State Bank of India along with Indian Overseas Bank, Union Bank of India, Corporation Bank and IDBI are looking to sell upto a combined 11% stake in the National Stock Exchange. This follows the sale of a 20% stake by five other leading financial institutions in the exchange.
Several private equity players such as Blackstone and Actis have shown interest in buying the stake. Earlier, the New York Stock Exchange (NYSE), Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund bought 5% each in NSE from a consortium of five domestic financial institutions. IFCI sold 7% for Rs. 779 crores, while both ICICI Bank and IL&FS divested 5% each for around Rs. 550 crores. GIC sold 2% for Rs. 205 crores and PNB sold 1% stake for Rs. 102 crores. The sudden interest in NSE from foreign players comes after the Reserve Bank of India allowed foreign investment of up to 49% in stock exchanges, fixing the foreign direct investment cap at 26% and foreign institutional investor limit at 23%. Rules stipulate that no single entity can hold more than 5% in a stock exchange.
Read the Business Standard article.
Related Post: NYSE, Goldman Sachs, General Atlantic, SAIF to buy 26% in NSE
Monday, February 5, 2007
Providence Private Equity to buy stake in Asianet for Rs. 300 crores
US private equity fund Providence is reportedly buying a minority stake in Asianet Satellite Communications, Kerala’s largest cable operator for Rs. 300 crores. Providence invests only in media and communication companies. Last year, it bought 16% in AV Birla-controlled Idea Cellular, India’s sixth-largest cellular operator for about $400 mn. The firm has opened an office in New Delhi.
Asianet reaches about 500,000 homes directly in Kerala and provides signal to other local cable operators covering an additional 300,000 homes. The company has been betting big on the integrated services play of late and has forayed into broadband through Asianet Data Line, which is expected to contribute an additional Rs. 25-30 crores to the topline this year. The company also operates a bouquet of channels, such as Jewel Box, Medley and Asianet Cable Vision.
Launched in August 1993, Asianet is the oldest Malayalam channel and beams its programmes through Intelsat to over 15 countries in West Asia, South and South-East Asia. The Asianet channel is also picked up by other cable operators in the state.
The 13-year-old channel is going for a major expansion in the near future. New Kannada and Tamil channels will be the latest additions to the bouquet of channels bearing the Asianet logo.
Read The Economic Times article.
Related Post: Providence Equity Partners opens offices in Hong Kong and India
Asianet reaches about 500,000 homes directly in Kerala and provides signal to other local cable operators covering an additional 300,000 homes. The company has been betting big on the integrated services play of late and has forayed into broadband through Asianet Data Line, which is expected to contribute an additional Rs. 25-30 crores to the topline this year. The company also operates a bouquet of channels, such as Jewel Box, Medley and Asianet Cable Vision.
Launched in August 1993, Asianet is the oldest Malayalam channel and beams its programmes through Intelsat to over 15 countries in West Asia, South and South-East Asia. The Asianet channel is also picked up by other cable operators in the state.
The 13-year-old channel is going for a major expansion in the near future. New Kannada and Tamil channels will be the latest additions to the bouquet of channels bearing the Asianet logo.
Read The Economic Times article.
Related Post: Providence Equity Partners opens offices in Hong Kong and India
Genpact plans largest IPO on US markets by an Indian company at $500-600 mn
Genpact, India’s largest BPO company has finalized its IPO in the US markets as it plans to raise between $500-$600 mn and will list on the New York Stock Exchange. This will be the largest IPO by an Indian company in the US. The Genpact board has approved the issue and has appointed merchant bankers Morgan Stanley and Goldman Sachs for the issue.
The public issue is important as Genpact is the largest BPO company in India, and the issue will fulfill the huge demand for Indian BPO shares in the US market. The issue will also affect the valuations and demand for two other Indian BPO firms that went public last year: WNS, which got listed on NYSE, and EXL Services on NASDAQ. Both WNS and EXL saw a huge demand for their shares when they went public and even after the issue, they command very high valuations.
