Max India raises Rs.1000 crs through QIP placement

Max India today announced that it has raised Rs. 1,000 crore through a QIP, which was subscribed 2.3 times by broad based investors, spread globally. CLSA acted as the sole book runner and global coordinator for the issue.

The QIP raises FII holding in the company to 39% from around 26% earlier. Max India has an investment limit of 49% for FIIs.

The company has issued shares at a price of Rs. 240/- per share. Each share of Max India has a face value of Rs. 2/- and therefore, the new shares have been issued at a premium of Rs. 238/- per share. The new shares aggregate 18.8% of the fully diluted equity base of the company. About 40 % of the allocation went to US based investors while the remainder was split evenly between Asia and Europe based investors.

Max India plans to use the net proceeds from this issue to meet its additional funding requirements in line with its strategic business plans to further grow each of its existing businesses. A portion of the proceeds is also expected to be used for general corporate purposes including acquisitions and investments in new ventures. Encouraged by an almost 100% CAGR of its life insurance business since inception, the company has committed itself to growth plans for this business.

Source: Business Wire

Ruias funding Algoma acquisition through senior notes & loans

Essar Global will raise $900 million through a combination of senior notes and loans to fund its acquisition of Canada’s Algoma Steel, reported Economic Times. The non-recourse fund raising exercise by Essar Global is the second-largest such transaction by an Indian steel company, after Tata Steel’s almost $7 billion loan to finance its acquisition of Corus.

The Ruias’ international holding company had acquired Algoma in April for $1.58 billion in an all-cash leveraged buyout. Essar Global’s acquisition is considered the second biggest by an Indian company in North America, after Hindalco paid $6 billion to buy Atlanta-based Novelis in February.

To finance its Algoma acquisition, Essar Global will sell $450 million of senior notes, recoursed to the Canadian company’s balance sheet. The eight-year notes, denominated in dollars, may yield 9.75% to 10%. UBS is the financial advisor to the offer.

Essar Global also plans to issue $450 million in loans, based on Algoma’s earnings. The group’s own contribution will be about $500 million. It could not be ascertained how the rest of the acquisition amount — about $100 million — will be raised.

Valuation dilemmas lead to panic fall in Bajaj’s stocks

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

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

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

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

Source: The Economic times, Mint

HDFC to raise money through ADR’s , preferential allotment

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

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


Source: The Economics Times

SBI allowed to reduce stake in subsidiaries

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

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

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

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

Source: The Economic Times.

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

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

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

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

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

Source:www.bpowatchindia.com

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

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

Source: The Economic Times

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

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

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

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

Read the complete article

Central Bank to roll out IPO in June

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

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

BSE heading towards demutualisation

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

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

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

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

Source: The Economic Times.

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

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

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

Read the full article here

Fund houses on a NFO rolling spree

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

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

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

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

Schroders looking to join the AMC brigade

Schroders Plc, a 204-year-old London fund manager, wants to open a mutual-fund business in India to tap demand for investments among the world’s second-most-populous nation, reported the Business Standard.

The company, London’s largest publicly traded fund manager, is considering either a joint venture or entering the market on its own.

Assets of the money manager overseen for clients outside the UK now account for 56 per cent of the total, up from 43 per cent five years ago. India’s mutual-fund market has about $73 billion of client assets, according to Boston-based Cerulli Associates.

The Indian AMC market has seen many new players establishing presence in the recent past. JP Morgan & AIG have launched their maiden India Equity Fund. Amongst the Indian names, Edelweiss has recently been awarded the AMC license. All of this is expected to further deepen the market and offer more choices to the Indian investor

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IIFC to raise $500 mn through the ECB route; Standard Chartered appointed as lead arranger

India Infrastructure Finance Company Limited (IIFC) will raise $500 mn through the external commercial borrowings (ECB) route. Standard Chartered Bank will be the lead arranger to the issue. The funds are being raised for a period of 10 years. The resource will be used for financing some major infrastructure projects in the country.

During 2007-08, IIFC, a wholly-owned special purpose vehicle of the Indian government for core sector lending, intends to sanction some 46 projects, aggregating Rs. 15,000 crores and disburse nearly Rs. 3000 crores. A major chunk of this Rs. 3000 crores funding requirement will be met through overseas borrowings.

IIFC’s paid-up capital is Rs. 100 crores. It sanctions loans up to 20% of the project cost. Out of the 46 projects which are under the IIFC’s consideration, 31 are road development ventures, 12 are power projects, 2 are port-related infrastructure ventures, while 1 is an airport project. To ensure proper usage of funds, IIFC has appointed ICRA to work out a detailed business roadmap. ICRA is expected to submit the report within a month. It will also recommend an HRD strategy suited to IIFC’s needs.

