Wednesday, January 10, 2007

NYSE, Goldman Sachs, General Atlantic, SAIF to buy 26% in NSE

The New York Stock Exchange (NYSE) and US-based global investment banking giant Goldman Sachs are among a group of institutional investors who are about to buy around a 5% stake each in National Stock Exchange (NSE), India’s biggest bourse. The NYSE, Goldman Sachs, General Atlantic Partners and Softbank Asian Infrastructure Fund have entered into an agreement with ICICI Bank, IFCI, IL&FS, PNB and GIC for the purchase.

NSE shareholders IL&FS and IFCI are selling 5% each of their holdings in the exchange to Goldman Sachs and NYSE in two separate deals expected to be signed soon. The two shareholders currently hold 7.1% each in the exchange. IDBI and ICICI Bank, the two other institutional promoters, are also expected to offload part of their holdings in the exchange in subsequent deals. The valuation of the NSE is expected to be over $2 billion.

Earlier, Fidelity had bought around 9% in MCX; later, Goldman acquired over 7% in NCDEX, the other online commodity exchange.

The proposed sale of stakes comes close on the heels of guidelines issued by the RBI on foreign investment in Indian stock exchanges. The RBI has allowed foreign investment up to 49% in stock exchanges, fixing foreign direct investment (FDI) cap at 26% and FII limit at 23%. Securities and Exchange Board of India (SEBI) has stipulated investment limit for single foreign investor at 5% beyond which an FII or any other investor like foreign stock exchange will not raise its stake in stock exchanges.

NSE has 21 promoters: an assorted medley of public sector banks, LIC, ICICI Bank, IL&FS and IDFC. ICICI holds 12.5% and IL&FS has 7.1%. NSE is an extremely profitable entity. In FY06, it had a net profit of Rs. 206 crores on revenues of Rs. 472 crores. In FY07 it is expected to report a profit of Rs. 250 crores. It has 70% share of all stock transactions in India.

Read more about the deal in The Economic Times and IndiaInfoline.com.

The Pawar family may buy 49% in UB Group winery

Union Agriculture Minister Sharad Pawar’s family could take up to 49% stake in the UB Group’s Four Seasons winery in Baramati, Maharashtra. The Pawar family will also have a strong boardroom presence in the UB Group’s first wine venture in the country. United Spirits, the spirits flagship of UB Group, will directly hold at least 51% stake in Four Seasons. The Pawar family and a few other local stakeholders will own the rest. The Pawar family is expected to keep a significant minority stake in the venture. The seven-member company board, headed by Mr. Vijay Mallya, is likely to have three Pawar family members on it.

The winery will have a five mn-litre capacity (7 mn bottles) and would attract investments of over Rs. 70 crores, when completed. Four Seasons is likely to hit the market with its first premium offering in October this year even though an economy range could be launched earlier.

Read the complete article in The Economic Times.

Rakesh Jhunjhunwala buys legal and healthcare KPO Inventurus

India’s Warren Buffet and ace investor Rakesh Jhunjhunwala has bought majority stake in Inventurus Knowledge Solution, a company that does back-office work for US- and UK-based legal and healthcare firms, for an undisclosed sum.

Jhunjhunwala had recently acquired Aptech, an IT training firm. He also owns large stakes in Shipping Corporation of India and Kochi-based retail broking firm Geojit Securities.

Inventurus has a 25-seater office in suburban Mumbai and plans to increase the number of seats to 1000. The knowledge process outsourcing (KPO) company hopes to tap into the estimated $5 bn US outsourcing market.

Read the article in The Times of India.

Paradyne Infotech close to acquiring a US software firm

Paradyne Infotech, an Indian IT services company specializing in infrastructure management and services is in the advanced stages of acquiring a US-based software services company with a turnover of around $10 million for the FY 2005-06. The company has approximately 20-25 customers and one of them is retail giant Wal-Mart. The deal is expected to be finalized by January-end. Funds for the acquisition will be raised through internal accruals and debt.