Genpact is owned by General Atlantic and Oak Hill Capital, who jointly control 60% of the equity of the company. The two funds had picked up the stake in Genpact in 2004 and in two years, have increased the value of their holding by five to six times. This is a fairly high rate of return for the investment made by a private equity funds. The remaining 40% is owned by US conglomerate GE.
The IPO is not likely to see a huge sale of shares by the existing shareholders. Bulk of the issue will be fresh issue of shares and the funds will be available for Genpact to fund growth. While the private equity funds Oak Hill Capital and General Atlantic are not expected to sell their holding, the value of their stake will go up substantially.
Read more in The Economic Times article.
Related Post: Oak Hill Partners may merge portfolio companies Genpact and Vertex; merged entity to be listed
The public issue is important as Genpact is the largest BPO company in India, and the issue will fulfill the huge demand for Indian BPO shares in the US market. The issue will also affect the valuations and demand for two other Indian BPO firms that went public last year: WNS, which got listed on NYSE, and EXL Services on NASDAQ. Both WNS and EXL saw a huge demand for their shares when they went public and even after the issue, they command very high valuations.
Genpact is owned by General Atlantic and Oak Hill Capital, who jointly control 60% of the equity of the company. The two funds had picked up the stake in Genpact in 2004 and in two years, have increased the value of their holding by five to six times. This is a fairly high rate of return for the investment made by a private equity funds. The remaining 40% is owned by US conglomerate GE.
The IPO is not likely to see a huge sale of shares by the existing shareholders. Bulk of the issue will be fresh issue of shares and the funds will be available for Genpact to fund growth. While the private equity funds Oak Hill Capital and General Atlantic are not expected to sell their holding, the value of their stake will go up substantially.
Read more in The Economic Times article.
Related Post: Oak Hill Partners may merge portfolio companies Genpact and Vertex; merged entity to be listed
Deutsche names Sanjay Sharma head of India equity capital markets
Investment banking in India is bearing witness to many high-profile people movements of late. After Citigroup’s investment banking head Surojit Shome’s move to Lehman Brothers India, we now hear of Merrill Lynch old hand Sanjay Sharma quitting Merrill to lead Deutsche Bank’s Indian equity capital markets operations. Sharma’s vacancy is being filled by Sumeet Puri, who will be moving from his post as Asian equity syndicate head from Hong Kong (See Related Post).
Indian equity capital markets volume jumped 22% to more than $19 bn last year, as total investment banking revenue hit a record $413 mn. Indian stocks rose more than 45% in 2006. Deutsche ranked second in investment banking revenues behind Citigroup, with $42 mn in revenues from underwriting stock and bond deals and advising on mergers.
Investment banks like Lehman Brothers, Goldman Sachs and UBS are expanding their
India teams as the country’s companies become bigger global players. Lehman last month poached Citigroup’s Surojit Shome as head of investment banking for India. Bankers, particularly non-resident Indians, are keen to move to Mumbai and New Delhi as top salaries approach the same levels as those in Singapore and Hong Kong, and the market yields increasingly large and interesting transactions. However, intense competition between banks has taken a bite out of fees, with equity deals only paying an average of 1.6%, compared with 2.3% for Hong Kong offerings and up to 7% for initial public offerings in the United States.
Read the article in Reuters.com.
Indian equity capital markets volume jumped 22% to more than $19 bn last year, as total investment banking revenue hit a record $413 mn. Indian stocks rose more than 45% in 2006. Deutsche ranked second in investment banking revenues behind Citigroup, with $42 mn in revenues from underwriting stock and bond deals and advising on mergers.
Investment banks like Lehman Brothers, Goldman Sachs and UBS are expanding their
India teams as the country’s companies become bigger global players. Lehman last month poached Citigroup’s Surojit Shome as head of investment banking for India. Bankers, particularly non-resident Indians, are keen to move to Mumbai and New Delhi as top salaries approach the same levels as those in Singapore and Hong Kong, and the market yields increasingly large and interesting transactions. However, intense competition between banks has taken a bite out of fees, with equity deals only paying an average of 1.6%, compared with 2.3% for Hong Kong offerings and up to 7% for initial public offerings in the United States.
