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

Hershey to buy 51% stake in Godrej Beverages & Foods

Hershey, America’s largest chocolate and confectionery-maker, is acquiring majority stake in the food and beverage business of the Godrej Group. Hershey is acquiring 51% equity stake in Godrej Beverages & Foods for Rs. 238 crores or about $54 mn. Hershey would also license Godrej Beverages & Foods some of its trademark rights for a lump sum payment of about $2 mn in addition to royalty payments of 5% for domestic sales and 8% for exports.

With this investment, financial investor IL&FS will exit from the venture while the holdings of the Godrej Group and that of an individual investor A Mahendran would come down. Post-acquisition, Hershey would hold 51% equity while Godrej Industries would hold 43% stake with the remaining 6% to be held by A Mahendran, a senior executive with the Godrej Group. The deal values the equity stake of Godrej Industries, a listed arm of the Godrej Group, at Rs. 200 crores. The deal values Godrej Beverages & Foods at Rs. 466 crores. Hershey would pick up the majority stake through multiple transactions. This would include acquiring the 40% equity held by IL&FS, acquisition of the convertible preference shares held by IL&FS, Godrej Industries and Mr. Mahendran as also subscription to fresh issue of capital in the company.

Godrej Beverages & Food represents the foods and beverages business of the Mumbai-based Godrej Group. It was formed last year when Godrej Industries transferred its foods division to another group company Godrej Tea. The combined entity was renamed as Godrej Beverages & Food Limited. With a turnover of around Rs. 400 crores, the company is engaged in categories such as tea, edible oils, health drinks including soymilk, tomato puree, fruit drinks and bakery fats.

Read The Economic Times article.

Wadhawan Food Retail close to acquiring HLL’s Sangam Direct

Wadhawan Food Retail Private Limited (WFRPL), which operates the Spinach chain of food and grocery stores, is leading the race to acquire Hindustan Lever’s Sangam Direct business. Reliance Retail, Subhiksha and RPG Retail are reportedly the other interested parties.

Sangam Direct is a unique e-tailing format very exclusive to Unilever across the globe. It has been operational for over three years and has been very popular with households in Mumbai. The service now covers almost 80% of Mumbai.

Read the article in DNA Money.

Gujarat Ambuja sells 11% in Ambuja Cement to Holcim

Gujarat Ambuja Cements has sold 11% stake in Ambuja Cement India Limited (ACIL) to Holcim for Rs. 526.5 crores. Gujarat Ambuja owns 33% in ACIL. It has exercised its put option for an 11% stake in ACIL and has sold 9.53 crore shares to Holcim. GACL made a profit of Rs. 240.7 crores by selling these shares. After this sale, Gujarat Ambuja owns 22% shares in ACIL and Holcim the remaining 78%. Holderind Investments, a subsidiary of Holcim, currently holds 16.51% stake in Gujarat Ambuja, while ACIL holds 9.93% stake in the company.

Read the Business Standard article.

Amalgamated Bean Coffee Trading to spin off coffee chain Cafe Coffee Day into a separate company

Amalgamated Bean Coffee Trading Company Limited (ABCTCL) is planning to spin off its coffee chain Cafe Coffee Day into a separate entity. The motive behind such a move would be to list Cafe Coffee Day in the next three years. It is expected that the coffee bar business will have a turnover of a little over Rs. 800 crores by 2010 from the current Rs. 380 crores. It had recently raised close to Rs. 160 crores through a mix of debt and equity from Sequoia Capital and International Finance Corporation.

Cafe Coffee Day has its business spanning the entire value chain of coffee consumption in India. Its different divisions include Coffee Day Fresh ‘n’ Ground (which owns 386 coffee bean and powder retail outlets), Coffee Day Xpress (which owns 500 Coffee Day kiosks), Coffee Day take-away (which owns 7000 vending machines), Coffee Day Exports and Coffee Day Perfect (FMCG packaged coffee) division.

ABCTCL in its roadmap has stated it aims to double the number of coffee bars to 800 in three years, while the coffee powder vending stores will number up to 650 from the current close to 400. The Xpress brand on the other hand will be paced up to 2500 outlets from the current 500 in three years’ time frame. Cafe Coffee Day is present in 70 cities across India, and is branching out to foreign shores by setting up cafes in Vienna, Austria and is planning to set shops in West Asia, Eastern Europe, Eurasia, Egypt and South East Asia in the coming months, besides in Pakistan and the US.

