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.
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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.

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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.

Edelweiss to start asset management and NBFC businesses; recruits senior people for the same

Leading domestic investment bank Edelweiss will commence asset management and non-banking financial company (NBFC) businesses by investing a total of Rs. 400 crores in the new ventures. Edelweiss would invest Rs. 300 crores for the NBFC business and another Rs. 100 crores for the asset management business. The NBFC would be looking at mortgage business and other credit instruments. Edelweiss had received in-principal approval from SEBI for the asset management company.

Edelweiss also announced the appointment of senior executives for its new business of NBFC and AMC businesses. R Balakrishnan, who will head the NBFC business, has been appointed executive vice-president of Edelweiss. Mr. Balakrishnan earlier worked as Senior VP & Head of Equity Research at DSP Merrill Lynch. Prior to Edelweiss, he was an independent consultant and part of the senior management team at credit rating agency CRISIL. For the AMC business, Edelweiss appointed Jimmy Patel as the CEO. Patel’s earlier stints include CEO and COO of JM Financial Mutual Fund and with the Principal Group, where he was in-charge of their pension initiative in India. Edelweiss also took on board Peeyoosh Chadda of Barclays as co-head of the AMC business.

Read the Business Standard article.

Ujala maker Jyothy Laboratories plans Rs. 300 crore-IPO

Mumbai-based fast moving consumer goods company Jyothy Laboratories, famous for its Ujala brand of fabric whiteners, is planning to list on the stock exchanges by end of 2007. Jyothy Laboratories will raise Rs. 300 crores in an initial public offering. The company has reportedly appointed Kotak and Enam as advisors to the issue.

Jyothy Labs is a closely held company with about 70% stake being held by founder chairman and managing director M P Ramachandran and his family. The balance 30% is held by private equity firms CLSA and Actis along with a foreign subsidiary of ICICI Bank. The foreign investors are likely to exit the company at the time of the IPO.

Sales of Jyothy Laboratories are pegged at between Rs. 400-500 crores. The company is said to have been valued at around Rs. 1000 crores.

Read more on Moneycontrol.com.

SEBI eases listing agreement for debenture issues

The Securities and Exchange Board of India (SEBI) today has relaxed listing agreement for debentures. It has allowed companies issuing debentures on private placement, to submit their unaudited half-yearly results to the stock exchanges, instead of quarterly basis.

The regulator seems to be easing the guidelines with an objective to encourage more companies to tap the debenture market, which has been lying low for some time now. With the amendment, the debenture issuer companies would now be submitting unaudited half yearly results instead of unaudited quarterly results.

However, the half-yearly accounts would be subject to a limited review, which has to be done by the statutory auditors of the company. The SEBI has also made changes to the format which is to be used for reporting of the limited review.

Read the article in Business Standard.

Essar Shipping share buyback fails; company to remain listed

Essar Shipping has failed in its buyback of shares and subsequent de-listing from the bourses. As a result, the company has decided to continue being listed on the stock exchanges. The Essar Shipping share buyback, being facilitated through a reverse book-building process, closed on March 16. The company has notified the exchanges that the buyback offer for its de-listing did not get sufficient bids.

The company had fixed the floor price for the buyback offer at Rs. 31.62. Maximum number of bids was believed to have been received at a price of Rs. 50-51 per share, while 15-20 mn bids were even received at a price of Rs. 75 per share. However, the total number of bids was not adequate to move ahead with the delisting process.

Meanwhile, the delisting process of another two group companies, Essar Oil and Essar Steel has been progressing as planned. The ballot papers have been sent to the shareholders and after they are returned, a public notice would be made and delisting would commence through RRB, after market regulator SEBI fixes the floor price for both the stocks.

Read The Economic Times article.
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Credit Suisse launches Indian brokerage operations

Zurich-based global bank Credit Suisse has launched of its securities brokerage operations in India. Credit Suisse holds a broker dealer license in the Bombay Stock Exchange and National Stock Exchange and will focus on equity sales and trading and research in India. Initially, the India operations will be run by about 40 people with addition of 20-30 more over the year.

The company would later bring the full range of its products including asset management and private banking as regulations for financial services in India open up. The company would also offer investment banking services in new equity issuance and merger and acquisition activities at a later stage.

Credit Suisse acted as the lead financial adviser to the UK-based steel major Corus in its acquisition by Tata Steel. Credit Suisse is also leading the provision of financing Tata Steel in the deal.

Read The Economic Times article.

