American Tower closing in on Tata Tele stake

Relief at last, for the underdog Tata Tele..DNA writes that American Tower Company (ATC) is believed to be the frontrunner among the bidders for investing in the tower firm of Tata Teleservices. Sources suggest a valuation of $2 Bn. from Tata Tele side.

Tata Teleservices MD Anil Sardana says divesture in the tower company would be concluded by the end of May. Tata Tele wants to divest between 26% and 49%. According to the company, around 15 strategic investors were shortlisted for picking up a stake in the hived-off tower entity of Tata Tele.

Indus Towers, the JV tower company between Bharti, Vodafone and Idea, may also look at divesting some of its stake to strategic investors. Bharti Airtel, Vodafone-Essar and Idea merged their tower assets in 16 circles to form an independent tower company Indus Towers. Bharti and Vodafone have 42% stake each in the company while Idea Cellular holds 16% in it.

Kapil Puri to sell off Sparsh stake

Kapil Puri, original promoter of Sparsh BPO, now owned by Blackstone controlled Intelenet, has decided to sell his residual stake of 12%.

Intelenet is awaiting regulatory approvals for the buyback. Puri intends to offer it all to intelenet, but incase of a spillover, will selloff to outsiders.

The sell off comes as he heads to develop Spanco's new BPO business after the may2007 no compete agreement has expired. Spanco's new BPO has already clocked Rs.35 Cr. of revenue

Intelenet, itself, has undergone a key change after buying out Sparsh. It went through a management buyout backed by PE firm Blackstone, which now owns 80% stake in the company

Reports ET

Graffiti

Global M&A trend. Where do you see it headed this year? The writting's on the wall.

Graph courtesy DealBook

Yatra invests 6.69 Mn in Saket for 26.05%

CNBC reports that Yatra Capital Ltd. has invested 6.69 Mn. euros for a 26.05 % in Saket Engineers Pvt. Ltd, a Hyderabad-based residential real estate development company.

Yatra Capital said with this, it now has invested in 12 deals and has used 153.03 million euros of the 220 million euros it has earmarked for investments in the Indian real estate market.

JM buys rest of ASK in the broking JV

JM Financial took over the other 40% of JM Financial ASK Securities to become 100% owner of the same. The deal was struck at 81 Cr.

For JM the priority is "providing all financial products under one roof" while for ASK it means "focus more on the portfolio mangement and wealth advisory business in future".
ASK is awaiting for clearance from SEBI for its proposed asset management business.
Read ET

The Financial Crowd : Barclays & PFC

It is our belief that financial sector in India will become broader and deeper. We will report this in a section called The Financial Crowd. And we will cheer, when one is added in The Financial Crowd.

Reuters reports through ET that Barclays will set up 100 strong private bank to serve rich enterpreneurs. "We have a successful investment bank in India and we have a very good offshore business with Indian clients and we are building an onshore private bank in India. The economy is growing at an incredible pace,” said Tom Kalaris, the chief executive of Barclays Wealth Management.

PFC on Monday floated a wholly-owned consultancy arm, PFC Consulting Ltd. to provide services in the power sector. PFC Consulting will provide services related to UMPP, including formation of special purpose vehicle. It would also conduct bidding process for awarding projects of state utilities.

Prozone sells 27% to Triangle Real Estate

Prozone Enterprises has sold a 27% stake in its realestate subsidiary to Triangle Real Estate India Fund for a total consideration of Rs 457 Cr.The subsidiary holds stake in four projects that being developed in Aurangabad, Indore, Nagpur and Jaipur covering approximately 16 million sq.ft.

Triangle Real Estate India Fund is co-promoted by ICS group and Old Mutual Investment Group Property Investments, the property division of Old Mutual.

Prozone Enterprises, is a joint venture between apparel maker Provogue (India) and UK-based Liberty International.

ICICI prepares for a pre-ipo placement

ICICI is looking for to pre-IPO placement of equity and Global FIs such as Goldman Sachs, Morgan Stanley, JP Morgan, Credit Suisse and Nomura among others are in line.

Apprantely 12-15 interests have been received and the deal will be sealed shortly.JP Morgan is the advisor for the pre-IPO placement while merchant bankers for the IPO have not yet been finalised. Sources believe I-Sec is valued at $7.5 Bn or 30,000 Cr, highest valuation for an I-Bank in India.

In February 2007, JM Financial had sold its 49 per cent stake in JM Morgan Stanley Securities for $445 million. The deal valued the entity at $908 million against DSP Merrill Lynch’s valuation of $1 billion, when Merrill bought out Hemendra Kothari’s 47 per cent stake in December 2005.

As reported by Business Standard

GS India buys another NBFC

Goldman Sachs India is on the verge of acquiring Pratham Investment and Trading, a Mumbai-based NBFC.

Goldman Sachs will invest INR2 billion in the firm, through Goldman Sachs (Mauritius) NBFC LLC. The company plans to invest $7.5 million upfront and the balance $42.5 million in the next 24 months or so, the ET report said.

Goldman Sachs India expanion has stated goal of buying NBFCs.

Mallya Wants Heinken's 37.5% Stake

Liquor baron Mallya is open & willing to buy 37.5% of heinken's share in UB. At this point both have equal stakes. Mallya says, "At today's price, I am a buyer".

Heinken get's its stake in UB from Scottish & NewCastle (S&N) after the worldwide takeover of the British brewer. The heinken-carlsberg combined takeover of S&N for $15.4 Bn was announced in jan.

Mr Mallya says Heineken is not yet a shareholder in UB pending global transaction. “My business agreement was with S&N, and Heineken will have to renegotiate a charter of rights. I cannot speculate on the outcome of our discussions,” he added.

Heinken's beer business is a direct conflict with UB's Kingfisher beer. Heinken is also a leading shareholder in Asia Pacific Breweries, makers of Tiger Beer, another competition to Kingfisher. According to a banker S&N's business charter agreement is not transferrable to Heinken, and that's where Mallya's leverage will come from.

report from ET

SEBI's effort at decoupling

With all the theorist of decoupling debating on it's merits, SEBI seems to be finding a way to implementing it.

SEBI is proposing a margin payment from Institutional Investors from April 21 onwards.