Read the article in Reuters.com.
Deutsche Bank’s real estate arm in talks with Emaar-MGF for investments worth $200 mn
Deutsche Bank’s real estate arm is in advanced stages of talks with real estate major Emaar-MGF to invest around $200 mn in the company. If the transaction goes through, it could possibly be the biggest deal in the real estate sector in India. As of now, the largest private equity transaction in the realty space has been Morgan Stanley Real Estate Fund’s $125 mn investment in Mumbai-based Oberoi Constructions (See Related Post).
Deutsche Bank’s investment will be done through its New York-based real estate arm RREEF. RREEF is one of the biggest real estate investors in the world with over $65 bn in assets under management. It currently has seven separate funds around the world which make investments in real estate and infrastructure. It provides services in fund management, investment management, asset management, property management, leasing, research, construction and development.
The stake Emaar-MGF will dilute is not known as the transaction is expected to be a quasi-equity deal. RREEF will hold convertible debentures in the company. Last year, Citigroup and New York Life Insurance had picked around 2% equity in Emaar-MGF Land for a consideration of $100 mn. Evolvence India Fund had recently invested $41 mn in Emaar-MGF.
Emaar-MGF is a joint venture between the Dubai-based real estate company Emaar Group and India-based MGF Developments. It plans to hit the capital market sometime in the third quarter of 2007. It is expected that the JV will dilute about 5-10% of its equity in the IPO. On the hospitality front, Emaar-MGF recently entered a 50:50 JV with French hospitality chain Accor. The JV aims to build and operate a chain of 100 budget hotels with an investment of $300 mn. Of this, the first 20 are likely to come up on Emaar-MGF’s existing land bank.
Read The Economic Times article.
Deutsche Bank’s investment will be done through its New York-based real estate arm RREEF. RREEF is one of the biggest real estate investors in the world with over $65 bn in assets under management. It currently has seven separate funds around the world which make investments in real estate and infrastructure. It provides services in fund management, investment management, asset management, property management, leasing, research, construction and development.
The stake Emaar-MGF will dilute is not known as the transaction is expected to be a quasi-equity deal. RREEF will hold convertible debentures in the company. Last year, Citigroup and New York Life Insurance had picked around 2% equity in Emaar-MGF Land for a consideration of $100 mn. Evolvence India Fund had recently invested $41 mn in Emaar-MGF.
Emaar-MGF is a joint venture between the Dubai-based real estate company Emaar Group and India-based MGF Developments. It plans to hit the capital market sometime in the third quarter of 2007. It is expected that the JV will dilute about 5-10% of its equity in the IPO. On the hospitality front, Emaar-MGF recently entered a 50:50 JV with French hospitality chain Accor. The JV aims to build and operate a chain of 100 budget hotels with an investment of $300 mn. Of this, the first 20 are likely to come up on Emaar-MGF’s existing land bank.
Read The Economic Times article.
Reliance Energy to bid for Globeleq's global assets
Domestic power major Reliance Energy will bid for the global assets of operating power company Globeleq in the four blocks of Asia, Africa, the Americas and Egypt. Globeleq recently partnered Lanco Infratech to win India’s first ultra-mega power project at Sasan in Madhya Pradesh. Globeleq’s operations, valued at $2 bn, span over 13 countries and accounts for about 5000 MW in 13 power companies. Globeleq’s stake, most of which is in gas-based power plants, totals to about 3000 MW. Lehman Brothers has been mandated to carry out the transactions. Reliance Energy, which is planning to develop several power projects in India including the gas based power project in Dadri, has set its eyes on these assets and is expected to put in an indicative bid by mid-February.
Globeleq was set up by the UK Government’s Department for International Development (DFID) as part of its strategy of promoting the private sector in the developing world. DFID launched Globeleq in 2002 as the power sector arm of its own CDC Group. In January 2004, it separated Globeleq as a stand-alone concern to run CDC’s power portfolio. CDC, Globeleq’s sole shareholder, has $3 billion in net assets and its investment is managed by Actis, the private equity fund manager specializing in emerging markets.
