources told ET. Even though the government has been in favour of allowing the Singapore entities to hold higher stakes in ICICI Bank, RBI had earlier said that Temasek and other investors associated with the Singapore government, like GIC and Monetary Authority of Singapore, were all ‘related entities’ and could together hold a maximum 10% stake.

The tussle between RBI and the Singapore government owes its origin to the Comprehensive Economic Co-operation Agreement between India and Singapore. The agreement says “...for investments into India’s capital markets, India shall regard GIC, Temasek and their investment vehicles as independent and unrelated legal entities, for the purpose of application of the Sebi legislation, including rules, regulations and guidelines governing investment limits on Foreign Institutional Investors...” Further, Annex 7 of the treaty says, “Each legal entity shall be allowed to purchase up to 10% or the prevailing threshold under these regulations, whichever is higher, of the issued capital of any company.” The Singapore investment arms were keen to participate in ICICI Bank’s issue in December ‘05. RBI had refused to make any exception for Temasek in the ownership guidelines for private banks, and had barred from further raising stake in the private bank.

Wednesday, May 23, 2007

FIIs' pre-IPO investments in real estate to get FDI status

The government proposes to treat the investments by foreign institutional investors in pre initial public offers (IPOs) of real estate companies as foreign direct investment (FDI), as reported by Business Standard.

The government has also said FII investments in the pre-IPO allotment of real estate companies will have a lock-in period of three years, in line with the FDI norms. The lock-in period of three years is currently applicable to FDI in real estate.

The government recently also clamped down on the use of external commercial borrowings for the real estate sector for integrated townships. All these measures are in response to widely held opinion that overseas funds are contributing to an asset bubble in the real estate space.

The government had said that it intended to slow down the flow of foreign debt into the real estate sector through its recent curbs on external commercial borrowings (ECBs).

HDFC Realty Fund invests 75 crs in Pune based real estate co.

HDFC India Real Estate Fund has bought a 10% stake in Pune-based real estate company Paranjape Schemes for Rs 75 crore. Private equity investor GE Capital has also signed a deal worth Rs 250 crore with the company for developing an integrated township project in Pune.

The funds infused by HDFC will be used for all upcoming projects of the company, while GE Capital’s investment is for a specific project in Pune, as reported by the Economic Times. Paranjape Schemes, which also undertakes construction activities and has completed over 100 projects, is also planning an IPO in the future.

HDFC India Real Estate, a real-estate fund having a corpus of Rs.1000 crs, was the first dedicated real estate fund launched in India in 2005. The fund has bought stake in another Pune based real estate developer Vascon Engineers. The fund has a mandate to invest in three broad classes of projects-those that are complete, those in the development stage and those in the planning stage.

India, China are Asia's top M&A destination - Are you surprised??

India & China are top M&A destination...havn't we heard this often enough. India is a party destination for the Financial services industry, and everyone wants to cover this party.

PWC has come out with a survey reiterating the above. “China and India still remain the top two targets for M&A in the region due to underlying economic growth conditions,” an annual report presented by the financial advisory firm said, as reported by Mint.

The survey which polled 230 senior financial executives in Asia, Europe, North America and the Middle East, showed interest in India had increased slightly from 37% in 2005 to 39% in 2007.
By comparison, 47% of executives answered that they expected to execute a merger or buyout in China over the next five years.

Taiwan, Pakistan and Vietnam were also fast emerging as M&A hot spots, the report said.
Managers also signalled particularly strong expectations for Hong Kong, Singapore and Indonesia over the next five years.

Among those surveyed, nearly three quarters predicted that their companies would undergo a significant merger or acquisition some time in the next five years, up from 68% last year. Already, transaction value in Asia last year totalled $64 billion (Rs2,59,711 crore), a jump of 66% from 2005.

The sun is shining...and we all know whos making hay

Nasscom floats a 100 cr VC fund for IT start-ups

In December 2005, Nasscom wanted the Union Government to set up a separate venture fund to fuel innovation in the software products space.

A year and a half later Nasscom is set to launch a Venture Fund, with a corpus of Rs.100 crs, along with Hyderabad-based ICICI Knowledge Park, an arm of the ICICI bank.