Only Korea & Taiwan, of all Asian markets, require margins on high beta stocks.
The other spin to the story could be "Level Field", with retail,HNI and corporates having to pay 50% margin in the cash markets. With the proposed upfront T+1 margin collection, trading churn will reduce due to a portion of funds locked in margins. Is this an attempt to regulate financial markets to avoid slingers? May be. But the consequence is on risk, as conservative institutions like pension funds will be unwilling to pay advance for shares (margin payment on T+1, shares received on T+2).

The move is finding supporters (though from conservative folks ). Abhay Aima, Equity Head of HDFC says "Fair move, as more players come in & risk rises, market needs safeguards". Ved Prakash Chaturvedi, MD, Tata AMC says "This will reduce the amplitude of swings"

Kotak raises $440 Mn. for PE buys

Kotak Investment Advisory ltd. has raised $440 Mn. in its PE fund, taking the corpus to $1.4 Bn. It will continue it's focus on small & medium enterprises with a sweet spot in the range of $10-$30 Mn.

C. Jayaram, head of KIAL says the India story is so strong that it has percolated even the scandinavian countries. Another $250 Mn. will be raised from oversees investors by september.

KIAL is organised under two heads. Real Estate & PE. The PE group has two other funds, a $160-million fund that invests across sectors and a $68-million fund focused only on biotech. With the closure of the third fund, KIAL now has approximately equal amounts in both groups. It intends to launch a third group focussed only on investments in the core infrastructure sector with a corpus of $1 billion.

reports ET

TechWave : DataCenter Story Rolls On With Ctrl S

Ctrl S Data Centers, promoted by the Pioneer Group along with IDBI and Och-Ziff will set up 4 tier-IV data centers in India, investing $250 Mn. over 2-3 years.

The Asian Data Centre market is expected to grow at CAGR 11.5 % over 2006 -10 with India emerging as the fastest growing market. The coming of around 50 Telcos is creating demand for datacenters.

All other current facilities are tier-II or III, a lowver version. A tier-IV costs 30-40% higher.

This is a part of new technology wave likely to hit India after software & BPO sector having matured, called Remote Infrastructure Management.

Reported by ET

Red Fort Capital Plans $800 Mn. Real Estate Fund

Red Fort Capital will launch second in the series offshore fund, Red Fort India Real Estate Fund II next month with size of $800 Mn.

The fund will invest in FDI-compliant projects in the residential, commercial, retail and hospitality sectors and has an investment threshold of Rs 40 crore ($10 million). ‘’We are expecting returns of 30 per cent,’’ said Subhash Bedi, partner. Red Fort has also received approvals for domestic realestate fund.

Red Fort India Real Estate Fund I has given returns in excess of 55%.

A host of global private equity players, including Blackstone, Citigroup, Morgan Stanley and Tishman Speyer and domestic funds of ICICI, Kotak and HDFC, has committed or invested nearly Rs 20,000 crore ($5 billion) in the Indian realty sector.

Read More on Business Standard

The CDS Iceberg

Two graphs from NY Times that put into perspective the seriousness of the issue.

India on Kuwait Finance House's Radar

In this Bloomberg interview, CEO & GM of Kuwait Finance House Mr. Mohammed Sulaiman Al-Omar spoke about his plans for expansion into GCC & India-China markets. "We have to be there, whether or not they have the legal infrastructure and environment for Islamic banking. "

"India is going through major economic changes. The purchasing power of the middle income has increased. They have a lot of demand for real estate, hotels and services, industrial parks, office buildings. They have heavy, light-to- medium industries. All of it comes into one basket and it is a very good market. We can do investment activities for our accounts, for our clients in terms of funds and that could be in direct investment or real estate".

As has often been commented, he added "GCC countries have a good sizeable income after oil prices rose to more than $100. That has created good liquidity in the market. GCC countries have tremendous inflows.''

Unitech to raise $500 Mn. from Lehman, Deutsche Bank

Lehman Brothers & Deutsche Bank will invest $500 Mn. in a Unitech SPV.

A source suggests talks are in advanced stage for two commercial projects at Santa Cruz (Mumbai), for developable office space of 2Mn. Sq.Ft. The deal might close in 3 weeks.

This project will be a Unitech first in Mumbai, as the firm gets aggressive outside NCR, it's home zone.

Poor market conditions, and reducing funding options have been hard on realestate companies, but everyone loves a good deal.

Read the full story on ET

Bajaj Capital To Expand With $50 Mn.

Bajaj Capital is planning to raise $50 Mn. to expand it's network. Bajaj Capital is a 4 decade old investment advisory & financial planning firm owned by KK Bajaj.

Sources indicate that Citigroup Venture Capital and Barings Private Equity are among the funds which have shown inclination to fund Bajaj Capital. In addition to being an investment advisory and financial planning company, Bajaj Capital is also a Sebi-approved Category-I Merchant Banker.

The company currently has 170 outlets across the country and is understood to be expanding. Early this year, Bajaj Capital started online trading under the Just Trade brand, which also offers online investment advisory services.

As reported in Business Standard

CRISIL to relook ratings

CRISIL is taking a re-look at ratings it assigned to debt issued by Indian Arms of 27 global financial institutions.

The ratings here derived support from parent ratings in western markets, which have now undergone change. They need revision to reflect several downgrades in the western markets.

Some of the financial entities rated by Crisil for their domestic operations include ABN Amro Bank, ABN Amro Securities, Barclays Bank, Citibank, Citicorp Financial, Citicorp Capital Markets, DSB Bank, Deutsche Bank, DSP Merrill Lynch, GE Capital Services, JP Morgan, Rabo India, Standard Chartered Bank, Bank of Nova Scotia and HSBC. Reports ET

PE Funds Waiting For Bargains

Mint here is first with a story on what was expected. PE deals down, but funds sure that companies are undergoing customary 3-4 month valuation adjustments before they line up for funds.

Also, Richard Heald, partner and MD of NM Rothschild and Sons. “During this period (of declining stock valuations), there will be more PIPE (private investment in public equity) transactions happening globally.”

“Deal prices remain high,” said John Levack, MD,Electra Partners Asia Ltd, "we will stay away from the Indian market and concentrate on deal opportunities in some other Asian markets in the short term".

Manu Punnoose, chief executive of PE fund Subhkam Ventures, added that “PE will get larger stakes (in pre-IPO deals)…but the holding time will be longer, around 3-4 years”. Nitin Deshmukh, head of Kotak Private Equity Group. “From a momentum play, we are getting into a value play.”