Andhra state government housing firm Deccan Infra to list; to raise Rs. 2000 crores

Andhra Pradesh Housing Board (APHB) subsidiary, Deccan Infrastructure & Land Holdings Limited (DILH) will raise up to Rs. 2000 crores through an initial public offering, most likely to come out in June – July. The company will divest 15-20% equity. The Government of Andhra Pradesh holds 49% equity and the APHB 51% in DILH. Deccan Infra is into the development of integrated townships and urban infrastructure either on its own or through JVs with other public bodies and private-sector companies. The managers to the issue are JM Morgan Stanley, DSP Merrill Lynch and SBI Capital Markets.

Based on the track record of its parent and armed with a land bank of about 8000 acres, Deccan is valued at over Rs. 12,000 crores on the lower side. Property consultants Trammell Crow Meghraj and Cushman Wakefield are carrying out a valuation exercise on the land bank.

Read the article in DNA Money.

Sharekhan to raise funds for expansion

Sharekhan is planning to raise funding for its aggressive expansion plans. Sharekhan is the retail broking arm of Mumbai-based financial services group SSKI. The company has held discussions with investment banks for raising resources. These may be in the form of an initial public offering, private placement, debt or a combination of all of these.

As earlier reported in the media, the promoters of the firm, the Morakhia family, also the single largest shareholder in the company, are not planning to quit the firm as yet. Private equity firm General Atlantic had invested about Rs. 144 crores ($31 mn) in April 2006 in the company through a combination of primary investment in the company and secondary investment through buying out the entire shareholding of First Carlyle Ventures. The other investors in the retail and online brokerage outfit are Intel Capital and a group of funds advised by HSBC Private Equity India.

Sharekhan is among the top five retail brokerage outfits in the country with over 100 branches across 150 cities. The investment banking and the institutional brokerage outfit of the group, SSKI has no fund raising plans.

Read the Business Standard article.

SEBI to allow hedge funds direct entry into Indian capital markets

The capital markets regulator, the Securities and Exchange Board of India (SEBI), is considering direct participation of hedge funds in the Indian stock markets. SEBI has invited hedge funds to register with the regulator and invest in the Indian stock markets without the cover of participatory notes, currently the most preferred route of hedge funds for channeling investments in the Indian markets.

Participatory notes are often seen as tools for money laundering and there have been numerous calls, including from the Reserve Bank of India, to curtail them. It is widely estimated that 48% of the $50 bn investment by foreign institutional investors in the Indian markets has come through offshore participatory notes. Allowing hedge funds direct entry will help SEBI track the source of funds coming into the capital markets more efficiently. It is difficult to track the source of funds coming in through participatory notes.

SEBI’s thinking was articulated by its chairman, M Damodaran, at a meeting organized by ICICI Securities in Singapore early this month, which foreign investors, including several hedge funds, attended.

Read more in the article in Business Standard.

UTI Mutual Fund poaches top Sundaram BNP Paribas fund manager Anoop Bhaskar

The Times of India reports that Anoop Bhaskar of Sundaram BNP Paribas Mutual Fund, and one of the top fund managers in the industry, will join UTI Mutual Fund. Anoop Bhaskar is the head of equities at Chennai-based Sundaram BNP Mutual Fund. He will join UTI Mutual Fund in the same position. Bhaskar is one of the most active, and one of the better-performing fund managers in the Indian mutual fund industry.

IndusInd Bank to issue GDRs worth Rs. 140 crores by March-end

The Hinduja Group-controlled IndusInd Bank is planning to raise around Rs. 140 crores through global depository receipts (GDR) by March 2007. The bank will issue close to 30 mn shares which will listed at the Luxembourg Stock Exchange. CLSA has been appointed as the lead manager to the issue. The fresh infusion of capital will bring the promoter holding down to about 28% from 31.3%. The foreign holding in the bank will increase to 25 % from about 17%. The GDR issue will help enable the bank to boost its capital adequacy ratio to 11.25% from 11.10%. It is also planning to raise Rs. 50 crores through issuance of lower Tier-II bonds. The post-issue paid-up capital of the bank will rise to Rs. 320 crores from Rs. 290 crores.

The capital raising will enable IndusInd to pursue new business lines like wealth management and asset reconstruction. It is also planning to expand its presence overseas by setting up an offshore banking unit in Singapore. At present, the bank has representative offices in Dubai and London.

Read more on IndusInd Bank in the article in Business Standard.