Read the Business Standard article.

Hong Kong-based ADM Capital to invest Rs. 80 crores in Rama Pulp and Papers

ADM Capital, a Hong Kong-based distressed debt fund will invest about Rs. 80 crores in mid-sized paper company Rama Pulp & Papers, which will use the funds for capex and for future programmes, including an acquisition (See Related Post). ADM is learnt to have been selected from players like Bank of America, Actis and DBZ.

ADM Capital joins a growing list of foreign private equity firms such as Citigroup, Standard Chartered, WL Ross, Clearwater and Eight Capital that have been cherry picking underperforming companies in India that they think have the potential to grow and churn profits in the next 4-5 years.

Formed in 1996, ADM Capital advises investment funds that make principal investments in distressed companies and special investment opportunities. ADM Capital had earlier joined Asian Development Bank to raise a $138mn fund to rehabilitate distressed companies in Asia. India’s distressed assets are estimated at $55 bn (about Rs. 253,000 crores). Distressed debt funds typically focus on companies that have either filed for bankruptcy or are likely to do so in the near future. The fund gets involved in restructuring to pull the company out from bankruptcy. Distressed debt firms often forgive the debt obligations of the company in return for equity.

Read the article in The Economic Times.

Actis and the Burmans seek re-bids for Punjab Tractors

Private equity fund Actis and the Burman family, the promoters of Dabur, who together hold a controlling 43.5% in Punjab Tractors (PTL), have rejected offers for the acquisition of their stake from seven interested parties. These companies include Mahindra & Mahindra, Ashok Leyland and Sonalika Tractors and have now been asked to make binding bids by next Monday.

The re-bid was reportedly prompted due to the non-binding nature of the offers. Also, the bids were much lower than the company’s share price, which has shot up around 30% in the month after the bids were invited.

Actis holds 29.5% and the Burmans hold 14% in the Rs. 958-crore tractor company, while the rest is held by financial institutions, the public and banks. Punjab Tractors is India’s fourth-largest tractor making company, with an 8% market share.

Read Business Standard article.
Related Posts:
M&M, TAFE eye Actis’ 29% in Punjab Tractors
M&M, Escorts vie for stake in Punjab Tractors; Actis, Burmans to sell out
Ashok Leyland bids for Punjab Tractors

The PVP Group picks up 51% in software training and real estate firm SSI

PVP Group has acquired a 51% stake in Software Solution Integrated (SSI) from the promoters, led by Kalpathi Suresh, for Rs. 613.14 crores. The stake sale would be followed by a mandatory public offer which is said to cost the PVP Group an additional Rs. 239.20 crores for 120 acres of prime land bank in Chennai and Ooty.

SSI was started more than 13 years ago as a software training company, which ventured further into software development and later into real estate. The SSI shareholders now have an option to exit when the acquirers make public offer to them at Rs. 208 a share.

For more details, read The Times of India article.

BPO firm HOV Services acquires US-based firm Lason for $148 mn

Pune-based HOV Services has acquired US-based Lason for $148 mn (about Rs. 660 crores). The acquisition was completed through HOV’s US wholly-owned subsidiary HOV Services LLC and was funded by HOV Capital, Merrill Lynch and Apollo Management; the three of them have invested $63 mn, rest of the acquisition has been funded by debt.

HOV had recently acquired Tracmail and SAM Holdings for $3.74 mn. The Lason acquisition will help HOV gain entry in new business verticals like transaction processing, healthcare and media. Lason has an Indian subsidiary based in Chennai, with a headcount of 8000. It also has presence in China (1200 people), Mexico (250 employees) and North America.

Read more in the Business Standard article.

Holcim to buy additional stake in ACC and Gujarat Ambuja

Swiss cement company Holcim is planning to increase its control in ACC and Gujarat Ambuja Cements for around Rs. 2700 crores. Holcim is in talks to buy Gujarat Ambuja Cements’ 33% stake in Ambuja Cement India Limited (ACIL). ACIL, in turn, holds 35% in ACC and 9.93% in Gujarat Ambuja Cements. At present, Holcim owns 67% in ACIL. The acquisition will make ACIL a wholly-owned Holcim subsidiary.