For more opinions on PE trends go to Mint Article

West Asia Pulls The Plug On Indian Power Projects

India Inc's effort to raise $6Bn. of funding from West Asian countries doesnt seem to be working.

According to a Central Govt. official,"After one & half year it's going nowhere with they not intrested in equity participation and Indian company's not interested in the interest rates demanded".

NTPC Ltd, National Hydroelectric Power Corp. Ltd, and Power Grid Corp. of India Ltd were targeting investments from West Asia backed by power ministry’s initiative to politically and economically engage these countries on PMO's direction.

The move would have ensured supply lines, especially . The initial focus was to attract investments from Saudi Arabia, Qatar, United Arab Emirates and Kuwait; Bahrain and Oman were to be targeted later.Each of the three companies was given an investment target of $2 billion.

However the SWFs of these nations have been busy with "better opportunities". Add to this a probable reluctance of these countries to expose themselves to Energy Demands (in their own investments) in current tight environment, has meant GoI's plans not working.

Read the article on Mint

HDFC to raise $1Bn. for buying HDFC bank equity

This Business Standard article reports HDFC raising $1 Bn. debt finance for it's stake purchase in HDFC Bank over 18 months.

Fresh equity issuance being ruled out, raising debt remains only recourse.

HDFC Bank acquired Centurion Bank of Punjab in an all-stock deal. Following this, HDFC Bank announced a private placement of equity to HDFC to enable the mortgage lender to maintain its stake at the current level of 23.3%. This entails an investment of almost $ 1 billion by HDFC.

I hope market liquidating financing mechanisms are avoided (e.g Orchid Chemicals)

Cairn raises 2534 Cr. with 5.37% stake sale

Cairn India, Indian arm of British O&G co. Cairn Energy decided to sell 5.37% to Malaysian Petronas, and Singapore-based Orient Global Tamarind Fund for Rs 2,534 crore ($625 million) for funding Capex.

Of the 113Mn. shares, 63.3 Mn shares go to Petronas & 49.7 Mn to Tamarind at Rs.224.3 each with a 1 year lockin. Funds will be utilised for capex at Mangala, Rajasthan, by next year.

For details of Cairn Operations read Business Standard.

No bidder for BKC Plot

MMRDA failed to get bids for two of the five plots that it auctioned in the Bandra-Kurla Complex (BKC).

For a commercial plot with a total developable area of 24,000 sq metres, the authority received around Rs 3.4 lakh per sq metre, only 14 per cent more than the reserve price of Rs 3 lakh per sq metre. Jet bought this bought as a sole bidder, to build its global headquarters. This is in mighty contrast to Rs 5.04 lakh per sq metre, the highest in the country to date, by Mumbai-based developer Wadhwa Builders for an MMRDA plot in November 2007.

Read BS article for more indication of sweet slowdown in realty.

Baring acquires 12% in Sharekhan

Baring Private Equity beat Merill Lynch to acquire 12% stake in Sharekhan for Rs.240 Cr.

The transaction is mixed secondary sale by Citigroup Venture Capital and additional infusion of capital.Last year, CVC along with IDFC had invested around Rs 650 crore to pick 85% stake in Sharekhan.CVC owns 75% in Sharekhan while IDFC holds 10% and the management and employees hold the remaining 15%.

Last year, CVC and IDFC together had acquired 37% equity owned by Sharekhan promoter Shripal Morakhia while 48% was acquired from other shareholders including GE, Intel Capital and some funds advised by HSBC PE India.

A private equity firm holding substantial equity stake in an unlisted company would be classified as a promoter. If that company goes public, the PE firm’s shares would have a lock-in period and cannot exit for a certain period. This could be one reason why CVC intends to dilute its stake, though it could not be verified independently (We suspect a hole in the books was discovered during due delligence and the promoter asked to make up. I would try to do some molework)

Baring earlier took exposure in the sector picking 44.8% in JRG Securities for $35 million (Rs 140 crore) about a year ago.

Go to Economic Times here

National Investment Fund Declared as QIB

In what could be a slow begining towards an Indian SWF, a SEBI Press release included National Investment Fund (NIF), a fund set up by the Government of India vide Gazette Notification no. F. No. 2/3/2005-DD-II dated November, 23, 2005 in the definition of QIB.

NIF is a fund consisting of the proceeds from disinvestment of Central Public Sector Undertakings, which would invest in equity in accordance with broad investment guidelines provided by the Government of India.

Osian`s sells 9.4% stake to PE firm

Osian’s Connoisseurs of Art will sell 9.4 per cent stake to Abraaj Capital, Dubai-based PE firm, for Rs 80 crore. Arif Masood Naqvi, VCM & group CEO Abraaj, will join the Osian’s board.

The Neville Tuli founded unique private-sector art institution straddling various sectors of art, films and lately, sports.

Osian has an archive of visual and textual material which includes rare etchings, lithographs, maps of India, British Indian photography, popular art, cinema publicity material. Having acquired Minerva theatre in Mumbai in 2006, where it is building Osianama, a museum for cinema and the arts, the company has also ventured into film production.

Osian also has an art fund, floated in 2006, with a corpus of Rs 100 crore. The company is looking at a public listing in 2009.

Osian’s has 48 other stake holders besides Neville, with none holding more than 5 per cent. These include Shiv and Kiran Nadar, Sanjeev Khandelwal, Gautam Thapar, Kumarmangalam Birla, Kito de Boer, Kamal Morarka, Sangita Kathiwada, Jerry Rao, Priya Paul and Ashok Alexander, among others.
“Each has been buying from 2001 when shares started at Rs 30 and thereafter many placements every year at Rs 90, Rs 180, Rs 360, Rs 540, Rs 1,000, Rs 1,200 and Rs 1,600.”

As reported in Business Standard

MFI gets funding from Unitus

MokshaYug Access (MYA) has received funding of Rs 8.35 crore ($2 million) from a private equity fund Unitus Equity Fund L P (UEF), a Unitus entity to support MFIs in Asia & LatAm.

MYA follows dual aim of developing rural entrepreneurial Self Help Groups & through them providing penetration to urban product & service providers.