Read more in the article in The Economic Times.
Globeleq was set up by the UK Government’s Department for International Development (DFID) as part of its strategy of promoting the private sector in the developing world. DFID launched Globeleq in 2002 as the power sector arm of its own CDC Group. In January 2004, it separated Globeleq as a stand-alone concern to run CDC’s power portfolio. CDC, Globeleq’s sole shareholder, has $3 billion in net assets and its investment is managed by Actis, the private equity fund manager specializing in emerging markets.
Read more in the article in The Economic Times.
Government considering amendments to the SEBI Act in Budget 2007
It is understood that the government is planning to amend the Securities and Exchange Board of India (SEBI) Act so as to enable SEBI to introduce plea bargain, disgorgement, etc. in the forthcoming budget session. The Ministry of Finance has called a meeting of the SEBI officials to discuss and finalize these amendments before placing it for the amendment. The Act will also incorporate the clause of compounding of cases in the capital market. This power will be accorded to the court and not to the SEBI. Plea bargaining might be allowed for select category of cases and not all. The SEBI Act amendments will also address more clarity and transparency by introducing clauses specifically related to disgorgement. The amendments will also incorporate the creation of an investor protection fund and the provision that all fees and charges collected by the regulator will be transferred to the government account. Among other things, this will include fees collected from brokers, penalties imposed, etc. After the funds were transferred to the government account, the SEBI might have to take the permission of the government to withdraw funds for use.
Read the Business Standard article.
Read the Business Standard article.
Auto component manufacturer Varroc acquires Italian forgings company Imes
Varroc Group, an automotive parts manufacturer, has acquired Imes SpA, an Italian hot forgings manufacturer, for an undisclosed sum. Imes has an annual installed capacity of 110,000 tons of forged parts and annual sales of about €60 mn with an EBIDTA of €12 mn in the last calendar year. Imes has manufacturing units in Italy and Poland, with large utilizable capacities in Poland. The acquisition has been financed by a combination of internal accruals and debt. Through the acquisition, Varroc hopes to enhance customer service to its clients in Europe by augmenting capacity and increasing product diversity. It would also shorten the length of supply chain to its clients, while preserving the benefits of low cost manufacturing. Varroc has significant presence in automotive components for two, three and four wheelers in the domestic and overseas markets supplying polymer, electrical and electronic and metallic components. It has 17 manufacturing facilities across Western and Northern India and is targeting a turnover of about $300 mn this fiscal.
Article in The Economic Times.
Article in The Economic Times.
MindTree Consulting IPO opens on Feb 9; priced at Rs. 365 – 425
MindTree Consulting Limited, an IT services company, is coming out with its maiden public offering of its equity shares, which opens on February 9, 2007 and close on February 14, 2007. The company proposes to offer 55.9 mn equity shares of Rs. 10 each at a price band of Rs. 365/- to Rs. 425/- per equity share through a 100% book building process method. The issue will constitute 15.00% of the post-issue capital of the company. Kotak Mahindra Capital, JM Morgan Stanley, JP Morgan and Macquarie are the managers to the issue.
MindTree is organized into two divisions – IT Services and R&D Services. IT Services comprise IT strategic consulting, application development and maintenance, package implementation and product engineering services. The IT Services business unit offers such services mainly to industries such as manufacturing, travel and transportation, banking, financial services and insurance. R&D Services are organized into two divisions – Engineering, which provides product realization services including architecture and design, re-engineering and product assurance to technology and product firms; and Research, which conceives and develops intellectual properties, primarily in the short-range wireless communication segment and licenses and customizes such intellectual properties for clients.
Read the press release here.
In a related development, MindTree is about to acquire a domestic semiconductor design company in an all-cash deal. The target company is reported to employ around 200 people. It has a sales presence in the US and a delivery centre in India. MindTree has signed a non-binding term-sheet with this firm and due diligence is on. It expects the acquisition to add to its IC (integrated chip) design capability and will also bring in new customers. This will be MindTree’s third acquisition in its seven-year history. The company had earlier made two acquisitions, the software division of ASAP and its subsidiary in September 2004 and Linc Software Services in June 2005.