The proposed move by Gujarat Ambuja is in line with its two-year-old agreement with Holcim under which it had reserved the put (or sell) option and Holcim had the call (buy) option for one-third of ACIL. In 2005, Holcim had bought a 67% stake in ACIL, 40% from the government of Singapore and American International Group and 27% through subscription of preferential shares, for $800 mn (Rs. 3502 crores).

Read the Business Standard article.

Autoline Industries acquires 51% stake in Belgian company Stokota

Pune-based Autoline Industries has acquired a 51% stake in Stokota, a Belgian special purpose vehicles maker, for Rs. 66.8 crores. Autoline is already contract manufacturing Stokota’s tippers, dumpers and tankers in India. It will fund the deal through a mix of internal accruals, debt and equity.

Autoline will provide 80% of the components to Stokota’s European operations based in Poland and will continue to assemble vehicles for the Indian, Middle Eastern and North African markets. Stokota also has a manufacturing facility in China, which caters to Australia, US and South-East Asia.

Stokota’s current customer base includes Volvo, Scania, MAN, Iveco, Renault, DAF, FAW and Deng Fong. It is the largest manufacturer of aluminium tankers in Europe. Post-merger, Stokota’s operations are expected to contribute Rs. 250 crores to Autoline’s consolidated revenue and Rs. 11 crores to its profit. Autoline, which recently listed on the bourses, expects to end the year with revenues of Rs. 210 crores and a profit after tax of Rs. 16 crores. Autoline has a tool design and manufacturing facility in Pune and is focused on sheet metal assemblies for automobile industry.

Read The Economic Times article.

Austrian company RHI picks up 51% stake in Clasil Refractories

The €1.3 bn-Austrian refractories company RHI has picked up a 51% stake in Clasil Refractories for an undisclosed price. RHI was, until now, the largest importer of refractories in India and supplier to steelmakers without any local production capacities. It imported material worth €40 mn annually. The stake acquisition now brings a local production centre under its fund. The consideration would be used for expansions currently under way, at the RHI-Clasil plant at Venkatapura in Andhra Pradesh. The plant capacity will reach about 40,000 tonnes with sales revenue of €15 mn per year.

Read The Economic Times article for more details.

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.

Mahindra and Mahindra, Renault and Nissan form Rs. 4000 crore-joint venture in Tamil Nadu

Auto and auto components major Mahindra and Mahindra (M&M) has formed a tripartite joint venture with global auto giants, France’s Renault and Nissan from Japan, to set up a Rs. 4000 crore-greenfield automobile plant at Oragadam, near Chennai in Tamil Nadu. The facility will have a capacity to manufacture 400,000 units by 2009 and would be used by all the three auto majors for production of vehicles from their respective stables. M&M will hold 50% stake in the new venture, while the rest will be jointly head by Renault and Nissan of Japan. The Tamil Nadu government would provide land and incentives for the project. M&M President, automotive sector, Pawan Goenka was named the chairman of the JV company.

The Tamil Nadu government has already had some land and would acquire more to meet the needs of the facility, which would come up on a 925-acre plot. The new facility would see to it that those displaced due to acquisition of land for the project would be relocated at a place convenient to them. The new company would also start vocational schools in the area to train students and absorb them in the facility.

The project would consist of integrated automobile manufacturing facilities which would include engine plant, transmission plant, press shop, body shop, paint shop and assembly line, an official press release here said, adding this would be India’s biggest vehicle manufacturing centre at a single location. It would involve manufacture of 50,000 tractors per annum and there would be a Mahindra Research Valley in the Mahindra World City near Chennai.

The project would result in gross value addition of about Rs. 18,000 crores per annum to Tamil Nadu’s GDP and the additional investment in the State by vendors and supporting service providers was expected to be about Rs. 10,000 crores. The new facility would provide direct employment to 5000 people and indirect employment to many more.

M&M and Renault already have an existing JV which is manufacturing the Logan brand of cars.

Read the articles in The Economic Times and Business Standard.