Segments MYA focusses on are manpower, infrastructure and community participation- that can be used to increase efficiencies in the delivery of services such as dairy farming, livelihoods, healthcare and agribusiness to the rural households.

In 2006, it tied up with ICICI bank on a ‘partnership model’, through which the MFI identified the Self Help Groups (SHGs eligible for the loan. The bank then channeled the loan through the MFI, against 10 % of the amount held as security. This arrangement has been particularly cost-effective for lenders since loan identification, disbursement and recovery aspects are outsourced to MFIs who are know the local market.

PE-VC funds may be deemed FDI

According to a latest draft put up on RBI site for public comment, various classes of investors have been broadened with specific mention of PE & VC funds.

"Secondly, the details of investment received in units of venture capital funds from FVCIs are proposed to be separately captured."

Details of investment received from foreign venture capital investors are also proposed to be captured separately. Part B of Form FC-GPR has been modified to capture details of such foreign investors. The date of filing Part B of the form has been extended from June 30 of every year to July 31.

FDI is permitted under automatic & approval route. An Indian company issuing shares and convertible debentures to non-residents under either route is required to submit details of the investment in a two-stage reporting procedure.

In the first stage, receipt of funds is to be reported to RBI within 30 days. In the second stage, the company has to file Form FC-GPR with RBI within 30 days from the date of issuing shares/convertible debentures.
Form FC-GPR was revised in April 2007 by which remittance receiving Indian banks were required to obtain a KYC report on the foreign investor from the overseas bank remitting the amount.

Go to Financial Express for the complete article

Future Capital picks 70% in Godrej's rural initiative

Future Capital takes a step ahead in it's Rural Retail Masterplan with a 70% stake buyout from Godrej's Aadhar, a part of Godrej Agrovet, which will be spun off into an SPV. The Future Group will intially scale up Aadhar as supply chain of agricommodities. Aadhar may also become a distributor of financial products and consumer finance.

Both Mr. Biyani & Goderej refused to comment on the deal.

About Aadhar

Aadhaar offers an array of products and services to rural households including basic food, grocery, apparel, footwear, furniture, kitchenware, home appliances, banking, postal services and pharmacy. The first Aadhaar outlet opened in December 2003 in Pune district. Since then, 50-60 Godrej Aadhaar Centre outlets have been set up across Maharashtra, Gujarat, Punjab, Haryana, Andhra Pradesh, Tamil Nadu, Orissa and West Bengal. It launched the outlets as a hub-and-spoke model, with 10,000-square foot outlets catering to various consumers in the countryside.

About Godrej Agrovet

Godrej Agrovet is a key player in the farm segment with a large presence in cattle and poultry feeds. In recent months, the group has been evaluating various rural initiatives as part of a larger plan to step up retailing in the hinterlands.

RBI Responds : FOREX Derivative Cap May Arrive

The RBI has called for data from banks to assess their expsoure to FOREX derivatives in domestic & overseas markets.
Local exposure mainly relates to interest rate and currency options and swaps while international investment includes credit derivative structures like credit-linked notes based on foreign currency loans and bonds raised by Indian companies abroad. RBI has asked banks to limit their capital market exposure to 40 per cent of their net worth, with direct exposure limited to 20 per cent.
As part of the proposed valuation norms, RBI could also ask banks to mark to market the derivative portfolio maintained in the held-to-maturity (HTM) category.

MTNL planning 50% stake offload in SunTel

In a case of wagging the dog by it's tail, MTNL, one of the shortlisted preferred bidder for Srilankan TelCo SUNTEL, is in talks for offloading 50% stake. As a 100% MTNL subsidiary SUNTEL would be subject to MTNL policies & practices and "SunTel is a profit making professionally run company, and MTNL doesnt want to change its working".

The PSU, which is a JV partner in Nepal’s United Telecom and also offers telecom services in Mauritius through its 100% subsidiary, has been scouting global markets for new licences to make up for shrinking local opportunities.

MTNL has lost its bid to acquire Telekom Kenya & failed to win mobile licences in Saudi Arabia, Qatar, Bhutan and several other countries. However second chance is around the corner— Qatar, Lebanon, Oman, Bahrain, Iran and Turkey are set to auction fresh mobile licences in the coming months.

As reported in Economic Times

Tommy eyes 51% in Indian Business

Tommy Hilfiger, controlled by buyout private equity Apax Partners, is looking at direct ownership of its India operations by bringing in the maximum permissible 51% foreign direct investment (FDI) allowed in single brand retail.

Tommy is looking for direct ownership, buying out perpetual India rights, currently with the Murjani Group.

The Murjanis invested in young Tommy Hilfiger when the American designer introduced his first signature collection back in 1985.

The Murjanis operate Tommy Hilfiger’s core fashion apparel business through an equal joint venture with Arvind Mills, which has 23 outlets across the country at present. The Murjanis have inked similar licensing deals with other Indian corporates like Titan Industries for watches and Welspun for home furnishings. The Murjanis, through their Brand Marketing India Pvt. Ltd. are pumping investment to develop other international fashion brands like Gucci, Jimmy Choo and French Connection. BMI recently raised $10 million through a private placement with VC fund Matrix Partners, for the cash burning realestate intensive business.

Rahejas to raise Rs.530 Cr. from PE funds

New Delhi based Rahejas plan to raise Rs.530 Cr. from PE funds against 26% equity in their upcoming Gurgaon based engineering SEZ.

MD Navin Raheja said the group was talking to Royal Group of Abu Dhabi, Ford Capital, Ascendas, Blackstone & Carlyle with E&Y as consultant. He said " Though the deal is not finalised we prefer Royal group because of their bigger projects, construction techniques, equipment & manpower"

The JV will be as an SPV to be listed later. The company plans to invest Rs 4,535 crore in the SEZ to be funded with a mix of equity, debt and internal accruals. It has plans to build country's tallest building here. Since haryana faces power shortage, the company is planning a 200MW captive powerplant and is in talks with Adani & Lanco.

Quippo, Oil & Gas Service Sector and A New PE Hotbed

Quippo Oil & Gas, a subsidiary of Quippo Infrastructure Equipment promoted by SREI Infrastructure Finance, is planning to put Rs.2400 Cr. over next two years in buying onshore rigs, off-shore supply vessels and pipe-laying barges.