Disclosing this to CyberMedia News here, Rajdeep Sehrawat, vice president of Nasscom, said “We have earmarked Rs 100 crore to fund IT start-ups in India, which are involved in IP-creation. These companies could be anyone who is working on automotive electronics, wireless and broadband, life sciences, medical devices and the like.”

The venture fund is expected to be in place by October this year. The fund will be looking at disbursing seed capital or angel funding, which other venture capital firms hesitate to enter. It intends to finance early start-ups, in their ideation stage, as this is where the liquidity crunch is felt the most.

Such initiatives promise to offer a lot of opportunities to an entrepreneurial mind. One hopes to see more such initiatives being taken in the future.

Funds continue to be lured by the Indian Real Estate story

About $2.5 billion have been invested by overseas realty funds in India to date. And if that wasn't enough, wait to see another $3.5 billion running after the best real estate opportunities India has to offer.

Nearly two dozen US funds are raising $3.5 billion for investments in Indian realty. Those raising the money include Wall Street powerhouses such as Blackstone Group ( $1 billion) Goldman Sachs ($1 billion), Citigroup Property Investors ($125 million), Morgan Stanley ($70 million) and GE Commercial Finance Real Estate ($63 million). Others raising the money are: JP Morgan, Warburg Pincus, Merrill Lynch, Lehman Brothers, Warren Buffett’s Berkshire Hathaway, Colony Capital and Starwood Capital.

Theres been enough said and written on the increasing property prices in India. But that doesn't seem to deter these funds to make investments in the sector. The attraction for these funds is potential investment returns of 25% and more in Indian projects that might be hard to come by in the US and Western Europe today.

One such determined big player is Goldman Sachs. For about a year now, Goldman Sachs’s Whitehall Street Real Estate Funds have been exploring the Indian market and checking out potential investment partners. Some time back the California Public Employees’ Retirement System invested $100 million in a $400-million real estate fund promoted by IL&FS.

Tishman Speyer is among the first US developers to invest in India. Last year, the New York City-based firm formed a joint development company with ICICI Venture Funds of Mumbai that will have a war chest of $2.5 billion. Similarly, New York-based developer Vornado Realty Trust has teamed up with The Chatterjee Group, a venture capital firm also located in New York.

The Indian Real Estate story seems to be growing by the day and everyone wants to play a part in it.

Source: Financial Express

From DSP ML to Citi: Vikas Khattars big move

The last couple of years have been exciting for the Investment Banking community to say the least. The action though has not been limited to large ticket deals. One gets to hear about high profile moves every now and then. DSP ML seems to have been affected more than others with movements of Munesh Khanna and Sanjay Sharma.

Vikas Khattar is the latest to make the big move. Citi India has poached Khattar from DSP Merrill Lynch to add strength to its equity capital markets team. He will be joining in as a Director early next month. Khattar is an MBA from IIM Calcutta and an engineer from the Birla Institute of Technology and Science. He was a veteran at DSP Merrill Lynch with 11 years experience.

Citi’s equity capital markets team is headed by another erstwhile DSP Merrill Lynch stalwart, Ravi Kapoor. Kapoor left DSP ML, where he was head of equity origination and capital markets, in April 2005 to kick-start the same business for Citi. Khattar will be part of Kapoor's team, which reports to Pramit Jhaveri, who heads investment banking for Citi in India.

For its part DSP Merrill Lynch is also on a hiring spree since Merrill Lynch bought out its Indian partner in December 2005. DSP is aggressively foraying into new areas including private wealth management, real estate and principal investing and hiring to staff these businesses. Indeed, worldwide Merrill Lynch has been beefing up its global private client non-resident Indian (NRI) business at the cost of Citi and has lured Rahul Malhotra, Inderjeet Hora and Aseem Arora from Citi in the last few months.

Source: Finance Asia

Monday, May 21, 2007

Valuation dilemmas lead to panic fall in Bajaj’s stocks

The newly carved out demerger is expected to increase the market cap aggregate of the daughter companies by 10%. This was infact cut short with what could have been a 50% increase.

The mangement of the parent company decided to give its insurance JV partner Aliianz a call option to increase its stake in the life insurance venture to 74% and the non life general insurance venture to 50% which would expire in April 2016.This according to the management was a safety procedure which saw a potential valuation of the insurance business by several intermediaries of 13-18 thousand crore to a mere 575 crore of the Life Insurance and 421 crore for the general insurance venture by the end of FY08.

