Tuesday, February 6, 2007

Moser Baer buys Philips' optical R&D tech unit OM&T

Phillips is selling its 100% subsidiary OM&T, a specialized optical R&D technology company, to Moser Baer India (MBI). The acquisition will complement the existing cutting edge technology research being done in Moser Baer's R&D centre in India and help it to further consolidate its position in the optical media market. All IP created by OM&T will be transferred to Moser Baer.

Read the Business Standard article.

JM Financial invests Rs. 120 crores in Sona Group

JM Financial India Fund, a $ 200 mn corporate private equity fund promoted by JM Financial Limited and Old Lane Partners LP will invest Rs.120 crores in the Sona Group. The investors have an option to invest another Rs.40 crores at a later stage. The investments include that in Sona Group companies including Sona Koyo Steering Systems Limited, Sona Okegawa Precision Forging Private Limited and other Sona Group Companies in the auto-ancillary space.

The Sona Group is an auto ancillary manufacturer with a diversified product range and enjoys industry leadership position in steering systems and precision forged gears. The investment by JM Financial will be used to expand capacities in the Sona Group’s subsidiary companies to meet domestic and export demand as well as for potential acquisitions.

Read the press release on Moneycontrol.com.

Tata Consultancy Services to raise funds to hedge forex risk

The Times of India reports that Tata Consultancy Services is planning to raise funds reportedly of around $200 mn to manage risks on its foreign exchange exposure. TCS earns nearly all its income in foreign exchange and volatile exchange rates impact its margins. J P Morgan will be managing the transaction. Citigroup, ABN-AMRO, Standard Chartered and HSBC are in touch with TCS on the same. The exercise is part of TCS' treasury management as it includes significant forex component. The possibilities include of either going in for a forward contract or a mix of forward contract and options.

IL&FS PE arm to raise $900 mn this year; may team with Trikona Capital

IL&FS private equity arm IL&FS Investment Managers (IIML) will raise funds worth $900 mn in 2007 for investments in infrastructure, real estate and hospitality.

In addition to raising a $400 mn-proprietary fund, it’s also in talks with the UK-based PE fund Trikona Capital to raise another $500 mn spread over two sector specific funds. Apart from this, IIML will also set up a $1 bn PE fund with Abu Dhabi Investment Corporation for investments in infrastructure. IIML and Trikona Capital already have two sector-specific PE funds for investments in real estate and hospitality. The corpus of these funds is $100 mn each. IIML’s proposed PE funds with Trikona Capital will also be for real estate and hospitality. The corpus of both the sector-specific funds is expected to be $250 mn each.

The proprietary fund that will be raised by IIML will invest only in infrastructure projects in India. The proposed fund would be raised by the company over the next three to four months.

IIML currently manages assets worth $1 bn in several funds and also manages a $56-mn proprietary fund of IL&FS. IIML has deployed $10 mn of its $100 mn PE fund set up jointly with Trikona Capital for investments in infrastructure and real estate. In October last year, the fund invested $9 mn in IL&FS Transportation Networks Limited for a 2.5% stake. The second fund, jointly promoted by IIML and Trikona Capital, is the hospitality fund which has deployed $60 mn of its $100 mn. The $1 bn PE fund with ADIC will make investments in infrastructure assets in West Asia and North Africa. Both ADIC and IL&FS will commit around $50 mn to the new fund.

Read The Economic Times article.
Related Post: IL&FS to float $1 bn PE fund with Abu Dhabi Investment Company

Indian Government to partner FIIs and PE funds to create National Shelter Fund for the housing sector

The Indian Government along with foreign institutional investors (FII) and private equity funds is planning a special purpose vehicle (SPV) called the National Shelter Fund to provide affordable houses in the country.

The government would raise its contribution for the fund through a proposed 1% cess on stamp duty collections levied by states. The creation of SPV is likely to be announced in the forthcoming Budget.

The proposed SPV will be on the lines of Istithmar of Dubai and Temasek of Singapore, but unlike these funds, the fund would only be used for domestic purposes. This would infuse a fresh leash of life into the country’s crumbling housing sector. The fund, with an initial corpus of Rs 1000 crores, would be invested in middle income group (MIG) housing across the nation.