Daiwa Securities plans India Equity Fund for Japanese investors

Business Standard reports that Daiwa Securities SMBC Company Limited, the investment banking joint venture between two of Japan’s largest financial groups, is planning to launch an India Equity Fund to enable Japanese investors invest in India’s emerging market. The fund likely to be launched within by 2007 would invest only in the listed stocks. Daiwa had earlier raised $750 mn of Japanese funds for Indian markets. The current value of the fund stood at $1 bn following the growth in the market.

Fidelity buys 5% in pharma packaging company Ess Dee Aluminium

Mutual fund house Fidelity International has picked up 5% equity in Ess Dee Aluminium, India’s largest provider of pharma packaging solutions, in an open market transaction. The fund has invested close to Rs. 40 crores in the company’s stock that pegs its enterprise value at around Rs. 800 crores. Ess Dee also has been approached by other private equity funds, including Blackstone, for investment opportunities.

The ICICI Group and famous Asian financial commentator Marc Faber already hold around 3.5% and 4% equity, respectively, in Ess Dee. Other investors include Nimesh Kampani of the JM Financial Group and Jagdish Master of Enam.

For more, read The Economic Times article.

SEBI to amend Clause 49 rules to tighten listing requirements

The Securities and Exchange Board of India (SEBI) has proposed to initiate a series of changes in Clause 49 rules, which relate to corporate governance, so as to tighten the listing norms for companies.

As per the proposed changes, the government nominees in public sector companies would not be treated as independent directors as they have “material pecuniary relationship with the government”.

The market regulator also has made it mandatory for companies to disclose relationship between independent directors, as well as other directors. SEBI has stipulated that companies would disclose the relation between independent directors inter-se, as well as the other directors of the company not holding management position, in all documents where the details of the board of directors are incorporated. SEBI also has proposed deletion of the provision allowing nominee directors appointed by the institutions to be considered as independent directors. The proposals came after SEBI received complaints that some companies were appointing independent directors related to other directors on the board. SEBI also proposed to fix the minimum age of 21 for independent directors.

The proposed norms have been made public for feedback.

Read the Business Standard article.

The Adani Group plans Rs. 1500 crore-IPO for Mundra Port and SEZ

Adani group company Mundra Port and Special Economic Zone Limited will raise money from the capital markets. It has filed a draft red-herring prospectus with SEBI. The issue size of the company would be around Rs. 1500 crores. The IPO is expected to hit the capital market between last week of May and first week of June. The Adani Group has appointed DSP Merrill Lynch, JM Morgan Stanley, SSKI, Enam Financial and SBI Capital Markets as their lead managers to the issue. Mundra Port and SEZ is the first company from the SEZ and the port sector to hit the capital markets. The proceeds of the issue would be utilized for the further development of the Mundra port and SEZ.

Read The Economic Times article.

Temasek sells stake in Apollo Hospitals for Rs. 134 crores

Singapore government’s investment company Temasek Holdings has sold its entire holding of 5.26% stake in healthcare major Apollo Hospitals Enterprise for Rs. 133.68 crores. The stakes were held by two investment firms Maxwell Mauritius and Aranda Investments.

Maxwell Mauritius sold 2.079 mn shares, while Aranda Investments sold 640,000 shares for Rs. 491.50 each in a bulk deal in the open markets. Aranda Investments’ holding represented a 1.24% stake while that of Maxwell Mauritius represented 4.03% in the Chennai-based healthcare group.

Meanwhile, another fund house Fid Funds Mauritius of Fidelity Investments bought 2.94 mn shares (5.7%) of Apollo for around Rs. 144.62 crores at the same price Temasek’s units sold their stakes. Fidelity Select Portfolios Medical Delivery Portfolio already holds 723,000 shares representing a 1.4% stake in Apollo Hospitals.

Article in Business Standard.

Union Budget 2007-08 Presented: Proposals for Capital Markets and Private Equity

The Finance Minister of India Mr. P Chidambaram has presented the Union Budget for the year 2007-08 today in the Parliament. Some of the proposals suggested for the capital markets are:

PAN to be made sole identification number for all participants in securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of account

Idea of Self Regulating Organizations (SRO) to be taken forward for different market participants under regulations to be made by SEBI

Mutual funds to be permitted to launch and operate dedicated infrastructure funds

Individuals to be permitted to invest in overseas securities through Indian mutual funds

Short-selling settled by delivery, and securities lending and borrowing to facilitate delivery, by institutions to be allowed

Enabling mechanism to be put in place to permit Indian companies to unlock a part of their holdings in group companies for meeting their financing requirements by issue of exchangeable bonds

Rate of dividend distribution tax to be raised from 12.5% to 15% on dividends distributed by companies and to 25% on dividends paid by money market mutual funds and liquid mutual funds to all investors

In case of venture capital funds, pass-through status will be granted to those VCFs 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, this benefit also will be granted to those VCFs that invest in hotel-cum-convention centres of a certain description and size

SIDBI issues bonds, raises Rs. 500 crores

SME micro-finance agency State Industrial Development Bank of India (SIDBI) has raised Rs. 500 crores by selling 10-year bonds to a state-run insurance firm.