The combined market cap of the demerged entities is expected to be around 30,000 crore as against 27,000 crore of the prevailing BAL. It could have seen a valuation of 36,000 crore had there been no put-call options.

The demereger according to Rahul Bajaj would be from effect from 31 March 2007 but the process could take upto December 2007.This would mean that the existing shareholders would recive the shares of the new company only then which could have been a possible reason for the inexplicable fall in Bajaj’s stock on 17th May followed by another fall on 18th May which saw the market cap shed by 15% or Rs 4000 crore

Source: The Economic times, Mint

Bajaj announces demerger into 3 new entities

After much speculation of a demerger, one to the effect was finally anounced on 17th May. The Bajaj’s business will be rolled off into 3 new companies with the existing Bajaj Auto Ltd continuing as the holding company which will also have a mammoth Rs 6,000 crore in cash.

Under the new scheme of arrangement the auto businesses will come under the Bajaj Holdings and Investments Limited (BHIL),it will also have 1,500 crore in cash and the Financial services company which includes a joint venture with the UK insurance major Allianz will continue operations under as Bajaj Finserv (BFL).It also includes consumer finance, windpower projects and Rs 800 crore in cash.

Rajiv Bajaj will continue as the MD and CEO of BHIL whereas Sanjiv will manage BFL and remain the Executive Director of BHIL. Rahul Bajaj will remain the chairman of all the three companies.The board of the two new companies will have four members comprising Rahul,Madhur,Rajiv and Sanjiv Bajaj. However the BAL board will not be tampered with.

Source: The Economic Times, www.livemint.com

Friday, May 18, 2007

HDFC to raise money through ADR’s , preferential allotment

HDFC is expected to raise $1 bn through ADR’s and preferential allotment. It plans to raise about one-fourth of the money through equity alloted on a preferential basis which will most likely be to its promoter HDFC Group as a public offer could see the promoters stake diminish. The promoter group has a current holding of 21.56% and the issue will increase its stake to 23%.

It currently needs a strategic investment of Rs 1390 crore to retain its stake and then it would go for a public offer of equity shares in domestic markets
as well as international markets like the US in the form of American Depository Shares(ADR)rasing the residual 2800 crore.


Source: The Economics Times

SBI allowed to reduce stake in subsidiaries

The lok sabha allowed SBI to reduce its stake in its seven subsidiaries from 55 percent to 51 percent. This will make their shares available to retail investors by listing on the stock exchanges

The State Bank of India (Subsidiary Bank Laws) Amendment Bill, 2006, which amends the State Bank of Saurashtra Act, 1950, the State Bank of Hyderabad Act, 1956 and the SBI (Subsidiary Banks) Act, 1959 was passed by a voice vote. The bill also raised the authorized capital of these banks to Rs 500 crore, allow them to issue bonus shares and augment the number of nominated directors representing shareholders to a ceiling of three.This also gives the chairman of SBI the power to appoint chairmen of its subsidiaries.

The government however clarified that it has and would dismiss any proposal of reducing stake in the subsidiaries below 51% as it would like to have majority voting power in these to be state owned companies after RBI transfers its holding to the government in August.

Tthe SBI has 100 per cent stake in State Bank of Hyderabad, State Bank of Patiala and State Bank of Saurashtra. Stakes in State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Indore -- SBI's stake varies from 75 per cent to 98 per cent.

Source: The Economic Times.

Foreign Private Equity firms to take India’s infrastructure story ahead

The monetary requirements for building infrastructure set by the government seems to find foreign support .The centre has earmarked $320 bn in infrastructure investments by 2012 which it proposes to accrue from its Foreign exchange reserves in partnership with foreign funds.

Various Private Equity firms has approved of investments pertaining to infrastructure in India .Citigroup and Blackstone will float a $5 billion fund with India’s Infrastructure Development Finance Company (IDFC) and India Infrastructure Finance Company (IIFC) .3i, another UK based PE firm, has put in $500 mn in projects with IIFC as its partner, in India .The SBI along with Société Générale of France plans to Rs 18 bn to invest in infrastructure companies .It also plans to venture into private equity with a target to invest Rs 42 bn in infrastructure .About 65% of these funds will be invested in equity .US based TransAsia infrastructure holdings will be another infrastructure dedicated fund to be launched by the end of 2007.