Quippo Oil & Gas currently owns two onshore drilling rigs and one offshore pipeline-laying barge (bought for $120 Mn.) The plans are to deploy these to India & Malaysia. This Business Standard article reemphasises a global trend in O&G service sector.

There is a shortage of rigs across the world and its impact is being felt in India as well. The Oil & Gas service sector market is booming globally with M&A/PE activity.

Globally PE firms are active in the O&G service market due to crash and easing valuations, specially in the mid-market. Tight credit markets have put brake on largecap deals but middle market is growing 50%.

Richard Spears, VP of energy analysis and advisory firm Spears & Associates Inc. says "Right now, we have projects for 15 deals under way, when last year, at any one time, we had six or seven." Investors and companies hire Spears to analyze businesses during the due diligence process of a transaction. Spears said his private equity clients were sizing up businesses in well completion services, land and offshore drilling and production, and other parts of the oilfield services sector.

Some of the recent deals in the sector include First Reserve Corp buyout CHC Helicopter Corp for $1.5 Bn., US buyout firm Castle Harlan's Anchor Drilling Fluids US for $250 Mn.

Analyst Bill Herbert of research firm Simmons & Co said expects PE firms to snap up more small-cap oilfield service companies with either international franchises or technology that can be exported to international markets.

It will not be surprising to see some of the Infrastructure Funds moving in, on the sector.

RBI lifts PwC Ban

RBI lifted ban on PwC auditing banks & NBFCs.

PwC was banned from auditing banks and NBFCs following its association with the now failed Global Trust Bank as its auditor for financial years 2002 and 2003. RBI had found that PwC underprovided for NPAs.

GTB eroded networth due to over exposure to Capital Markets. It tried to make up for the capital by roping in Newbridge Capital, but RBI disapproved on grounds of questionable source of money. Since bank was not able to make up for capital, it was put under moratorium and then a quick takeover by OCB.

Blackstone eyeing 10% in Ennore Foundries

Blackstone & Primus Capital are racing to acquire a 10% stake in Ennore foundries, now renamed Hinduja Foundries.

Hinduja's have decided to sell 10% of the their holding to raise $80-100 Mn. for partfinancing proposed capex.

The Sun Also Sets : PE deals falling through

The chill is moving deeper down the spine. This HT article points out that southbound market is taking a lot of valuations and some of the deals with it. Down.

With 14 PE deals falling through in last 3 months & big 3 in last last month, Feb. PE deals are 55% lower then Jan'08.

The 3 big ones to go down are ICICI Venture-Jaypee Infratech deal, Rs 1200-crore Blackstone-Eenadu group deal and Rs 250-crore Future capital-DishTV deal. The Jaypee deal is shaved from 3200 to 1000 Cr.

PE funds closed over 27 deals in Feb. valued around $1.48 billion, according to a Grant Thornton study. India Inc recorded deals worth $5.06 billion in 116 M&A and PE deals in Jan.

Compared to Feb'07, there was a 50 % rise in PE deals this Feb.

Reality Major's REIT plans delayed

IndiaBulls RealEstate and Unitech Ltd. have put their Singapore REIT plans on hold siting volatile market conditions. DLF may follow too.

Unitech, IBREALEST & DLF had lined up a $0.5Bn,$1Bn & $1.5Bn. offer. Unitech and IBREALEST were exploring private placement, according to Business Standard. DLF too might delay the offer or go for $500Mn. private placement.

Indian developers, hit by soaring land costs and curbs on bank loans, are looking to tap REITs, which are not yet allowed in India, although draft guidelines for them were issued in December.

Read the article on Mint

New Mineral Policy

The National Mineral Policy (NMP) 2008, approved by the Cabinet last night, will reduce time delays in disposing off mining applications, boost FDI and "protect risk capital by providing automatic minning rights to miners".

The Cabinet aproved the policy after factoring in the recommendations by the high-level committee and other policy authorities at state level. Delays in ensuring mining leases is believed to be a key reason behind meagre investments in the sector, which the new policy aims to address.

He pointed out that the mineral-rich states of Orissa, Chhattisgarh, Jharkhand and Orissa would be given little more than a year to decide on the merit of the mining lease applications. If these states remain undecided by that period, the applications would be decided the Mining Tribunals, Minister of State for Mines T Subbarami Reddy added.

The Cabinet has also approved setting up of Mining Administrative Appellate Tribunal (MAAT), within six months. The minning states meanwhile will get higher royalty. The status of their demand for ad-valorem based royalty structure and share of export levy is unclear.

Nexus India Capital invests in Organic Farming

Nexus India Capital has invested in Suminter India Organics, a leading contract farming company that focuses on organic produce for the textile and food industries.

Nexus, a $100-million fund, has so far invested in technology, mostly internet and wireless companies. This investment in farming is first of it's kind on the space and may have to do with special emphasis in recent budget on VC investments in this sector.

Sandeep Singhal, Managing Director, Nexus India Capital Advisors, spoke about a huge potential demand for organic products globally.

Suminter, which supplies to buyers in the US and Europe, currently has a farmer network in four Indian states, across 25,000 acres of land. Its network of farmers grow cotton, oil seeds, spices and herbs, in accordance with buyers demand. The company plans to expand its reach to ten Indian states. It will also set up an organic food park with high-end machinery for processing.

As posted here previously, it seems the money is headed for the farms.

Promethean Raises India Focussed SPAC

The founders of the UK-listed investment firm Promethean have raised a $200 million special purpose acquisition company (SPAC) called Atlas Acquisition Holdings in the US, the largest ever SPAC targeted prominently at India.

Atlas Acquisition Holdings raised $200 million (Rs 800 crore) through the American Stock Exchange, the hub of global SPACs.

Though the SPAC does not mention in its offer document any geography or sector it would target, it is understood that Atlas is looking at businesses which have an India story. According to sources in the merchant banking industry, Atlas would eye a minimum deal value of around $500 million which could include funds raised by it as a SPAC and would be backed by debt. However, Atlas could even scout for bigger deals which could go upto $1 billion in enterprise value.

Atlas is led by its chairman & CEO James Hauslein, along with Gaurav Burman, part of the Dabur Group and also a key member of Promethean India. Promethean India is an AIM-listed investment firm with a corpus of $115 million, which targets Indian companies to pick small private equity stakes.