Read the article in Business Standard.
MindTree is organized into two divisions – IT Services and R&D Services. IT Services comprise IT strategic consulting, application development and maintenance, package implementation and product engineering services. The IT Services business unit offers such services mainly to industries such as manufacturing, travel and transportation, banking, financial services and insurance. R&D Services are organized into two divisions – Engineering, which provides product realization services including architecture and design, re-engineering and product assurance to technology and product firms; and Research, which conceives and develops intellectual properties, primarily in the short-range wireless communication segment and licenses and customizes such intellectual properties for clients.
Read the press release here.
In a related development, MindTree is about to acquire a domestic semiconductor design company in an all-cash deal. The target company is reported to employ around 200 people. It has a sales presence in the US and a delivery centre in India. MindTree has signed a non-binding term-sheet with this firm and due diligence is on. It expects the acquisition to add to its IC (integrated chip) design capability and will also bring in new customers. This will be MindTree’s third acquisition in its seven-year history. The company had earlier made two acquisitions, the software division of ASAP and its subsidiary in September 2004 and Linc Software Services in June 2005.
Read the article in Business Standard.
Indian economy showing signs of overheating, says The Economist
The latest issue of The Economist presents an alternative picture to the all-pervasive ‘India Shining’ story. The cover story says that even though India is growing at a rate comparable to that of China, it would not be possible to sustain this pace and that there are some worrying indications of the Indian economy overheating.
· Inflation has risen to 6% despite lower oil prices, above the 5.5% upper limit set by the Reserve Bank of India (RBI).
· Capacity utilization is higher than at any time in the past decade and severe skill shortages have caused wages to spiral upwards.
· Bank lending to firms and households has expanded by 30% over the past year; lending on commercial property up by 84% and home mortgages by 32%.
· India's stock market is one of the emerging countries’ most expensive, with a price-earnings ratio of more than 20.
· House prices in many big cities have more than doubled over the past two years.
· India's deficit widened to more than 3% of GDP in the three months to September.
· India is heavily dependent on short-term portfolio capital inflows, rather than foreign direct investment, which is longer-term.
· India’s total fiscal deficit, including off-budget items such as oil and power subsidies is close to 8% of GDP, the biggest among the main emerging economies. India also has the highest ratio of public debt to GDP, at 80%.
· India spends 4% of its GDP on infrastructure investment, compared with China's 9%. In absolute dollar terms, China spends seven times as much on its infrastructure.
· India's labour laws are among the most restrictive in the world.
· Quality of public services, from education and health to the provision of water, is dreadful, to say the least.
Read the complete article in TheEconomist.com.
· Inflation has risen to 6% despite lower oil prices, above the 5.5% upper limit set by the Reserve Bank of India (RBI).
· Capacity utilization is higher than at any time in the past decade and severe skill shortages have caused wages to spiral upwards.
· Bank lending to firms and households has expanded by 30% over the past year; lending on commercial property up by 84% and home mortgages by 32%.
· India's stock market is one of the emerging countries’ most expensive, with a price-earnings ratio of more than 20.
· House prices in many big cities have more than doubled over the past two years.
· India's deficit widened to more than 3% of GDP in the three months to September.
· India is heavily dependent on short-term portfolio capital inflows, rather than foreign direct investment, which is longer-term.
· India’s total fiscal deficit, including off-budget items such as oil and power subsidies is close to 8% of GDP, the biggest among the main emerging economies. India also has the highest ratio of public debt to GDP, at 80%.
· India spends 4% of its GDP on infrastructure investment, compared with China's 9%. In absolute dollar terms, China spends seven times as much on its infrastructure.
· India's labour laws are among the most restrictive in the world.
· Quality of public services, from education and health to the provision of water, is dreadful, to say the least.
Read the complete article in TheEconomist.com.
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