The coupon on the bonds is 9.6%, payable annually. SIDBI plans to sell another Rs. 500 crores worth of bonds to other investors through a private placement, on the same terms as its deal with the insurance company. The issue is rated AAA by CARE, signifying the highest safety. Bank of America was the sole arranger for this issue.

Article in The Economic Times.

Alagappan Murugappan returns to ICICI Securities as head of equities

Alagappan Murugappan has re-joined ICICI Securities, the investment banking division of The ICICI Group as head of equities. Prior to this, he was with private equity firm Deeva Capital where he was a partner and returns to the ICICI fold after an overall three-year stint in private equity. Before he joined ICICI Securities, Murugappan was with Cazenove, heading its Indian operations; Cazenove was primarily into equities broking. Murugappan began his career with Cazenove in London after qualifying as a solicitor in England. He holds an LLM from Cambridge University.

Murugappan was one of the three founding partners of Deeva Capital and had spent one year at Deeva. Deeva Capital is a start-up private equity firm with about $100 mn secured from international seed funding. Murugappan had left ICICI Securities in early 2004 to pursue a career in the private equity business. Then, Murugappan had joined Actis as an investment principal and was responsible for leading and coordinating fundraising activities relating to South Asia and for deal generation in India. Murugappan quit Actis to form Deeva in early 2006.

Read more in the article in AsianInvestor.net.

SEBI bars Atlanta Infra, 15 others from capital market transactions for price rigging

The Securities and Exchange Board of India (SEBI) has barred 16 entities from selling or buying the shares of Atlanta Infrastructure, a construction and engineering company, for alleged price manipulation. These entities include the promoters of Atlanta as well as managing director Rajoo Barot and company secretary Sachin Jain.

The SEBI has also asked exchanges not to approve the listing of Atlanta’s convertible warrants and shares, till further directions. It also has asked depositories not to dematerialize convertible warrants and shares issued upon conversion and not to allow stock-split plans. The company had raised Rs. 85.72 crores by issuing convertible warrants at Rs. 317.50. At its EGM on February 16, the company approved 1:5 stock split and further raising of funds through foreign currency convertible bonds.

Shares of Atlanta, which were listed on September 25, 2006, have rose from its offer price of Rs. 150 to Rs. 1446 on January 17 a rise of 681% in 55 trading days. Sensing something fishy in the sudden spurt in its share price, the SEBI advised the NSE and the BSE to conduct a probe. The probe concluded that the Manish Marwah / Dilip Nabera Group, the Atul Shah Group and the Nirmal Khotecha Group made large scrip purchases during the period. It also said the employees, who were allotted shares, had immediately transferred the shares through off-market transactions, to persons connected with the company.

Read the article in Business Standard.

JM Financial and Morgan Stanley to go separate ways

In one of the biggest developments to have happened in the Indian investment banking space, the JM Financial Group and Morgan Stanley have called it quits on their Indian joint venture JM Morgan Stanley, one of the most prominent names in the investment banking and securities broking businesses in India. The joint venture, inked in 1997 and formalized in 1999, established a pre-eminent investment bank, equity broking, research, wealth management and advisory and securities distribution operations in India during the decade long relationship.

JM Financial will acquire the 49% holding of Morgan Stanley in JM Morgan Stanley, which along with the investment banking business will also include its subsidiaries engaged in fixed income, equity broking, wealth management, advisory and distribution businesses of the joint venture at around book value for $20 mn (approximately Rs. 88.5 crores). JM Financial will simultaneously sell to Morgan Stanley, their 49% holding in JM Morgan Stanley Securities, the institutional equity broking business for $445 mn (around Rs. 1970 crores).

The transaction is expected to close by the first quarter of FY2007-08.