Highlights of The Economic Survey 2006-07

The Finance Minister of India Mr. P Chidambaram presented the Indian Economic Survey 2006-07 to the Parliament today. Major highlights of the survey are:

· GDP to grow 9.2%, touch Rs.. 2,844,000 crore in 2006-07
· Inflation at 6.7% (as on Feb 3) a matter of concern
· Government’s top priority: Growth without high inflation
· Risks include volatile oil prices, delays in WTO talks, global macroeconomic imbalances
· Priorities include making growth inclusive, fiscal prudence, high investment improving government intervention in critical areas like education & health, subsidies to be targeted
· Agriculture to grow 2.7%, share in GDP dips to 18.5%
· Industry to grow at 10%, share in GDP up to 26.4%
· Services to grow at 11.2%, share in GDP rises to 55.1%

· 10th plan average GDP growth at 7.6% versus targeted 8%
· Average inflation in 52 weeks ending Feb 3 at 5%
· Food items, wheat, pulses, sugar driving inflation
· In industry, mining, gas and power issues of concern
· Current account deficit at $11.7 billion in H1 of FY07
· Exports up 36.3% to $89.5 bn in April-Dec 2006-07
· Capital flows strong, FDI up 98.4% in Apr-Sept 2006-07

· FIIs sellers in H1, but likely to be positive in H2
· Core sector growth 8.3% versus 5.5% in Apr-Dec 2006-07
· Infrastructure to require $320 bn in 11th plan
· Public sector to fund 60% of infrastructure
· Fiscal deficit budgeted at 2.8% in 2006-07
· Tax-GDP ratio rises to 11.2% FY07 versus 10.3% in FY06
· Personal income tax mop up rose 30.3% in Apr-Dec FY07
· Share of direct taxes in total revenues grows to 47.6%
· Stock markets buoyant, market cap rises to 91% of GDP

· Rs. 161,769 crore raised from IPOs in 2006
· Mutual funds raise Rs. 104,950 crores in 2006, up four-fold
· Corporate tax collections up 55.2% in Apr-Dec FY07
· Tourism earnings cross $6.6 bn in 2006

· Gross domestic savings rate up at 32.4% in 2005-06
· Gross domestic investment rate at 33.8% in 2005-06
· Gross fixed capital formation rises to 28.1% in 2005-06
· Savings of private corporates rise sharply at 8.1%
· High savings rate to continue

· Government final consumption expenditure up 11.5% in FY06
· Saving-investment gap turns negative at 1.3%
· Government to miss 2007 target of elementary education to all
· Employment rate grows to 2.5% in 1999-2005
· Decline in organized sector jobs
· Unemployment rate up to 3.1% in 2004-05
· Poverty down at 22% in 2004-05 versus 26.1% in 1999-2000
· Population to stabilize around 2045

Read more about the Economic Survey 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.

EDS to buy Bangalore-based software testing company RelQ for $40 mn

Bangalore-based RelQ Software has finalized a deal worth $40 mn to be acquired by IT consulting major Electronic Data Systems (EDS). RelQ specializes in software testing, validation, verification and quality assurance. It has 800 people and posted revenues of $22 mn last fiscal. It is expected to record revenues of $30 mn in 2006-07.

RelQ will help the $21-billion EDS, which focuses on consulting, application management, maintenance, re-engineering, migration, technical support and testing, to ramp up its testing practice in India. EDS has over 17,000 employees here across varied verticals.

Read The Times of India article.
Related Post: Software testing company up for sale by stakeholders ICICI Ventures and Acer Technologies

Bennett Coleman picks up 5% stake in YOU Telecom

Bennett & Coleman Company Limited (BCCL), the holding company of the Times of India, has acquired a 5% stake in YOU Telecom India Private Limited for an undisclosed sum. YOU Telecom is India’s first ISO 9001:2000 accredited broadband company. Citigroup Venture Capital International is already an investor in YOU Telecom.

AV Birla Group bids €85 mn for Italian fibre firm

The AV Birla Group has reportedly made a bid of close to €85 mn to acquire Italian cellulose fibre company BembergCell. Bemberg Cell is a financially distressed company and is on the block through a corporate administered process.