More in the article in The Economic Times.

Tata Power, Kalpataru, Lanco to join Reliance Energy in bidding for Globeleq’s assets

Tata Power, Kalpataru, Lanco Infratech are some of the companies that have joined the race for British power major Globeleq’s assets. The Anil Ambani Group has already shown interest in Globeleq’s generating assets of 4500 MW in Asia and Africa valued at $2 bn (See Related Post). Lanco Infratech is Globeleq’s partner in the Sasan ultra-mega power project. Globeleq is searching for a buyer for its 70% stake in Sasan. Kalpataru, the Mumbai-based real estate and power transmission group, has a strong presence in North Africa with its transmission business and is said to be also in the race for the African assets.

Read the Business Standard article.

SBI to raise $700 mn from markets overseas by March 2007

The State Bank of India will raise $700 mn by March through placing long- and medium-term bonds overseas. The bank may also go for a follow-on public offer in 2007-08. The borrowing is part of the $2 bn medium term note programme of SBI. It has hired Barclays and Citigroup to sell dollar-denominated bonds. Deutsche Bank and HSBC will also manage the sale. The four banks will also arrange a sale of five-year notes. The bank is raising funds to meet new Central bank rules on capital levels and meet demand for loans. The Reserve Bank of India (RBI) on 21 July permitted banks to increase capital by selling debt overseas. SBI last month increased $300 mn of bonds it sold in December to $500 mn.

Read the Business Standard article.

Reliance Communications raises India’s largest FCCB issue worth $1bn

Reliance Communications (RCL) has raised $1 bn through foreign currency convertible bonds (FCCBs). This is the largest-ever FCCB issue from India and was oversubscribed 3-4 times by investors from Asia, Europe and the US. The bonds have a maturity of 5 years and would be convertible to equity shares at a 30% premium to the then prevailing market price.

The proceeds from the issue will be utilized to part-finance the company’s $2.5-bn expansion programme. The company has announced the expansion of coverage to 15,000-20,000 new towns and was proposed to be funded through a mix of internal accruals and debt.

JP Morgan and HSBC advised the firm on this FCCB issue. This is the second FCCB offering by RCL within a year. In March 2006, RCL had completed an FCCB issue to raise $500 mn. In December 2006, RCL raised $1 bn in debt from international markets. The five-year unsecured loan was facilitated by ABN-AMRO, Standard Chartered and Citibank.

Read the article in The Economic Times.

Government to bring M&As under RBI, SEBI regulations

The Indian Government may pass regulations to empower the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) to inspect mergers and acquisitions involving domestic and foreign companies in order to examine whether such deals pose any security threat to the country. All details regarding the source of funding and the structure of the new entity, after merger / acquisition, will be closely scrutinized by the two regulators. In the case of inflow and outflow of funds, the RBI will set a threshold limit. The apex bank and the capital market regulator will examine any investment beyond the threshold limit in the case of listed companies. In addition, sectoral regulators would also examine impact of the M&As for the domestic market.

The investigation will seek to find out whether the formation of the new company, post-merger, will be a threat to national security—both economic and physical. A probe by sectoral regulators will deal with the impact of the merger for the domestic market in terms of monopolistic practices. In the event of a foreign company acquiring an Indian company, the regulator will investigate the antecedents of the company that is acquiring the Indian company and its promoters. Moreover, a detailed investigation of the source of funds, used for financing the acquisition, will also be undertaken.

In the case of an Indian company acquiring a foreign company, the procedures will be much simpler, with the domestic firm required to follow the existing procedures of informing the regulators about the source of funding. Not just the foreign direct investment (FDI), even projects covered under the public-private-partnership (PPP) model will come under security. As a part of this, all PPPs will have a national security exemption clause, which will prevent companies in the consortium to undertake activities, which the government thinks will be against the country’s safety. In case of violations, companies will be removed from the project.

Article in The Financial Express.