ICICI Bank raises $500 mn via five-year bond

ICICI Bank has raised $500 mn (Rs. 2205 crores) through dollar-denominated five-year bond overseas. The bank will pay a coupon of 62 basis points above the London Inter-Bank Offered Rate (LIBOR). Road shows for the issue were conducted in London, Singapore, Hong Kong, and Paris. Barclays Capital and Deutsche Bank AG were the lead managers to the issue. This is the second time that ICICI Bank is tapping the overseas market in 2007. In January this year, ICICI Bank had raised $2 bn through a bond issue in three tranches.

Read the article in Business Standard.

SBI Capital Markets tops Lead Manager rankings

State Bank of India’s i-banking unit SBI Capital Markets has been ranked as the top mandated lead arranger and advisor in the Asia-Pacific region by Project Finance International (PFI) for the year 2006. SBI Caps has also been ranked 9th and 3rd globally in the ‘Project Finance Arranger’ and ‘Project Finance Advisory’ categories, respectively, in 2006 by PFI. It is the only Indian investment bank to figure among the top 10. Leading global data, news and analytics provider Bloomberg has also ranked SBI Caps as the No. 1 Mandated Arranger for the second year in a row.

Read the Business Standard article.

BPL promoters sell 6.3% stake in company in open-market transaction

The promoters of BPL, the Nambiars, have sold a 6.3% stake in the company for about Rs 25-30 crores. The stake was sold in the open market. In June 2006, the Nambiars had significantly raised their stake in BPL through a preferential allotment; they have now sold their stake at more than double the price of the preferential allotment. The allotment was made at a price of Rs 43 per share. The promoters’ stake in BPL has now come down to 65.26% from 72.6% stake as of December 2006.

The preferential allotment made to the Nambiars in June 2006 was in lieu of conversion of a loan advanced by the promoters to comply with the corporate debt restructuring plan. BPL is currently undergoing a debt restructuring programme; BPL has been going through financial pressure including cash flow problems.

For the quarter ending December 31, 2006, BPL had reported net sales of Rs. 24.97 crores on a net loss of Rs. 8.78 crores.

Read The Economic Times article.

Mitsubishi UFJ Securities opens office in India

Reuters.com reports that Mitsubishi UFJ Securities, the investment banking and brokerage arm of Japan’s Mitsubishi UFJ Financial Group, has set up its Mumbai office in India to offer corporate finance and capital market-related advisory to Indian corporates. Mitsubishi UFJ will focus on areas such as mergers and acquisitions, corporate finance, asset management and fund raising in Japanese capital markets for Indian companies. Lat year, Mitsubishi UFJ Securities had signed a Memorandum of Understanding with ICICI Bank to explore a non-exclusive alliance. Mitsubishi UFJ Securities also offers the PCA India Infrastructure Equity Fund in Japan, which has funds of $516 mn.

JP Morgan, AIG to launch mutual funds in India

JP Morgan Asset Management, a manager of over $1.013 trn assets across the world, and the AIG group that manages $670 bn will be launching their mutual funds for local investors in India. Both have received the Securities and Exchange Board of India (SEBI) approval for opening shops in India. Fidelity Investment in early 2005 was the last big global player that entered the Indian mutual fund space. Aegon Global, Dawnay Day, Nikko Asset Management, a JV between Ambit Capital and Nikko AMC of Japan, Bharti-AXA, another JV between Bharti Enterprises and asset management firm AXA of France are some of the other players wanting to float funds in India. Currently, the domestic mutual fund industry has 30 players managing Rs. 339,000 crores of assets. JP Morgan plans to start the domestic business with an initial net worth of Rs. 45 crores, AIG has earmarked $20 mn. The Indian regulator requires asset management companies to have a minimum net worth of Rs. 10 crores.

JP Morgan is headed by Krishnamurthy Vijayan, who was heading the JM Financial Mutual Fund for five years. Nandkumar Surti, also of JM Financial, will be heading JP Morgan’s fixed income business in India. Similarly, Saurabh Sonthalia, who heads AIG Global Investment Group, was earlier with DSP Merrill Lynch Mutual Fund. On the investment management side, Tushar Pradhan, who was earlier with HDFC Mutual Fund, will be the Chief Investment Officer, Equities at AIG.

Read the article on livemint.com.

Investment banking fees in India touch $200 mn from Jan-Feb 2007

Investment banking houses in India have generated a deal fee of around $200 mn in the months of January and February in 2007, as compared to $150 mn for the total year of 2006. Total fees earned during 2006, including equity and debt capital for India, was around $500 mn. Of the $500 million, equity capital markets could have contributed around 60% while around 10% could be the debt capital market fees. The M&A transactions have contributed the remaining $150 mn. Equity and capital market deals entail issuance of shares and bonds by companies to raise money.