The funds raised by Atlas are large, even by US standards where SPACs size in general is around $100 million or lower. As per the data compiled by US-based investment banking firm CRT Capital, out of the total 142 SPACs raised in the US till early February 2008, only 30, including Atlas, raised $200 million or more.

As reported in Economic Times

Blackstone Buys Pre-IPO stake in Titagarh Wagons

PE fund Blackstone has picked up a minority interest in Titagarh Wagons for Rs 672 a share in a pre-IPO placement. Blackstone bought 2.35 lakh shares for around Rs 16 crore from the Strategic Ventures Fund (Mauritius). The Mauritius-based company bought equity in Titagarh in July 2005 for Rs 976 a share. But its acquisition cost came down, following an 1:8 bonus issue.

Blackstone is the fifth major investor to put money in Titagarh Wagons. The other investors include GE Capital Infrastructure (15%), JP Morgan (5%), 2i Capital (6%) and ChrysCapital (6.5%). The Chowdharys, the promoter group, holds a 57% stake.

Kolkata-based Titagarh Wagons will sell 23.8 lakh shares in the primary market through an entirely book-built issue. The company will sell 20.68 lakh fresh shares while two investors will offer 3.15 lakh shares through the issue.

Titagarh Wagons is a leading railway freight wagon manufacturer. It makes railway wagons, balley bridges, heavy earth moving and mining equipment, steel and SG iron castings. It is one of the approved vendors for defence manufacturing as an ‘industry partner’ to the DRDO.

Singpore's BAF Spectrum seed fund enters India

Singapore-based BAF Spectrum Pte Ltd made its first India investment last week in Gurgaon-based Le Travenues Technology Pvt. Ltd running the travel search engine IXIGO.COM

BAF is a collaboration between private investors & Singapore government. It's the second investor at the pre-series A (first round) funding stage to enter the Indian market in the last month. Earlier, Singularity Ventures backed by West Asian investors launched operations in the country.

The firm, which typically invests between $500,000 (Rs2 crore) and $1 million, has a dedicated corpus of $14 million. Thus far, it has funded five companies headquartered in Singapore.

Several companies in the online travel space here have received funding in the last two years, including Bangalore-based Yatra Online Pvt. Ltd, Mumbai-based Cleartrip Travel Services Pvt. Ltd and New Delhi-based Makemytrip India Pvt. Ltd.

Over the last 12-18 months, many sources of seed capital have sprung up, including New Delhi-based India Angel Network, Mumbai-based Seedfund and Mumbai Angel Network and Bangalore-based Erasmic Venture Fund.

The Singapore government, under its Business Angel scheme (BAF comes under this), grants $7 million angel money to be invested in start-ups to a group of private investors on the condition that they match the amount with their own capital. As an incentive, the government returns a third of its profits on exits to the investors. It is a hybrid model that combines the Band of Angels mode of investment with government grant distribution. In markets outside Singapore, the angels put in their own money.

The full article can be read on Mint

Funds Hunt For Land To Ride Commodity SuperCycle

While Equity Markets globally have taken a tumble, commodities are riding on a SuperCycle. Global money is now chasing direct farmlands in search of alpha. Investment banks and hedge funds are mopping up vast tracts of agricultural land around the world, hoping to ride the so-called "commodities supercycle" that has lifted prices of everyday agricultural commodities such as wheat, rice, soybeans and corn to record highs.

U.S. investment bank Morgan Stanley has bought several thousand hectares of land in Ukraine, Europe's grain basin.Morgan Stanley declined to comment, but industry executives say many other big banks are looking at land. Barclays Capital, the investment bank arm of UK bank Barclays Plc, is actively searching.

Fund manager BlackRock has a hedge fund that invests in agricultural land. International estate agents Knight Frank is setting up one to buy agricultural land in the UK.

"Over the next five years, you will have 2 billion more people eating bread, eating noodles, drinking coffee ... There is no way in this world that the supply side can catch up with the demand side," says Badung Tariono, an Amsterdam-based fund manager for ABN AMRO.

Goldman enters commodities trading through Shriram

We had mentioned Goldman's India Bet a couple of days back in a post here. The NBFC & commodities brokerage part of it they have implemented by picking a 20% stake in Chennai-based Shriram Credit (an NBFC) for Rs 300 crore, making an indirect entry into equity and commodity brokerage business in India. GS reserves the right to further hike it to 25%.
The Indian group is transferring its brokerage and distribution services business to Shriram Credit and bringing in Goldman Sachs as a significant minority partner. The deal values the firm at Rs 1,500 crore ($375 million). Goldman Sachs is routing the deal through its 100% Mauritius-based subsidiary GS Strategic Investments.
Foreign investment norms currently do not allow direct investment in a commodity brokerage firm. However, foreign companies can invest in a firm, which in turn owns a separate commodity brokerage entity. The funds would be used for expansion of its existing and proposed businesses of Shriram Credit.
Read the full article on Economic Times

Piramal to demerge R&D - to invite equity partner

Nicholas Piramal India Ltd. will demerge its R&D into a separate company early in March. The partner, likely a pharma MNC with interest in drug discovery, will have at least 10% equity in the research unit, said a senior executive, preferring anonymity.

The research company, which will be known as Piramal Life Sciences Ltd, is valued at about $500 million (Rs2,025 crore) by financial and equity research firms such as Lehman Brothers, Enam Securities Pvt. Ltd and Kotak Securities Ltd.

The promoters will dilute around 10% in Piramal Life Sciences to the partner, “but it will happen only after the company gets listed on the stock exchanges, because we will have an absolute valuation only then”,said Nicholas Piramal chairman Ajay Piramal.

The new unit’s valuation is predominantly based on three new drugs under advanced development in the company’s discovery portfolio. Nicholas has one cancer drug that has almost cleared early-stage, or phase I, trials in Canada and some other international markets. It has two anti-inflammation molecules in advanced development stages.

For detailed intreview read Mint

L&T-GreatOffshore-Blackstone for ICICIVenture's Tebma Shipyard

According to a ToI article, L&T, shipping company Great Offshore and private equity funds Blackstone, Abraaj Capital and Apax Partners are eyeing a stake in the south-based Tebma Shipyards.

Tebma Shipyards is India’s third largest private ship-building firm after ABG and Bharati Shipyard. Owned largely by ICICI Venture, Tebma, as part of expansion strategy, plans to build a facility in West Bengal.