Apart from some of major infrastructure projects, IIFCL is also working with the municipal corporations and urban local bodies to develop urban infrastructure projects. IIFC has tied up with IDBI, Canara Bank and IL&FS to create a Rs. 3000 crore-pooled municipal debt obligation (PMDO) facility. The fund will be channelized for urban infrastructure development.

Read more in The Economic Times article.
Related Post:
Citigroup, Blackstone, IDFC, IIFC tie-up for $5bn India Infrastructure Financing Initiative fund

BPO service providers Sutherland, Genpact plans IPO on US bourses

The Economic Times reports that following the lead of the listing of its peers EXL Service Holdings and WNS on NASDAQ and NYSE, respectively, Sutherland Global Services, a US-based third party BPO service provider, is planning a NYSE / NASDAQ listing by the last quarter of 2007 to raise around $250 mn. Private equity firms Oak Investment Partners and Standard Chartered Private Equity (through its Merlion Fund) are invested in Sutherland. Sutherland offers services including process consulting, back-office processing, account management, customer care, technology support across verticals such as technology, telecom, retail, healthcare and banking, financial services and insurance (BFSI). It has about 18,000 professionals on its global rolls, 50% of them based in India and has other global facilities in locations like Mexico, Canada, and the Philippines.

Meanwhile one of the India’s largest BPO firms Genpact is mulling a US listing through an initial public offering to raise over $600 mn for the company and its promoters. The company, previously part of the US-based industrial conglomerate General Electric, is planning to offload about 15% equity through a public float on NYSE / NASDAQ later this year. The company’s major shareholders, GE and US-based private equity firms Oak Hill Capital and General Atlantic, are likely to sell part of their holding through this IPO, valuing the company at around $4 bn. Genpact has appointed Morgan Stanley, JP Morgan and Citigroup for the offering and it may file the regulatory prospectus in the next few weeks.

Related Post:
Genpact plans largest IPO on US markets by an Indian company at $500-600 mn

ICICI Bank re-jigs i-banking operations

India’s largest private sector bank ICICI Bank has restructured its investment banking division, giving it a ‘global’ appellation and new functional lines. The reason cited for the exercise has been the global opportunities emerging through Indian corporates, and the bank’s need to grow beyond trade finance and working capital to corporate advisory, deal origination and M&A funding. Investment banking provided roughly 30% of ICICI Bank’s profit of Rs. 2285 crores in the nine months to December 31, 2006.

The restructuring of i-banking operations has been as follows: Corporate Products & Investment Banking Group has been renamed as the Global Investment Banking Group (GIBG). ICICI Securities, the existing wholly-owned investment banking arm of ICICI Bank, will now focus only on equity markets and research. The investment banking business of I-Sec will shift to GIBG, while the retail equity brokerage part of ICICI Bank, called ICICIDirect.com, is now a part of ICICI Securities. GIBG will have three groups under it: Global Structured Finance & Advisory Group (GSFAG), Financial Institutions and Syndications Group (FISG) and International Syndications Group (ISG).

GSFAG will be responsible for banking products across India and all international markets. FISG will work with GSFAG and ISG for domestic syndication, and with the Balance Sheet Management Group for resource-raising and securitization. It will handle the needs of financial institution clients. For deals where the approving authority requires an amount of the facility to be sold-down or syndicated in the domestic market, the FISG will approve the terms of the facility. It will also originate deals for sell-downs directly, along with GSFAG. FISG will include the Capital Markets Division and the Global Custodial Services Group of the bank. ISG will work with GSFAG and FISG for all international syndications of corporate issuances for Indian as well as international clients. It will approve terms for sell-downs / syndications in the international market and also, along with GSFAG originate deals directly for the specific purpose of sell-downs.

Read the article in DNA Money.

Central Bank to come out with IPO; issues 5 merchant bankers for the issue

Mumbai-based public sector bank Central Bank of India is coming out with an initial public offering of Rs. 1000 crores, expected by end-May 2007. The bank has finalized five merchant bankers for the issue. The bank has appointed IDBI Capital Markets, Kotak Securities, ICICI Securities, Citigroup Global Markets and Enam Financial as the lead managers to the issue.

The bank has received all regulatory clearances for converting about 71% of its large equity base into preference shares. The proposal for conversion of shares, which was stuck at the Reserve Bank of India (RBI), was recently cleared by the government. The bank is negotiating with the government for the coupon rate on the preference shares. The government wants a floating coupon rate of 100 basis points above the RBI’s repo rate, which is currently at 7.75%.

Of the Rs. 1124.14 crores equity capital, Rs. 800 crores would be converted into preference shares. The conversion will lower the bank’s paid-up equity capital to Rs. 324.14 crores. Central Bank, which had planned to get listed in the fourth quarter of 2006-07, as on December 31, 2006, had a total business of Rs. 121,301 crores, comprising deposits of Rs. 74,974 crores and advances of Rs. 46,327 crores.