Indiabulls to reorganize businesses; may hive off broking biz into a separate entity

Indiabulls Financial Services is reorganizing its businesses. This will include the de-merger of its brokerage services known as Indiabulls Securities. The Indiabulls board has considered the proposal involving the de-merger of Indiabulls Securities on a going-concern basis and plans to list the resultant entity after the de-merger. Indiabulls also proposed the amalgamation of the entire business and undertaking of Indiabulls Credit Services with the company. Indiabulls has recently been in the news due to the IPO of its arm Dev Developers on the London Stock Exchange’s Alternative Investment Market (AIM) (See Related Post) and the hike in the stake held by steel magnate LN Mittal in the company.

Read the complete article in Business Standard.

Goldman Sachs propose to buy stake in Multi-Commodity Exchange

Goldman Sachs has put in a proposal to buy a stake in India’s largest commodity bourse, the Multi Commodity Exchange (MCX). Goldman Sachs already holds a 7% stake in the National Commodity and Derivatives Exchange Limited (NCDEX). The MCX stake would be considered as an investment and not a strategic acquisition. The New York Mercantile Exchange, London Metal Exchange and The Tokyo Commodity Exchange have also initiated talks with MCX. The talks were being initiated ahead of the publication of final guidelines on foreign shareholding in Indian commodity exchanges. The idea is to firm up plans in readiness for the guidelines. The Forward Markets Commission has told all commodity exchanges not to change shareholding patterns until the new guidelines are issued. The shareholders of MCX include Financial Technologies Limited, State Bank of India and its associates, National Bank for Agriculture and Rural Development (NABARD), National Stock Exchange of India, Fidelity International, Corporation Bank, Union Bank of India, Canara Bank, Bank of India, Bank of Baroda, HDFC Bank and SBI Life Insurance.

Read the Business Standard article.

Videocon forms telecom JV with US firm Verizon

Consumer durables major Videocon’s Leo Communications is forming a JV with $88 bn US telecom giant Verizon to offer international long distance (ILD) services in India. The initial investment in the venture is estimated to be over $30 mn. Verizon will hold 74% in the JV, while the rest will be held by Videocon. Videocon is likely to be more of a financial partner in the JV and would eventually sell out in the long run.

India is a lucrative market for telecom companies and tele-density is just around 16%. The wireless business is growing very fast and the number of people calling overseas from India is rising fast every year. The annual ILD outgoing minutes from India were 2500 mn in 2005-06 and are expected to rise to 3500 mn by March 2007.

Read more on this in The Economic Times.

Dhanalakshmi Bank planning private placement to satisfy capital adequacy ratio and net worth requirements

Kerala-based private sector bank Dhanalakshmi Bank is planning a private placement of less than 5% of its equity shares as part of its capital-raising plans. These include a follow-on public issue to increase its net worth to the minimum limit of Rs. 300 crores as stipulated by the Reserve Bank of India (RBI).

36.69% of the bank is owned by Andhra Pradesh-based industrialist P Raja Mohan Rao. Dhanalakshmi seeks to raise Rs. 60 crores through the private placement and another Rs. 55 crores through a qualified institutional placement. The remaining amount will be raised through a public issue later. Currently, the bank has a net worth of Rs. 119 crores. The private placement procedure will be completed by March-end 2007. As of December 2006, the bank’s capital adequacy ratio stood at 9.66%.

The bank will sell a little less than 5% through private placement as selling anything above that requires RBI permission. The bank is currently in talks with four to five investors at present, and has been approached by venture capitalists, other banks, high net worth individuals and corporate groups as of now. The bank is willing to sell its equity to only small-sized corporate groups and not to the large ones.

Read the article in Business Standard.

BHEL, HPCL, Engineers India in race to buy sick PSU Bharat Heavy Plate and Vessels

Underperforming public sector EPC firm Bharat Heavy Plate and Vessels Limited (BHPV) has been put up for sale by its parent company, the state-owned Bharat Yantra Nigam Limited (BYNL). Bharat Heavy Electricals Limited (BHEL), Engineers India Limited (EIL) and Hindustan Petroleum Corporation Limited (HPCL) are in the race to acquire it, with BHEL I the lead. SBI Caps has already conducted the due diligence.