The 150 acres Rs 500 crore project ($125 million) will be funded by Debt & . ICICI Venture has been approached by various players.Ship-building players earn operating margins of 20-25% helped by 30% export subsidy

The West Bengal shipyard will be Tebma’s third facility, in addition to its Chengalpattu (70km from Chennai) and Malpe in Karnataka. The company will issue fresh equity to the investor and accordingly, ICICI Venture’s stake in Tebma Shipyards will come down, market sources said. The new shareholder is likely to get upto 26% stake for $100 million in Tebma Shipyards. The Rs 400 crore Tebma has an order book position of $400 million.

Similar to publishing firm Infomedia and heat resistant cement products maker ACE Refractories, Tebma too has been a buyout deal by ICICI Venture. Last year, the private equity arm of ICICI Bank bought a 33% stake in Tebma Shipyards and increased its holding to 53% by acquiring additional shares through open offer. Several small investors hold the remaining shares in the company.

The second largest shareholder is Balan, founder of Tebma, who holds about 9% stake.

Two India Centric Funds from Baer Cap

Dubai-headquartered Baer Capital Partners is planning to launch two India-dedicated hedge funds this year.

The two funds - Beacon India Opportunities Fund with a corpus of $400 million and the $100 million Beacon India Growth Fund - will invest in listed companies. Baer is in the process of securing the regulatory approval for foreign institutional investor (FII) licence.

Sub-Prime Benefits Indian MidCap Companies

This Business Line article reports that Indian Midcap companies have a hit a good time in their Deal Intentions in the US. Reduced profitability, crunch for working capital requirement (this requires a second look though..) & distressed assets on the block are all adding up to increased acquisitions.

This cross sector trend has seen Bangalore-based Kavveri Telecom Products and Pradot Technologies Pvt Ltd, the Ahmedabad-based Azure Styx Infotech, the Hyderabad-based FXLabs Studios, the Indore-based Plethico Pharmaceuticals, the Aluva-based Kerala Ayurveda Ltd and the Vadodara-based Minal Jewels figure among the mid-cap firms that have bought out US companies post-November 2007.

According to Virtus Global Partners’ estimates, deal sizes of less than $25 million accounted for 76 per cent of the US-bound acquisitions by volume in 2007, followed by transactions in the $25 million-50 million range ( eight per cent). “Deal sizes in the $50 m-100 m, $100 m-500 m, and greater $500 m range each accounted for less than six per cent of the 2007 transactions,” an analyst said.

For a list of deals below $25 Mn. read the complete article on Business Line

Sovereign Wealth Funds Come Under Scanner

India has joined the global debat on Sovereign Wealth Funds (SWFs).

As a first step, the finance ministry is going to come up with a common working definition of such funds and identify their Indian holdings, said a senior official in the ministry who did not want to be named.

The issue contested is motive. Profit versus Strategic motives for investing. Loose governance standards can mean an individual's money moves in & out of SWFs while state owned firms can acquire stake in rival firms/countries for strategic objectives.

SWFs have existed for about 50 years, but it is their recent growth in size that has triggered concerns. According to the International Monetary Fund (IMF), SWFs’ sizes are likely to grow threefold over the next five years to $6-10 trillion. The recent growth in SWFs is being driven by foreign exchange surpluses generated by some countries on account of historic highs in oil prices and trade surpluses.

Australia recently became the first developed country to officially articulate a set of principles to be applied to scrutinize SWF investments. IMF has been asked by to come with proposals for a voluntary set of best practices in management of SWFs. Some countries with SWFs such as Singapore, operating through Temasek Holdings and Government Investment Corp., are open to following an IMF code to prevent a political backlash, the economist said. It is China’s aims which have many countries worried, said the finance ministry official. China, for its part, has been reluctant to submit to governance practices pushed by external agencies.

For full article please follow Mint

Spanish BBVA to enter India through PSB JV

Spanish financial services group BBVA SA has identified India as one of its key markets in Asia and plans to enter the country through a joint venture with a public sector bank (PSB).

The roadmap over next three-four years involves a mutual funds venture followed by projects in consumer finance, credit cards and later, life insurance.

BBVA’s Asia general manager Manuel Galatas said that BBVA plans to enter MF market through a JV with a PSU Bank. They are talking with two PSB. It is believed that the two PSBs are Bank of India & Corporation Bank.

Some time ago BBVA was in talks with Union Bank of India for a mutual funds joint venture, but it is now understood that the Union Bank has zeroed in on Belgium’s KBC Group NV as its partner for its mutual funds business.

BBVA with a market capitalization of €53 billion (Rs3.2 trillion) and more than 8,000 branches worldwide, is also open to acquisitions of mid-sized banks here, when the regulatory environment permits. The Spanish company entered India in April last year with a liaison office in Mumbai.

For full article read Mint

VC Funds: The Problem Of Plenty

It's long been suspected, the problem of plenty. But now it seems real. India is flush with VC funds but not enough worthy enterpreneurs. This, according to Sramana Mitra at Forbes.

Saramana is an MIT educated Silicon Valley serial enterpreneur & strategy writer. In her commentary on Indian VC space at Forbes she makes following observations.

In 2007, 50 new VC firms were added taking the total to 500, ready to fund close to $1 Bn.

According to her, the tech. enterpreneur's natural instinct to build outsourcing companies is a by product of lack of understanding of how global technology markets work. Hence BPO, Software Services & Chip Design etc., each takes less capital & begins generating revenue shortly making VC capital redundant. It further has few entry barriers. However it's the only available model in Tech VC space & has returned money hence a common investment thesis.

That nearly $1 billion of venture money, however, has been seeking other opportunities. That's made consumer Internet and mobile offerings the next stopping point; India's growing mass of connected consumer population is the target wallet. Travel, matrimonials, jobs, games and mobile payments are all segments getting substantial capital infusion. The engineering or product marketing required in building these sites is marginal, brand marketing being the big differentiator--something the Indians know how to do.

But consumer Internet alone cannot exhaust the available capital, so those who understand the subtleties of these dynamics have started diversifying their portfolios with retail, real estate and hotels. In 2005, Oak Investment Partners announced a $200 million venture fund to focus on the retail boom in India. Veteran Retail investor Jerry Gallagher india visit & a look at revenue per sq. ft at malls & stores prompted him to convince his partners to commit capital to retail.