Paradyne has a turnover of around Rs. 87.70 crores, and is already in talks for acquiring a few other Indian companies in the product development space. Its clients includes JM Morgan Stanley, SIDBI, Bank of India, Corporation Bank, Punjab National Bank, NABARD, Bank of Baroda, Rochem Separations Systems, Globus Stores, ONGC, UTV, Outlook Publishing, Indian Navy, Geometric Software, KPIT Cummins and Syntel.

With an employee-strength of 300 in India, Paradyne also has a US presence through its wholly-owned subsidiary Dyne Techservices.

Read the article in Business Standard.

Kotak lines up a second $350 mn real estate fund

The real estate investment arm of Kotak Mahindra Limited is raising its second fund. Kotak Realty’s Kotak India Real Estate Fund II is planning a corpus of around $350 mn, and has got commitments from international investors, financial institutions, multilateral agencies and high-net worth investors in the United States, the Middle East and Europe for investing in Indian real estate. The fund is expected to be closed in the next 5-6 weeks.

In May 2005, Kotak Mahindra Investments started Kotak Realty Fund with the setting up of the Kotak India Real Estate Fund I — a $100-min fund for investing in real estate. The fund will be probably closed by March 2007.

Kotak’s new fund would seek equity investments in development projects and enterprise level investments in real estate operating companies. These would include hotels, healthcare, retailing, education and property management. The proposed fund will also focus on the northern region.

Kotak Realty’s first fund, a closed-ended fund of seven years, is said to have deployed nearly 65-70% of its corpus. While it invested through the pre-IPO placement in Bangalore-based Sobha Developers, the fund has also invested in the Delhi-based hotel chain Lemon Tree Hotels and Red Fox Hotels. Both these hotel chains have also been funded by private equity major Warburg Pincus. The fund, which will be organized as a scheme of Kotak Mahindra Realty Fund, will have Kotak Mahindra Investments Ltd as the investment manager.

Read more about the fund in The Economic Times article.

Italian Annabelle acquires sick Tamil Nadu-based footwear company

Annabelle, an Italian shoemaker, has acquired AS Nissar Ahmed and Co., an Ambur-based sick leather footwear unit, in the leather belt of Tamil Nadu for an estimated €800,000 (Rs 4.6 crores approximately). This is reportedly the first foreign direct investment (FDI) in the formal male footwear segment.

All previous investments have been made in the sports footwear and the foot component sectors. The company will soon commence production to meet its global demands. Annabelle will significantly invest additional capital, besides bringing along technology to make world class footwear. Currently, AS Nissar Ahmed and Co. manufactures around 3000 pairs a day. Annabelle is looking to scale up the production capacity to about 10,000 pairs a day. The Italian shoemaker is sourcing 15,000 pairs of footwear and components, mainly leather shoe uppers and leather unit soles, from India and Bangladesh. Its manufacturing unit in the south of Italy produces close to 15,000 pairs a day.

According to a Council for Leather Exports report, global trade in leather footwear is worth $30 bn, while non-leather footwear is $18 bn. India's share is a mere 1.4% and 0.15% respectively.

Read The Economic Times article.

Dabur Pharma acquires Thailand-based Biosciences

Dabur India’s pharma subsidiary has acquired the sales and distribution network of a Thai-based associate. Dabur Pharma has acquired Biosciences its long-term partner in oncology products distribution and marketing, for an undisclosed amount. The deal will make the New Delhi-based Dabur Pharma the largest Asian company in the oncology segment.

The deal was funded from internal accruals. The company has been looking out for brand acquisitions for a long time and has also considered some products of the US-based Abbot Laboratories.

The $290 million Dabur Pharma is India's largest player in the oncology segment and has marketing presence in more than 40 countries including the US and Europe. In addition to India and Thailand, it has major market share in South Asian countries such as Malaysia and Philippines. It develops, manufactures and markets a wide range of medicines from injectables and oral dosage forms to intermediates and active pharmaceutical ingredients across oncology and women's health.