BembergCell has three production centres located in Italy with 155 spinning machines to produce yarns. BembergCell is the result of the union of three companies: Bemberg, Novaceta and Nuova Rayon. The company employs close to 400 people. The other bidders in the fray include a top manager of another Italian fibre company, Italo Fabbro, and Germany-based International Chemical Investor, promoter of the brand Erika.

Read The Economic Times article.

Zensar Technologies buys US-based IT firm ThoughtDigital for $24.9 mn

Zensar Technologies has acquired the US-based ThoughtDigital and its holding company SOA Software for $ 24.9 mn. ThoughtDigital focuses on Oracle applications. The acquisition puts Zensar in a position to become one of the top 10 organizations for Oracle implementation globally. The acquisition will be funded through a mix of debt and internal accruals, with 60% coming from borrowings. The all-cash deal is structured with earn-outs to be paid over two years.

ThoughtDigital had revenues of $27 mn and an operating profit of $3 mn in 2006. It employs 120 Oracle consultants and its customer base includes firms like Gartner, Cingular Wireless, Primavera and USPS.

Read The Economic Times and Business Standard articles.

Shoppers’ Stop, Nuance form airport retail JV

Shoppers’ Stop and Nuance Group AG have formed a joint venture to bid for contracts to set up duty-free retail outlets in Indian airports. The JV is among the five short-listed bidders for a contract to set up duty-free retail outlets at Mumbai international airport. In the airport retailing space India, with a projected annual passenger growth of 10.4%, is considered a strong growth potential market. Nuance with an annual turnover of $1.7 bin has a presence in 17 countries with 340 shops across 57 airports operating in duty-free core categories like cosmetics, liquor, chocolates and specialty stores like food and beverage outlets.

Read the Business Standard article.

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.

GIC, Deutsche Bank, L&T Infra submit bids for SICOM stake

Government of Singapore Investment Corporation (GIC), Deutsche Bank, Standard Chartered Bank and L&T Infrastructure have submitted their bids along with eight others with the Specified Undertaking of Unit Trust of India (SU-UTI) for acquiring its 40% stake in the State Industrial Corporation of Maharashtra (SICOM), the investment arm of the Maharashtra government. The tender invited by the SU-UTI closed in the second week of February and 12 parties have submitted their expressions of interest. Currently, the Maharashtra government holds 49% in SICOM, SU-UTI 36.5% and another 3.5% stake is held by UTI AMC.

ICICI Securities has been appointed as the merchant banker by SU-UTI for the stake sale. It will hold talks with the interested buyers soon. SU-UTI is also said to be in talks with the state government to offload its stake in SICOM.

SICOM has posted a net profit of Rs. 33.98 crores in 2005-06, up 69% from Rs. 20.15 crores in the previous year. SICOM offers advisory services to the state government, Maharashtra Electricity Regulatory Commission and other corporates. It is launching a second venture fund and would be soon offering merchant banking, treasury management and real estate development through subsidiary or joint ventures.

Read the Business Standard article.
Related Posts:
IFC, DEG planning to acquire a stake in SICOM
UTI to divest 36.58% stake in SICOM

MCX promoter Financial Technologies eyes stake in OTCEI, ISE

Financial Technologies, the promoter of the Multi Commodity Exchange of India (MCX), has shown interest in acquiring stakes in the Over the Counter Exchange of India (OTCEI) and the Inter-connected Stock Exchange (ISE). The company had recently applied to the Securities and Exchange Board of India (SEBI) expressing interest in floating a separate stock exchange for small and medium enterprises (SMEs). The company’s move to acquire a stake is seen as a step towards setting up an SME bourse. The OTCEI had placed Financial Technologies’ proposal to buy stake before its promoters and was awaiting their response. The ISE is expected to complete its valuation shortly, with the September 14 deadline for the completion of demutualization process approaching. Apart from Financial Technologies, a few other IT companies and private equity firms are learnt to have approached the exchange to acquire stake. The OTCEI is promoted by financial institutions such as UTI, ICICI, IDBI and LIC, while the ISE is promoted by 13 regional stock exchanges of Bangalore, Kochi, Jaipur, Bhubaneshwar and Mangalore, among others.

Read the Business Standard article.