However all this is subject to approval by RBI who dictates an upper limit for External Commercial Borrowings(ECB’s) in India and also the decision to use the forex reserves is reserved with the RBI.

Source: www.economist.com

Thursday, May 17, 2007

Indian BPO's want share in US markets;Genepact next in list

Genepact is harboring ambitions to upfold what could be the biggest Indian IPO in US markets and is speculated to be worth around $600 mn.

The listing in the New York bourse would make Genepact the third Indian BPO trading in US after WNS and EXL services listed on the NYSE and the Nasdaq respectvely.The proceeds from the share sale will be used to repay debt bligations and for realizing potential acquisitions, according to a filing with the US Securities and Exchange Commission.

Genpact will apply to have its common shares listed on the NYSE under the symbol “G”. The IPO will be managed by Morgan Stanley, Citigroup Inc. and JPMorgan Chase.

General Atlantic and Oak Hill Capital Partners hold 60 per cent of the company’s equity, while GE owns the remaining 40 per cent. All the three sareholders are diluting their stake through the proposed IPO, according to the SEC filing.

Source:www.bpowatchindia.com

Wednesday, May 16, 2007

Mutual Funds' ADR/GDR exposure limit to increase by $50 mn:SEBI

SEBI, to much cheer from the MF industry, has decided to increase the investment limit of single domestic Mutual fund's from $150 mn to $200 mn.It also said that there would be a sub-ceiling for individual MF's which should not be greater than 10% of their total AUM or $ 200 mn whichever is higher.

Source: The Economic Times

Millennium India Acquisition Company, Inc. to acquire stake in SMC Group

Millennium India Acquisition Company, Inc. announced that it would be picking up a minor stake in SMC group of companies worth A$39.97 mn.This would give the company a 14.9% control in what is one of the heavyweights in the finanial services industry in India.

This deal values SMC Group at $228 million, or approximately 8.6 times FY2008 projected earnings.

The capital realized from this investment will be used by SMC Group to expedite its expansion plans

Read the complete article

Geogit Financial sevices to partner BNP Paribas

The BNP Paribas-Geojit financial services partnership which was ascertained in March 2007 is being renamed as 'Geojit BNP Paribas Financial Services Limited' in India.

BNP Paribas picked up a stake of 27.18% in March which will go up to 34.35%.Investors of Barjeel Geojit Securities LLC, a leading UAE-based provider of financial services of which Geojit Financial Services is the parent company, are to benefit by way of best practices, global products and technology as a result of this partnership.

Read the full article here

HDFC buys out Chubb in insurance JV

HDFC bought out the 26% stake of Chinese insurance major in the JV whose book value expected to be around Rs100 crores would make the deal worth Rs 26 crore.The General Insurance Venture was set up in 2001.

The Insurance Regulatory and Development Authority(IRDA) has been approached by HDFC to clear the Buy-Out.Ergo,the German reinsurance company is speculated to be the lead runner in the race to pick up the Chubb stake,till then,as the HDFC authorities say the JV will be fully owned by them.

Indian insurance regulations limits foreign institutions to own a maximum of 26% stake in insurance ventures.The limit might be raised to 49% but not without political opposition.

Source: Mint

ICICI plans India's biggest Public Offering;to be worth $4.3 bn

ICICI Bank Ltd. has filed documents with the market regulator SEBI seeking a public offer speculated to be worth 17,500 crore which may go up to 20,100 crore depending on the demand.

The bank which has hired Goldman Sachs and Merill Lynch to manage the offer said it would meet its next 3 years requirements assuming the banking system grows at 25%.It proposes to use the proceeds to meet the strong credit growth and also to usher the bank's inorganic growth ambitions.

Enam Financial Consultants and JM Morgan Stanley are also hired to see the deal through.

Source: www.livemint.com

Hindalco wins court approaval for Novelis buyout

The AV Birla group promoted Hindalco is set to become the largest producer of aluminium rolled products in the world after it won the approval of the Ontario superior court to acquire Novelis, a leader in the aluminium rolled products market.The buyout is valued at $6 bn.