Read the article in Business Standard.

SEBI propose 2-year lock-in to hedge funds wanting to invest in India

Hedge funds interested in participating in the Indian stock markets have been asked by The Securities and Exchange Board of India (SEBI) to agree to a lock-in period of two years as a cushion against sudden withdrawal under adverse circumstances. Some hedge funds, both new and existing, already have agreed to the lock-in stipulation, as per SEBI officials.

Some of these are already invested in the Indian market through participatory notes (PNs), and may want to register directly with SEBI and invest with a two-year lock-in. SEBI chairman M Damodaran is trying to persuade many other new hedge fund applicants to provide a lock-in undertaking. The regulator also wants to ensure that hedge funds registering directly with it are regulated in the country of their origin. This information is being gathered by SEBI within 24 hours from a multilateral body of global regulators. Once the hedge fund comes upfront, SEBI is able to determine whether it is regulated in the home country. Having ensured this, the other comfort being sought is whether the fund will agree to a two-year lock in period. Sources said those who agree to this will get a preference in entering the Indian stock market.

In the past, SEBI had considered allowing hedge funds as it felt that they could be an additional source of liquidity besides diversifying the pool of foreign investments in the local market. As part of policy options, it was suggested three years ago that hedge funds could be allowed in the Indian market subject to certain conditions such as ensuring that at least 20% of the corpus should be contributed by investors such as university funds, charitable trusts, endowments, insurance firms, banks and pension funds.

Read more in The Economic Times article.

Indian i-banks to fight it out with foreign ones for size and talent

It has now become common knowledge that since it announced its “break-off” with Morgan Stanley, domestic investment banking major JM Financial is aggressively hunting for both size and talent. Having sold its equity broking division for a whopping $445 mn to MS, JM is now flush with funds to afford a local brokerage house to re-build the equity sales and research team. Plans are also afoot to hire around 30 research analysts over the next 12 months. On both these accounts, it will be a rough ride ahead for the venerable institution.

According to an article on The Mint, the Indian investment banking industry is facing a severe talent crunch, with the cream of the lot having been picked up by the foreign investment banks, which are landing up on the Indian corporate shore in droves. The foreign banks have been snatching talent out of the jaws of Indian recruiters, with pay packages comparable to those in other parts of the world. The article goes on to cite instances of Lehman Brothers hiring Gaurav Gupta of NM Rothschild and Blackstone hiring Anup Kapadia from HSBC India, thus highlighting the bitter feud between foreign banks themselves for skilled personnel. Certain firms like Goldman Sachs are calling in Indian expats handling overseas operations to set up and manage the Indian offices.

In all this rush for deals and dealmakers, the only ones who are smiling are the i-bankers themselves, who earlier with a salary of Rs. 8-10 lakhs can now expect the same to go up to around Rs. 35 lakhs. And anyone with an experience of 8 years plus can demand upward of Rs. 2 crores a year!

Top management re-jig at JM Financial post-Morgan Stanley break-up

Nimesh Kampani, after the separation of his firm JM Financial with JV partner Morgan Stanley, is re-organizing his operations to exploit future opportunities in the fast-growing Indian investment banking industry, with a view to give foreign investment banks, who are opening offices in India, a run for their money. A new management structure is being formalized for the group flagship company JM Financial by Mr. Kampani, who has carved up the operations of JM Financial into seven strategic business units to be managed by independent managing directors.

The investment banking business is split into corporate finance, M&A and global capital markets. Dipti Neelkantan, 48, who joined JM as a research analyst 25 years ago, has recently risen to the rank of MD & COO of the investment banking business. She is in charge of overall operations. Two MDs have been appointed for the corporate finance division, which is scaling up its operations. Nimesh Kampani’s son Vishal Kampani, 30, and BK Bansal, 53, will be heading this division. Adi Patel, 38, has been designated as head of the M&A division, while Atul Mehra, 39, has recently been elevated to the post of MD (global capital markets). Adi Patel, Atul Mehra and BK Bansal have been with JM for more than 15 years.

JM Financial is bringing in talent from outside to run the new-age businesses. Last month, Nityanath Ghanekar, 61, joined as CEO and MD of the mutual-fund business from global consulting firm PricewaterhouseCoopers. A few months ago, Dilip Kothari joined JM to head its private equity business from Olympus Capital. Rajeev Chitrabanu, 35, is CEO and MD of the financial services business, which includes wealth management and IPO distribution. Subodh Shinkar, 39, is the new COO of the division.

While Vipin Gupta, 35, is the MD of the fast-growing commodity business, Basant
Agarwal, 40, heads the special situations fund. JM Financial is also planning to create independent divisions for the fixed-income and research portfolios.