That apart, with "Product Driven" companies absent, large available funds & not enough avenues in the traditional space, VC funds are moving to areas, where competition already exists. Retail, Real Estate, Bio-Tech, Hospitality each has bigger players making VC presence unwelcome. Add to that increasing thrust from government in creating VC funds catering to SME (read previous post) and we are facing the problem of plenty.

SIDBI Finanancial Inclusion 2000 Cr. Package

SIDBI will roll out new equity scheme for SME through Rs.2000 Cr. risk capital fund announced in budget.
Besides the funds allocated in the Budget, SIDBI will seek participation of private equity players and venture capitalists for injecting risk-bearing equity capital into small and medium enterprises (MSME), the bank's Deputy Managing Director Rakesh Rewari said.
This 2000 Cr. fund is in addition to another Rs.2000 Cr. fund set aside for refinancing to MSME.

"Equity financing is very low in the MSME sector. Of the total finance raised by small firms, only five per cent is contributed towards equity and the rest 95 per cent is in the form of debt," Additional Secretary in the MSME Ministry Jawahar Sircar said. The large industries, on the other hand, manage to meet 45 per cent of their fund requirement in the form of equity, he said.

Earlier this week, SIDBI Venture CEO A K Jaipur said at an MS ME seminar here that availability of equity capital can be increased by promoting more Angel Clubs in the country. "Angel clubs have limited presence in India. There are more than 2,500 in the US compared to only a handful in India," he had said.
Read the full article on Financial Express

Tata Motors CDS Inching Up on Risk Worries

Credit-default swaps (CDS) on the Mumbai-based company rose 10 basis points to a record 503 basis points at 3:48 pm in Hong Kong, according to ABN Amro Holding prices. That means it costs $503,000 annually to protect $10 million of Tata Motors’ debt from default for five years.
Tata Motors’ five-year credit-default swaps have more than doubled and its share price fallen 12 per cent since Ford announced the automaker as the preferred bidder for Jaguar and Land Rover on January 3.

Tata Motors plans to raise the 15-month loan from nine banks led by Citigroup and JPMorgan Chase & Co, three people with direct knowledge of the deal said

It will pay less than 2 percentage points more than the London interbank offered rate (Libor) as interest and fees for the loan, the people said. About $2.5 billion will fund the cost of the acquisition and the rest will be used for working capital, the people said. Tata Motors is also talking to Bank of Tokyo Mitsubishi UFJ, BNP Paribas, Calyon, ING Groep, Mizuho Financial Group, Standard Chartered and State Bank of India to arrange the loan, according to the people who declined to be identified because the information was not public.

For more read the article on Business Standard / Bloomberg dated 07.03.2008

VC gets Pass Through Status in Budget

From the Finance Minister’s Union budget speech:

“Venture capital funds are a useful source of risk capital, especially for start-up ventures in the knowledge-intensive sectors. Since such funds enjoy a pass-through status, it is necessary to limit the tax benefit to investments made in truly deserving sectors. Accordingly, I propose to grant pass-through status to venture capital funds only in respect of investments in venture capital undertakings in biotechnology; information technology relating to hardware and software development; nanotechnology; seed research and development; research and development of new chemical entities in the pharmaceutical sector; dairy industry; poultry industry; and production of bio-fuels. In order to promote business tourism, I also propose to allow this benefit to venture capital funds that invest in hotel-cum-convention centres of a certain description and size“

M&A Activity 2007

Here's a merged graphic on last years Banker Activity. It sure has been a busy year.

CLICK TO ENLARGE. For more detailed reference click Business Line

The PE Pitch : A Different Ball Game

PE investors, long known for their nimble profit seeking minds, have found yet another opportunity.

The Cricket Pitch.

Chennai Super Kings, the team owned by India Cements (ICL), has been approached by private equity investors. Admitted N Srinivasan, vice chairman and MD, India Cements: "A few private equity investors met me. They were interested in knowing if I would be willing to dilute my stake in the team's equity."

However N Srinivasan is banking on GBP 9 Bn. Manchester United valuation, with much smaller soccer audience compared to cricket, for a better deal.

According to I-Banking sources other IPL franchisee too may be willing to offload minority stake. The other names doing rounds include Deccan Chronicle (Hyderabad), Vijay Mallya (Bangalore), Ness Wadia and Preity Zinta (Mohali) and Shah Rukh Khan's Red Chillies Entertainment (Kolkata).

According to UTI Venture CEO K E C Rajakumar, Opportunistic PE Investors, Cricket win momentum, 4+ years of time to prove the concept and lower valuations in the nascent stage all point to this being a good deal now.

PE investors insist their interest in the cricket business is based on sound logic. Said one of them, "Let's get it straight. Mukesh Ambani, Vijay Mallya, GMR are businessmen who are not given to doing stupid things. Also, keep in mind that Anil Ambani and K V Kamath (of ICICI Bank) also wanted to enter this business."

Read it all on ToI

Goldman Sach's Long bet on India with AMC,NBFC, PE & Wealth Management

After severing it's Kotak ties in 2006, Goldman Sachs is getting 30 year long on India according to GS India's MD & CEO L. Brooks Entwistle. “This is not an outpost. We are here building businesses with a view of the next 30 years.”

GS (India) team of 100 is readying a launch of AMC, followed by Primary Dealership, an NBFC to compete with GE Money & Citi Financial in loans business.

The $770Bn AUM leader is also preparing for Private Wealth Management & Commodities research. It already advises Oil Companies on hedging while it awaits regulatory clearances for Commodity trading.

On the PE front Goldman Sachs has begun chasing Blackstone & Temasek with investments close to $2 billion (Rs8,060 crore) in some 40 Indian firms including OnMobile Global Ltd (recent IPO, Sudhir Gensets Ltd, IRB Infrastructure Developers Ltd and Sigma Electric Manufacturing Corp., besides the NSE Ltd and NCDEX Ltd.

With its research team now closely tracking 75 Indian stocks, its sales force in London, New York, Singapore and Tokyo is aggressively selling Indian equities. L. Brooks Entwistle has appointed HK based Adam Broader as CFO to head the AMC and awaiting SEBI approvals. In the run-up to the AMC launch, GS is in the process of floating Goldman Sachs India Fund, an offshore fund, some time this month.

Read the full story on Mint