The Atlanta based Novelis will now become a fully owned subsidiary of Hindalco.This catapults Hindalco in the top five league of aluminium heavyweights with revenues standing at $14 bn.

Hindalco would acquire Novelis through its subsidiary AV Metals which would cost the company $44.93 per share.Novelis is on its way to being delisted from the New York Stock Exchange and the Toronto Stock Exchange.

Source: The Economic Times

Hilton-Dlf to form joint venture in hotel business

Hilton Hotels Corporation will create a joint venture company (JV) in India with DLF Limited (DLF). The joint venture company plans to develop and own 75 hotels and serviced apartments over the next seven years. The formation of the joint venture is pending receipt of formal written approval from the Government.

The JV-owned hotels will represent several brands from the Hilton Hotels Corporation portfolio, including Hilton Hotels, Hilton Garden Inn, Homewood Suites by Hilton and Hilton Residences. The JV Company will develop and build these properties, while Hilton will manage them.

DLF will hold 74% in the JV Company, and Hilton will hold the remaining minority stake as a symbol of its commitment to the venture. Over the next five to seven years, Hilton will invest up to USD 143 million in the JV Company, before any consideration of debt.

The initial stage of the joint venture will involve 20 hotels in a number of key locations, including Chandigarh, Chennai and Kolkata. A large number of these hotels are expected to be Hilton Garden Inn properties -- a business hotel brand, offering focused services. Beyond the initial 20 sites, the JV Company will continue to identify and acquire sites and undertake new hotel developments in due course of time.

Source: INR News

Central Bank to roll out IPO in June

The Central bank of India is expecting an approval for an IPO from the Securities and Exchange Board of India(SEBI) in June. The capital realized by the bank would be used to amend the basel-2 Capital adequacy ratio (CAR) as directed by the Reserve Bank of India(RBI).The CAR is expected to rise to 12 per cent from the current levels of 10.40 percent after the issue.

The management also plans to expand the bank internally, upgrade it technologically and strengthen the Human resource department. The size of the IPO is expected to be somewhere around Rs300 crore. The bank is also thinking on capital expansion as a means of capital restructuring and diversifying it services.

Arvind mills and Diesel planet to form joint venture

Arvind mills announced that it had completed a joint venture agreement with Diesel International B.V. to represent the arrival of the diesel brand in India. The new entity would be called Diesel India Fashion Arvind Pvt Ltd.

Arvind mills, as the diesel authorities claim, was carefully chosen by them after a detailed search.

The joint venture hopes to start operations before the end of this year opening stores in Delhi and Mumbai

Source: www.equitybulls.com

Tuesday, May 15, 2007

Ranbaxy acquires yet another company,this time a South African major

Ranbaxy laboratories has added another feather to its cap.It confirmed the acquisition of Be-Tabs the South African pharma major for a whooping $70 million.This will make the company the fifth largest generic pharmaceutical company in South Africa.

The deal is expected to give Ranbaxy local manufacturing capability.As part of this acquisition, Ranbaxy has concluded a Black Empowerment transaction with a Community Investment Holding(CIH) group company.Ranbaxy has also planned a major upgrade of the Be-Tabs manufacturing facility to bring its factories in resonance with new standards.The comapny expects to cash in on the brand equity of the South african firm and expects to appease the local markets.

This would lead to the further enhancement of the products portfolio of Ranbaxy especially in the acute and over the counter products stream.Ranbaxy has operations in South Africa since 1996.

Source:
www.moneycontrol.com

Valuation business to be regulated:CA's oppose move

In a move to regulate the valuation business,the government is expected to introduce a Valuation Professional Bill in the upcoming monsoon session of parliament.

The Bill would endeavor to create a council of valuation professionals who would train the professionals,set standards and issue qualifying norms.According to a concept paper by ICAI,ICWAI and ICSI it will comprise of two members from each of these bodies and five other members from government entities.

This move has invited much criticism from the community of valuation business, who have a mixed view about this.Some of them claim that people working in the field have already studied these subjects thoroughly while the others welcomed the move saying that it would draw the line,and ensure that they acted responsibly.