SREI Venture to raise $250 mn infrastructure fund by April 2007

SREI Venture Capital is raising a $250 mn infrastructure-focused fund by April 2007. The company plans to tap the UK’s Alternative Investment Market (AIM) or the main UK market. This will be SREI’s first overseas fund-raising, with the company’s contribution at 2-5%. The new fund will focus on the entire gambit of infrastructure projects in India right from oil & gas to roads to power projects.

SREI Venture Capital is a wholly owned subsidiary of SREI Infrastructure Finance, which is into financing infrastructure equipment, infrastructure projects and renewable energy projects. SREI Infrastructure manages assets worth of around Rs. 4500 crores.

This is the second time that SREI is attempting to raise a Rs. 1000 crore-plus fund after it launched the India Global Competitive Fund (IGCF) in mid-2005; so far, the fund has raised around $80 mn (Rs. 360 crores) and is in the process of raising further funds.

International Finance Corporation (IFC), DEG, Germany (a financial institution owned by the Government of Germany), FMO, the Netherlands (financial institution owned by the Government of the Netherlands) and BIO (financial institution owned by the Government of Belgium) are among the large stakeholders in the company.

Read the Business Standard article.

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L&T merges Datar Switchgears with itself

Larsen & Toubro Limited (L&T) has reportedly merged the Nashik-based Datar Switchgear with itself for an undisclosed amount. L&T has also absorbed 160 workers of Datar Switchgears in its Ahmednagar facility. The remaining legal formalities in this regard are expected to be completed within the next one or two months. The distressed Datar Switchgear, spread over four acres in Ambad in Maharashtra Industrial Development Corporation (MIDC) facility, was engaged in the manufacture of electrical and electronic products.

The company was a pioneer in the production of circuit breakers. The move is aimed at extending its presence in the low voltage electrical business. The Board of Industrial & Financial Restructuring (BIFR) has also reportedly given its clearance for the merger of Datar Switchgears with L&T. L&T has already shifted all the technology and machinery of Nashik-based Datar Switchgears to its Ahmednagar facility in Maharashtra.

Datar Switchgears, established in 1984 in Nashik, had indigenously developed the technology for the manufacture of earth leakage circuit breakers (ELCB) and minutes circuit breakers (MCB). Datar Switchgears was also involved in manufacturing switchgears, ultrasonic welding machines and of capacitor panels, for rental and outright sales. But the company had financially come into distress with the collapse of company’s cash flow and affecting payments of interest and principle to financial institutions, banks and other financiers, and also a loss of substantial business opportunities.

Read the Business Standard article.

Kotak AMC ties up with US-based T Rowe Price

Kotak Asset Management Company has tied up with the US-based T Rowe Price to launch a fund that will invest in the Luxembourg-domiciled T Rowe Price Funds Sicav-Global Emerging Markets Equity Fund.

Baltimore-based T Rowe Price is one of the world’s leading independent investment management firms. The fund is expected to be launched in the next couple of months. The tie-up with T Rowe encompasses only product initiatives.

The size of the fund can be up to $150 mn. The fund will aim to outperform the MSCI Emerging Markets Index over the medium-to-long-term by investing in T Rowe Price fund. The fund invests primarily in a widely-diversified, global portfolio of transferable equity and equity-related securities of companies established or conducting a significant proportion of their business activities in the emerging countries of Latin America, Asia, Europe, Africa and the Middle-East.

Read the article in Business Standard.

Firstsource Solutions, 24/7 Customer to merge

India’s fifth-largest BPO Firstsource Solutions (formerly ICICI OneSource) and 24/7 Customer, the tenth-largest, are planning to merge themselves in a move which would usher in a whole new era of consolidation in the Indian BPO / ITeS industry.

It is reported that Sequoia Capital is behind this action, which has substantial stakes in both companies. An array of strategic investments has been made in Firstsource by Sequoia, Temasek, Metavante and ICICI. In June 2003, Sequoia had led the $22 mn funding in 24/7 Customer. Firstsource employs over 10,717 people; 24/7 has 5500 people on its rolls.

Read the article in DNA Money.

WPP merges Bates with David; David head Josy Paul resigns

WPP is merging its agencies Bates Enterprise and David to form Bates David Enterprise in India. The boards of directors of both the companies have approved the merger. Integration of processes and people is expected to be completed over the next two months. The offices in Delhi, Kolkata, Bangalore, Chennai and Mumbai, will offer a complete range of communication services. Bates David Enterprise will be led by Subhash Kamath as CEO and Mohammed Khan as chairman. Josy Paul, chairman and NCD, David, has put in his papers and will not be part of the new entity.