For multi-billion deals above $10 bn, advisory fees range from 0.1% to 0.2% of the deal size or anywhere between $10-25 mn. Global i-banks charge a minimum of $1 mn. For small-sized deals, the fee could be around 3.5% of the deal size. With corporates looking at big-ticket deals which require large syndication ability of banks, a commitment fee is also now being levied. This would ensure a minimum payment to i-banks from the deal, even if the corporate eventually loses out in the bidding battle. As deals turn complex, i-banks have also started levying ‘drop dead’ fee or non-refundable fee in case of failed transactions. This is simply to compensate for their time and effort. The bigger chunk of the fee collected by i-banks is garnered from financing and structuring the deal. This fee could range anywhere between 0.50% and 1.25% of the deal size. Fees are higher for equity transactions.

In most of the recently announced deals, European banks have been the lead advisors as Europe has been the destination for the maximum number of acquisitions by Indian corporates. In case of Tata Steel, it was ABN-AMRO, Deutsche Bank and NM Rothschild, while in case of Vodafone and Hindalco, UBS was the sole advisor.

Read more in The Economic Times article.

The Reserve Bank of India hikes CRR rate by 50 bps to 6%

The Reserve Bank of India (RBI) has upped the Cash Reserve Ratio (CRR) by 50 basis points. The CRR now stands at 6%. This move by the RBI is said to drain liquidity to the tune of Rs. 14,000 crores from the system. The CRR rate hike will have it effect on banks in that many would be forced to hike interest rates. The CRR rate hike has been effected in two stages. The first hike of 25 basis points will be effective from February 17 and the second from March 3. The RBI’s move of hiking the CRR rate is aimed at checking liquidity from further compounding the inflation rate and follows a fortnight after the central bank raised its overnight lending (repo) rate to 7.5% on January 31.

Read more in the article in Business Standard.

Pradip Overseas to form JV with US textile firm; hit capital markets with Rs. 200 crore-issue

Ahmedabad-based Pradip Overseas Limited, a manufacturer of household linens, is forming a JV with a US-based textile company for branding and marketing its home linen in the overseas markets. The size of the JV is around Rs. 200 crores and will be finalized by Pradip next month by signing a Memorandum of Understanding with the US company. The name of the American company has not been disclosed.

Pradip Overseas is also planning a domestic JV with at least two Mumbai-based companies. The companies would look after the branding and marketing activities of Pradip in the domestic market. The domestic JVs will also be worth Rs. 200 crores.

Pradip Overseas is planning to raise funds for its Green Field Textile Park in Ahmedabad in the debt-equity ratio of 60:40. Of the equity, 20% would be raised from the capital markets for which it plans to come out with a public issue of Rs. 200 crores in the next six months. As of December 2006, the turnover of the company was Rs. 280 crores.

Read the Business Standard article.

Tata Group not to exercise government call option; will hike VSNL stake via market purchase

The Tata Group will increase its stake in group company Videsh Sanchar Nigam Limited (VSNL) through market acquisitions instead of buying the government’s 26.12% residual stake in VSNL through the exercise of a call option.

The Tata Group has a combined effective shareholding of over 50% in VSNL. The government divested VSNL in 2001, with Tatas acquiring the majority stake in the company. However, the government was holding on to 26.12% stake in the company that gave it a controlling power and two nominees on its board.

Panatone Finvest (a Tata Group entity) holds 40.7% in VSNL, while Tata Sons has 8.51%, Tata Power holds 0.09% and Government of India holds 26.12%. Institutional investors and individuals hold the remaining stake in the company. The government was earlier ready to dispose of the residual stake, but had asked for a golden share in the company. A golden share means that the government would sell its 26.12 per cent stake in the company and in return ask for a single share with controlling stake. This was not acceptable to the Tatas.

Read the Business Standard article.

AK Capital Services wins India Bond Award 2006 from IFR

AK Capital Services has won International Financing Review (IFR) Asia’s India Bond Award for the year 2006. AK Capital has won the award for structuring and placing Rs. 1500 crores worth of perpetual bond issuance from UCO Bank in March 2006.

The UCO Bank transaction was India’s first perpetual bond issuance, after Reserve Bank of India issuing guidelines for same. These instruments are eligible for inclusion as Tier-I capital of banks. AK Capital, one of India’s leading debt arrangers, received this award in Hong Kong on February 5, 2007.