Read the Mint article:
Chartered accountants oppose regulation move

United Spirits buys scottish counterpart Whyte and Mackay

Vijay Mallya's United Spirits has bought out the Scottish Scotch major Whyte and Mackay.An official announcement is scheduled for Wednesday.The deal which was initially valued at Pound 650 million was settled at pound 595 million which includes a pound 100 million payout to bridge a Pension fund Deficit in W&M's Pension trust.

The main owners of the Scottish firm is expected to leave the board including chief executive Mr.Vivian Imerman,who owns nearly two thirds of the firm.However,United spirits is keen on Mr Brannan ,the erstwile manager to head the existing management,as scotch is a new proposition for the Indian major.

Whyte and Mackay has an array of brands including their USP W&M scotch whisky,Dalmore scotch whisky,Isle jura single malt and Vladivar vodka.United spirits will look to promote these in India and some other markets too.

Mr Alok Gupta, one of Vijay Mallya's senior executives is expected to control the operations going forward.

Source: The Economic times

Aavishkar Goodwell to foray into Microfinance;Dubai's Legtaum Capital Picks 51% stake in SHARE

India's leading MicroFinance Institution(MFI) SHARE to get equity support from Aavishkaar Goodwell.The private equity player is expected to buy a small stake in the firm and help the SHARE management expand its existing operations.This is after Dubai's Legtaum capital picked up 51% stake in SHARE for Rs 125 crore.

Aavishkaar Goodwell which has a "for the poor" approach generally invests in small start up's and microfinance and has build up a porfolio worth US $25 mn.On the other hand SHARE is one of India's largest MFI with outstanding loans to the tune of $95 mn and has operations in 5 Indian states.

Read the complete article

BSE heading towards demutualisation

The Bomabay Stock Exchange has 22 foreign and local investors lined up for a 51% stake sale as a part of its ongoing mandated demutualisation process.This is after foreign investors including the NYSE and global Investment Bank Goldman Sachs bought 20% stake in the National Stock Exchange a few months ago.SEBI has fixed the deadline as 19th May to complete the transaction.

BSE has managed to convince the Foreign Investment Promotion Board(FIPB) to allow six foreign investors to invest in Asia's oldest bourse. The Singapore stock exchange and the Dutch bourse exchange already own 5% of BSE's equity.Among the foreign investors Dubai Financial, Caldwell Asset Management(USA),Katriel Investment(Cyprus) and Atticus(Mauritius) are expected to pick up stakes.

16 domestic investors including corporates Mahindras,Bajaj,LIC,Bank of India,SBI,Central Bank of India are also acquiring equity stakes of 1% or a little more.Any company buying more than 1% is subject to approval by SEBI.High net worth individuals such as Infosys CEO probable Kris Gopalakrishnan are also buying into the company.

Post Demutualisation BSE will have 77.2 lakh outstanding shares up from 69.5 lakh shares.FY'06 saw BSE booking profits of 60 crores ,it has reserves and surplus to the tune of Rs 930 crores.

Source: The Economic Times.

Debt markets to have credit default swaps

The next level for the debt markets in India is not far from realization.The RBI is expected to issue guidelines for the introduction of credit derivatives and set the regulatory framwork for its issuance today.This is after the the credit market has soared more than 27% in the last tweleve months.

RBI claims that it has reached the "adequate comfort level for the introduction of such products".However it may take several months for the banking industry to standardize the terms for trading these instruments.

There is a possibility that the government initially sets aside these instrument to be secured against an asset before allowing the markets to do away with them at a later stage.Also there is much speculation about whether or not offshore FI's will be allowed to trade in them.

Interest rate derivatives were the only derivative products allowed by the regulators to hedge against foreign currency risk before 1999.Allowing credit derivatives to be traded after the recent inclusion of derivatives on equity products(as recently as 2001)will cerainly lead the markets towards more stability.

Source: Mint

Monday, May 14, 2007

Right's issue worth $400 million on Jet's radar

Jet is planning a mammoth rights issue worth $400 million, the offer is still in its gestation period, and the issue is expected to come through in another 4-5 months according to director Mr. Vic Dungca.

$50 million from the proceeds would be used for Jetlite,the renamed Air Sahara which the company acquired after a prolonged legal tussle.The rest,according to the management, would be used to expand its existing fleet to 22 new aircrafts which would include 10 Airbus 330 and 10 Boeing 777.