For more, read the articles in Business Standard and The Economic Times – 1 2.

Ranbaxy Laboratories to bid for Merck's generic drug business

Ranbaxy Laboratories, India's third-largest drug maker by market value, is planning to buy German pharma major Merck’s generic drug business, estimated to be worth more than €4 bn ($5.2 bn). If a deal is struck, Ranbaxy will become the third largest generic drug manufacturer in the world, behind Teva Pharmaceuticals of Israel and Swiss pharma company Novartis, with combined sales of $4 bn. Ranbaxy itself is valued at $3.5 bn, and aims to be one of the top five generic players in the world with $5 bn in annual sales by 2012.

Ranbaxy would likely be competing with other pharma companies such as Teva, Sandoz (Novartis’ generics division) and Sanofi-Aventis as well as private equity majors such as Blackstone and KKR, for acquiring the assets of Merck’s generic business. Ranbaxy hopes to be in the fray by January-end. The company is planning to raise finances for the acquisition through a mix of debt, equity and private equity.

In the year 2006, Ranbaxy laboratories had made six acquisitions - Be-Labs (South Africa), Ethimed NV (Belgium), Terapia (Romania) and the unbranded generic business of GlaxoSmithKline (GSK) in Germany and the Mundogen generic business of GSK in Spain.

Merck’s generics business has gross revenues of around $2.5 bn. The German company had announced last week that it was considering the sale of its generics division (Merck Generics) to raise resources for the acquisition of Swiss drug-maker Serono. Merck Generics has sales in more than 90 countries and accounts for the third largest generics business in the world. The division employs approximately 5,000 people world-wide.

A successful acquisition, besides tripling Ranbaxy’s topline, will give it greater access to key markets in the US, Europe and Japan. Moreover, with the Merck business not being vertically integrated, Ranbaxy can use its strengths in the active pharmaceutical ingredient (API) business to bring about greater cost synergies and efficiencies. It will also result in improved product flow, economies of scale and relative enhanced pricing power for Ranbaxy in the highly competitive generic industry.

Read more on this news from Reuters.com, Business Standard and The Economic Times – 1 2.

Spentex Industries merges with Indo Rama Textiles

Spentex Industries is merging Indo Rama Textiles with itself. The merger ratio has been fixed at 10:9, i.e. for every 10 shares of Indo Rama Textiles the shareholder will get 9 shares of Spentex Industries.

Spentex had acquired 49.03% stake in Indo Rama Textiles in May 2006. Its total equity holding in Indo Rama Textile now stands at 84.02%. Spentex had then acquired an additional 14.99% stake in Indo Rama Textiles through the market and enhanced its stake by 20% acquired through an open offer to the shareholders

Spentex Industries is India’s largest yarn manufacturer and currently has eight manufacturing plants-- six in India and two in Uzbekistan.

Read more in the article in The Economic Times.

New Enterprise Associates to buy 50% stake in HFCL Infotel

New Enterprise Associates (NEA), a US-based private equity firm, may buy up to 50% of HFCL Infotel, a listed cellular service provider arm of HFCL. The stake is estimated to be valued at Rs. 350 crores. The company may reportedly go for a preferential allotment to allow NEA to pick up to 50% stake in the company.

HFCL Infotel offers CDMA-based services in Punjab, including fixed-line, fixed wireless terminal, and digital mobile services. As of November-end, HFCL Infotel had about 327,000 subscribers. The company also provides leased line services and PCO services. The company is estimated to have an enterprise value of $230-250 mn (including a debt of about $80 mn). As per the current shareholding, the promoters hold 62% in HFCL Infotel, private corporate bodies hold just over 30% and 2.51% is held by the public.

NEA has been scouting for buys in India. The company plans to invest $125-175 mn from its recently-closed $2.5 bn fund. Recently, it also created an Indian arm, NEA IndoUS, which is raising a $150 mn fund ($30 mn provided by NEA) to primarily put into start-ups here.

Read more in The Economic Times article.