The Rs. 1500 crore-bonds of UCO Bank, rated ‘AA’ by CRISIL and ’AA-‘ by CARE, were perpetual in nature with a call option at par at the end of 10th year from the Deemed Date of Allotment. The bonds carried an interest rate of 9.50% pa, payable semi-annually, for the first 10 years and step-up coupon rate of 10.00% pa, payable semi-annually for all the subsequent years if call option is not exercised by the Bank at the end of 10th Year from the Deemed Date of Allotment. The bonds listed on the WDM segment of National Stock Exchange were reckoned as a part of Tier-I Capital of UCO Bank.

Read the release on Moneycontrol.com.

Tatas offload 0.84% in TCS for Rs. 1000 crores

Tata Sons, the holding company of the Tata Group, has raised more than Rs. 1000 crores by selling 0.84% of its equity stake in group company and software major Tata Consultancy Services (TCS). This has taken the total amount raised so far to about Rs. 2800 crores (about $622 mn). It is believed that the proceeds could be used for part-funding Tata Steel’s $12.1 bn-acquisition of Corus.

Tata Sons has sold about 8.1 mn equity shares of the software company to an undisclosed buyer. This is the third time in three months that the holding company has diluted its equity stake in TCS, which on December 31, 2006, stood at 78.3%. On February 6, Tata Sons sold 6.9 mn equity shares raising Rs. 900 crores. In a similar transaction in November 2006, Tata Sons raised another Rs. 900 crores by diluting 0.86% of its stake in TCS. A bulk of it was sold to Mauritius-based HSBC Global Investment Fund.

Read the article in The Economic Times.

IDBI plans raising Rs. 1500 crore-Tier II bonds

IDBI will raise around Rs. 1500 crores by way of Tier-II bonds in the coming 12 months. This is to support credit growth and Basel II norms and supplement for capital bonds that will be redeemed over next few months. Present capital base can support 20% annual growth in assets for next two financial years. However, the bank wants to provide adequate cushion for business expansion and Basel II compliance. Currently, IDBI has an outstanding Tier-II bond portfolio of Rs. 5000 crores. A part of this bond portfolio will mature soon. The new bonds may be issued in tranches depending on the business requirement over a year. The lower Tier-II bonds will have tenure ranging between 5 and 10 years and will carry slightly higher coupon rate than debentures. CRISIL has assigned an AA+ rating to the proposed issue. The public sector bank has raised Tier-II capital of about Rs. 1418 crores till date in the present financial year. The bank is adequately capitalized with CAR of 14.09% at end of December 2006.

Read more in the Business Standard article.

JP Morgan to set up asset reconstruction business in India

JP Morgan is planning to set up an asset reconstruction company (ARC) in India and is seeking regulatory approval for the same. It has already identified and tied up partnerships for the proposed venture, but declined to name them. The company has already picked up around six distressed assets and is looking out for more.

JP Morgan has invested around $700-800 mn in distressed assets and principal investments in the Asian markets; it is not disclosed as to how much has been invested in the Indian market. The existing Indian assets might not be transferred to the new company immediately

JP Morgan is the second player in the recent months to announce the setting up of an ARC. Anil Ambani’s Reliance Capital has already approached the Reserve Bank of India for approval to promote an ARC, Reliance Asset Reconstruction Company. It has tied up with Corporation Bank, Indian Bank, General Insurance and some foreign players as equity partners. A number of foreign banks and funds have shown interest in the country’s bad loan market. US-based George Soros and US fund Blue Ridge have acquired 26% stake in Reliance Asset Reconstruction, while Barclays is close to picking up a nearly 10% stake in ICICI Bank-promoted ARCIL.

Read the article in Business Standard.

Syndicate Bank to raise Rs. 240 crores in Tier-II bonds

Syndicate Bank is raising funds to the tune of Rs. 240 crores from the bond markets by issuing upper-tier bonds with a 15-year maturity. It will have the right to call back the bonds after 10 years.

Syndicate Bank will exhaust its capacity to raise Tier-II bonds this fiscal if it raises Rs. 240 crores. The bank is eligible to raise upto Rs. 150 crores through hybrid perpetual bonds which qualify for Tier-I capital. The bank’s Rs. 240 crore-issue includes a Rs. 140 crore-green shoe option. The bank has fixed the coupon at 9.3% for the first 10-year period. After the 10-year period, if the bank decides against exercising the call option, it will step up the coupon by another 50 basis points (bps).