Read the full article here

Fund houses on a NFO rolling spree

The mutual fund industry is set for a roller coaster ride.Investment banks like JP Morgan and AIG are coming out with NFO's for the first time.Along with them NFO's from veterans like SBI and HDFC is expected to hit the markets soon.

Capital protection offers are also rolled out by Franklin Templeton and DWS.DSP Merill Lynch's closed ended scheme is another fund which is closing for subscription at the end of the month.

Fixed maturity plans are in the pipeline by the likes of ICICI Prudential,Standard Chartered and Lotus.The offer documents of these funds have been filed with the SEBI.On the equity side UTI India Lifestyle, UTI Flexi Cap and Lotus Nifty Index Plus Fund are ready to make their offers public.

Read the Hindu article:
Fund houses line up series of new offers

Sunday, May 13, 2007

Hedge funds to debut in India soon

The RBI monetary policy for 2007-2008 has given a fillip to the alternative investment industry in India.

In a move to usher the capital and current account convertibility of the rupee the RBI has increased the present limit for individuals for any permitted current or capital account transaction from $50,000 to $100,000 per financial year.The current account convertibility was established with the acceptance of the obligations under Article VIII of the IMF’s Articles of Agreement in August 1994.

Driven by the need to increase their assets under management Hedge funds have reduced their minimum investment limits from $1mn to 200,000$ and even 100,000$ overseas and to tap the retail markets launched mutual funds that invest in them.This move by the Hedge fund community over the years coupled with the government's incentive gives a strong case for Hedge fund investments in India.

The SEBI has laid down the guidelines for the direct registration of hedge funds.What is to be seen is that how these funds interpret this move by the RBI.

Read the Hindu article
$100,000 limit puts hedge funds within reach of Indian investors

Friday, May 11, 2007

LBO'S in India in the long term???

The Private Equity Industry in india has ripened to a stage where it needs regulatory legislations so as to accelerate the development of the capital markets in India.
The current SEBI laws do not allow firms to pick up more than minority stakes in Indian entities.The ban on leveraged buy-outs is a constraint, which is the preferred mode of entry for many private equity firms.
Other regulatory obstacles include foreign ownership and investment restrictions, for instance in the aviation and publishing industries, that make departing from this sort of business more difficult.There are cultural barriers where the founding entrepreneur may wish to bring in money and management expertise through PE funds but do not have the appetite for handing over the reins to them.
The recent influx of investors in the stock markets would begin to reduce return which gives a stong case for Private Equity growth in India, though on the flipside PE funds have a history of job sacking and asset stripping realizing huge profits from that.They also have the uncanny ability to takeover businesses at low premiums which might effect investors.These doesnt make things easy for the regulatory authorities and they will find it difficult to give them unmarked access to the Indian markets.
But the real question is that is it the right time to let loose entities who have been labelled by many as 'barbarians'?
On a personal level, i think that the indian markets are not mature enough and still is highly imperfect to sustain a sudden change in the regulatory issues and allow highly risk activities such as LBO'S,which may see a sudden shift in liquidity trends from other AMC'S on the back of global perfomance and may cause a collapse that can trigger financial instability, however i endorse the government taking a stand on this issue and allow such activities over a period of time which will help investors gain more out of the markets and at the same time have the markets realize the cons of getting linked with these funds.The top private equity firms have been consistently outperforming the markets elsewhere and i find no reason why they can't produce the same results in India.
Private Equity activities in India reached its peak after domestic funds were able to raise $1.8 bn from the market and foreign funds from Carlyle to Blackstone betting on the markets.
India was the biggest recipient of private equity investment in Asia last year, with 143 deals worth a total of $2.21bn, according to figures from Thomson Financial, the data group.