BHPV requires an infusion of Rs. 1000 crores for its revival package. As per the estimates made by EIL and BHEL, investments of Rs. 300 crores would be required for replacing the existing machinery which is around 30 years old. Both companies propose additional machines for new product lines having market potential in oil and gas and power industries. Besides investment in equipment, there will be requirement of over Rs. 100 crores for the working capital needs. BHPV also seeks financial restructuring to clean its balance sheet with waiver of loans and other statutory liabilities that have accrued till date.

The firm is expected to close the current fiscal with a turnover of Rs. 175 crores; its order book position is worth over Rs. 400 crores. The company also has excess land measuring 377.7 acres, which may be disposed of to secure additional funds.

The Ministry of Heavy Industries and Public Enterprise has invited EIL, BHEL and HPCL seeking an Expression of Interest (EoI) for acquiring BHPV. It has been proposed that EIL will provide engineering, inspection, marketing and managerial support. HPCL has been considered for partnering this venture for managerial support and securing orders for the ongoing projects of BHPV. However, BHEL with experience in handling labour, running industrial enterprise, capability to provide technology, besides securing orders from the power industry was considered as an ideal partner in the venture.

Read The Economic Times article.

SemIndia buys Exalted Networks for $8 mn; in talks with PE funds for buying more

SemIndia has acquired Bangalore-based fabless semiconductor company Exalted Networks in an $8 mn cash and stock deal. SemIndia is setting up a $3 bn silicon wafer fabrication unit. Exalted Networks has now been renamed as SemIndia Systems Private Limited, and has 100 engineers working for it. The company is expected to close the current financial year with a turnover of Rs. 100 crores. It has already started marketing third-party products with the SemIndia brand in the country. It has shipped out the first batch of ADSL modems made by co-investor Flextronics to BSNL.

SemIndia is close to closing two similar deals like Exalted. The target companies have not been named yet. It is also understood that AMD, which is till now a technology partner in the $3 bn wafer fabrication unit, will pick equity along with the government. It is also scouting for ATMP units in Thailand, Malaysia, Singapore and Taiwan. These acquisitions will be in the range of $100-200 mn and there could be at least three such deals. Additionally, it has also initiated talks with global private equity funds to raise the money for acquisition of Assembly, Testing, Marking and Packaging (ATMP) plants and fab units across the world. The local fab units will cater to the domestic market, while the overseas fab units, which could be ultimately shifted to India, would initially cater to customers abroad. SemIndia may not buy old fab units and will focus only on acquiring new equipment.

The SemIndia consortium has been promoted by former McGill University don Vinod Agarwal, the world’s second largest chip-maker AMD, fabless ASIC semiconductor design and manufacturing giant Flextronics, private equity fund Sandalwood Partners and others.

Read the article in DNA Money.

Rain Commodities to buy Canadian carbon company for Rs. 1624 crores

Rain Commodities Limited is carrying out a leveraged buyout of Carbon Canada, Inc. for Rs. 1624 crores (Canadian $437 mn). Toronto-based Carbon Canada is a subsidiary of Great Lakes Carbon Income Fund (GLC Carbon). The acquisition would also include a 73.56% stake in GLC Carbon and certain unsecured subordinated notes of Huron Carbon ULC, a wholly-owned subsidiary of GLC Carbon.

Post-acquisition, Rain Commodities’ stake in GLC Carbon will scale up to 94% from the current 20.23%. Rain Commodities bought this stake from American Industrial Partners Capital Fund in 2006. Rain Commodities will also purchase the remaining stake in GLC Carbon from its management and other investors. Rain Commodities will conduct the transaction through its US-based wholly-owned subsidiary Rain Commodities US. The EV of the transaction is approximately Rs. 2513 crores (Canadian $767 mn). The transaction is expected to be close by June.

Citigroup Corporate and Investment Banking is advising Rain Commodities US on the transaction. Rain Commodities has secured bank financing from the ICICI Group and Citigroup to fund the proposed acquisition.

Great Lakes Carbon Income Fund is a trust established to hold indirectly the securities of GLC Carbon USA. The fund is listed on the Toronto Stock Exchange, Canada. GLC Carbon is the world’s largest producer of calcined petroleum coke (CPC) with annual production capacity of 2.3 mn tonnes a year.

Read the articles in The Economic Times and Business Standard.