The bond issue proceeds would help Syndicate Bank fund its business growth and augment long-term resources. After the fund-raising, the bank’s capital adequacy ratio, currently at 11.34% will increase by 20-30 bps. The issue is being managed by AK Capital Services, Citibank, Darashaw, HSBC, IDFC, Standard Chartered Bank and UTI Bank. Syndicate Bank, with government holding of 66.5%, will also have the option of going public with a follow-on offer next year. It can offload government stake by another 14.5%.

Read The Economic Times article.

SEBI prohibits Gammon Infrastructure IPO for a year

The Securities and Exchange Board of India (SEBI) has blocked the Rs. 450 crore-public offer of Gammon Infrastructure, restraining the company from tapping the capital markets for a year. This follows the December 21, 2006 order barring the parent company of Gammon Infrastructure, Gammon India from accessing the capital markets.

SEBI had stopped Gammon India and four others including promoter-chairman Abhijit Rajan and two companies controlled by him, from accessing the capital markets for a year for routing Gammon funds to subscribe to its rights issue in 2001. However, back then, it had not named Gammon Infrastructure Projects in the order. Gammon India will now appeal against the SEBI order with the Securities Appellate Tribunal (SAT). The SEBI has communicated to Gammon India that since the parent company holds significant stake in Gammon Infrastructure, the one-year prohibition on Gammon India would be applicable to Gammon Infrastructure as well.

At present, Gammon India holds 82.5% in Gammon Infrastructure, which following the IPO was supposed to come down to 20%. US hedge fund Och-Ziff also owns 12.5% in Gammon Infrastructure. The company is debt-free and has around Rs. 100 crores cash and sees no funding issues to delay its ongoing projects.

Read the article in Business Standard.

Escorts seeks SEBI approval to launch Escorts Gold ETF

Escorts Mutual Fund is planning to launch a gold fund and has approached the Securities and Exchange Board of India for its approval to launch gold fund. To be named as the Escorts Gold Exchange Traded Fund will offer returns in line with domestic price of gold by investing in physical gold as well as gold as an underlying security. The scheme will also have a provision to invest up to 10% of the corpus in money market securities. The open-ended scheme will list on the National Stock Exchange. Minimum application in the scheme is Rs. 5000 and in multiples of Rs. 1000 thereafter. The scheme would not levy entry load during new fund offer. On closure of the new fund offer, the scheme would charge 1% entry load. The exit fee would not exceed 0.5%.
Read the Business Standard article.

In a similar fashion, Benchmark Mutual Fund has launched an open-ended Gold Exchange Traded Fund. Minimum application in the scheme is Rs. 10,000 and in multiples of Rs. 1000 thereafter. The scheme levies a maximum entry load of 1.5% during new fund offer. On closure of the new fund offer, the scheme would charge no entry or exit load. There is no exit fee. The fund would trade on the National Stock Exchange. New Fund Offer period is from 15th February 2007 – 23rd February, 2007.

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.

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.

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.

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.

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

Genpact, India’s largest BPO company has finalized its IPO in the US markets as it plans to raise between $500-$600 mn and will list on the New York Stock Exchange. This will be the largest IPO by an Indian company in the US. The Genpact board has approved the issue and has appointed merchant bankers Morgan Stanley and Goldman Sachs for the issue.

The public issue is important as Genpact is the largest BPO company in India, and the issue will fulfill the huge demand for Indian BPO shares in the US market. The issue will also affect the valuations and demand for two other Indian BPO firms that went public last year: WNS, which got listed on NYSE, and EXL Services on NASDAQ. Both WNS and EXL saw a huge demand for their shares when they went public and even after the issue, they command very high valuations.

Genpact is owned by General Atlantic and Oak Hill Capital, who jointly control 60% of the equity of the company. The two funds had picked up the stake in Genpact in 2004 and in two years, have increased the value of their holding by five to six times. This is a fairly high rate of return for the investment made by a private equity funds. The remaining 40% is owned by US conglomerate GE.

The IPO is not likely to see a huge sale of shares by the existing shareholders. Bulk of the issue will be fresh issue of shares and the funds will be available for Genpact to fund growth. While the private equity funds Oak Hill Capital and General Atlantic are not expected to sell their holding, the value of their stake will go up substantially.

Read more in The Economic Times article.
Related Post: Oak Hill Partners may merge portfolio companies Genpact and Vertex; merged entity to be listed