Big names gear up to pick up stake in Reliance MF

Big private equity and asset management firms have lined up for a small stake in Reliance MF. Blackstone, the big US PE firm which has operations in India will look to build a relationship base with what is the biggest Asset management company in India and has Assets Under Management(AUM) which are scaling new heights, recently surpassing the 50,000 crore mark.
Reliance MF which is eyeing a valuation of 1.2 billion dollars (10% of the total AUM) is also on the radar of Schroder’s, the British fund with assets of about $260 bn after speculation that it wants to enter the Asset Management business in India and one of the units of US based Capital.
If this deal does go through it will help the foreign investors to cement a relationship with one of the biggest money mangers in the world .The industry’s AUM has witnessed a growth of almost 85% over two years starting 2005 April, and with the future looking bright these foreign firms could not have possibly found a better opportunity to build on a base starting with the leader in the Indian Markets .On the other hand it’s a win-win situation as far as Reliance Capital is concerned as it will give the company valuable know-how and technical proficiency in the Financial Services industry with the biggest names on its board. Valuations are also going crazy with the firm hitting a new high on the BSE.
Even if the offer is not accepted it has showcased the potential for the growth of the industry, with the American and the European markets approaching perfection and that these investors are finding it hard to outperform the markets there, they are looking at offshoring their business to low cost and high return destinations on the long term like India.
Related articles:
Schroders looking to join the AMC brigade

Friday, May 4, 2007

Godrej Sara Lee may take over Sara Lee business in India

Godrej Sara Lee, the joint venture company between the Godrej Group and US-based Sara Lee Corporation, is in discussions to take over Sara Lee’s independent business unit in India. While Sara Lee has a 51 per cent stake in Godrej Sara Lee (GSL), a household product company, it also has an independent unit, Sara Lee Household and Body Care India, which is headquartered in Chennai. The independent unit markets brands like Kiwi shoe polish, drain cleaner Kiwi Dranex and hair care brand Brylcreem in India. It is believed that the business and operations of Sara Lee Household and Body Care will be transferred to GSL. Sources familiar with the discussions said the size of the transaction is estimated to be in the range of Rs 100 crore. At present, Godrej Sara Lee’s portfolio largely consists of household insecticide brands like Hit and Good Knight in India, apart from Sara Lee’s air purifier brand, Ambi Pur. Industry sources said Sara Lee was keen on moving all its brands to one company to better manage its portfolio in India.

Wockhardt will pay $265 million (Rs 1,090 crore) in cash to acquire Negma Laboratories

Wockhardt will pay $265 million (Rs 1,090 crore) in cash to acquire a research-based French pharmaceutical company,Negma Laboratories. This means a valuation of 1.8 times the sales and 9.7 times the EBIDTA. While the valuation seems reasonable, if measured against revenues, it is relatively high when one looks at the EBIDTA multiple. Wockhardt will fund the acquisition through internal accruals and debt; it has about $250 million on its books as cash. But more importantly, the acquisition gives Wockhardt a portfolio of patented products.
The management expects the takeover to reflect in its performance from the third quarter. Indian pharma companies are vying for a global presence in the branded generic drug space. Dr Reddy’s had recently acquired German generic drug maker Betapharm.
Earlier, Wockhardt acquired companies in the UK (Wallis and CP Pharmaceuticals), Germany (Esparma) and Ireland (Pinewood Labs). With this acquisition in France, the company effectively covers the whole of Europe. This acquisition helps the company get a strong foothold in the French generic market, which is valued at about $2 billion.
With this acquisition, the management has raised its estimate of group turnover by $90 million to $590 million for FY07. The European business will account for more than 60% of total revenues. The key concern, however, could be the acquisition’s impact on margins. Margins could get hit by about 100 basis points during the current year, as Negma recorded an EBIDTA margin of about 18% last year.

Thursday, May 3, 2007

HCL, SABA looking at a tie-up for enhanced IT services

Global IT services company HCL and human capital management (HCM) and software services provider Saba have tied-up to strengthen their services and relationship in the Asia Pacific, Europe and North America. They'll be aligning their marketing efforts to provide coordinated software and IT services to mutual customers in several vertical markets including media and entertainment, healthcare, financial services, retail, life sciences and manufacturing.

Ranbaxy considers acquisitions in US

Ranbaxy Laboratories Ltd, India's biggest drugmaker, considers acquisitions aimed at expanding operations in the US, south and central America and its home market to be priorities.
Ranbaxy made eight acquisitions last year, buying South African company Be-Tabs Pharmaceuticals and Romania's Terapia. The US $3.4 billion company has been built over the past three decades by copying blockbuster drugs such as Bayer AG's Cipro and selling them for a fraction of the price in countries including France, Germany and the US.