Read more in DNA Money.

Apollo Hospitals has UK-based Abbey Hospitals on its radar

Indian healthcare major Apollo Hospitals may bid for Abbey Hospitals, a UK-based hospital chain. Abbey Hospitals has been put up for sale by its parent company, the British healthcare group Covenant. It operates a chain of six hospitals. Any sale would happen at an estimated deal size of $100-150 mn. JP Morgan’s private equity arm, One Equity Capital is likely to partner Apollo Hospitals in the buyout. The fund already has investments in the Apollo Group companies.

Covenant Group is controlled by the Cognetes Fund. Cognetes acquired Covenant from Phoenix Private Equity for about $170 mn in 2005. Capio, the other identified target is also controlled by private equity funds Apax Partners and Nordic Capital. Deloitte is managing the sale process of Abbey and is expected to kick off the procedure in the next few weeks.

Read The Economic Times article.

Infosys eyes UK-based SmartStream Technologies; deal valued at £100 mn

Indian IT behemoth Infosys may acquire UK-based SmartStream Technologies, a solutions provider for financial services sector, for over £100 mn. Headquartered in London, SmartStream has direct operations across Europe, New York, Sydney, Beijing, Singapore and Mumbai.

SmartStream has more than 70 of the world’s top 100 banks as its clients and has 38% share of the transaction lifecycle management solutions market. The acquisition of SmartStream will be Infosys’ second major one, after it acquired an Australian IT firm for $22.9 mn in 2003.

Buyout fund TA Associates holds 60% stake in SmartStream. TA acquired the company around 18 months back after the exit of 3i, which supported a management buyout in 2000.

Read more in The Economic Times article.

Changi Airport forms airport modernization JV with Tata Realty & Infrastructure

Singapore’s Changi Airport International (CAI) is entering into a joint venture company with Tata Realty & Infrastructure, a subsidiary of the Tata group, to pursue airport modernization projects in India. The two partners have signed a memorandum of understanding (MoU) to set a joint venture company in which Tata Realty will hold a majority 51% stake and CAI 49%, to invest in, develop and manage Indian airports.

The scope of the venture could include bidding for the impending modernization and operations of the Chennai and Kolkata airports, India’s third and fifth busiest airports respectively, which the government wants to develop as alternative hubs to Mumbai and Delhi. The venture could also extend to investments in some of the 35 smaller airports, as well as the proposed Rs. 4235 crore-Navi Mumbai airport project. Regarding Chennai and Kolkata airports, the government is expected to make a formal announcement of a privatization programme. Chennai handled 6.77 mn passengers and Kolkata 4.4 mn in 2006. The Navi Mumbai airport is expected to absorb 10 mn passengers a year in 2013, its first year of operation, and 40 mn passengers a year by 2030.

CAI is wholly owned by the Civil Aviation Authority of Singapore. It had earlier teamed up with telecom giant Bharti for the Mumbai airport modernization project but later pulled out citing lack of confidence in meeting tender conditions. Besides the Tata group, CAI is exploring the option of teaming up with hotel major Leela Group to develop Kannur airport in north Kerala. Though it had withdrawn from the Mumbai airport project, CAI has teamed up with GVK Group, the present developers of the Mumbai airport, to implement a 100-day improvement programme and assist them in reviewing their master plan.

Read the Business Standard article.
Related Post: Tata Group forms Tata Realty & Infrastructure with Rs. 4500 crore-fund

Bharti Enterprises to engage in PE activity

Bharti Enterprises, the parent company of Airtel, plans to get into the investments space by being strategic partners in new businesses. The company has roped in Mr. Prakash Nene, a senior ICICI Ventures executive as corporate director, investments and new opportunities to spearhead the initiative with the mandate to identify new business opportunities where Bharti Enterprises can invest. He would report directly to Mr. Sunil Mittal.

Bharti Enterprises is the parent company of the Sunil Mittal group with investments in Bharti Airtel, financial services venture Bharti-AXA and fresh food and vegetables distribution business Field Fresh. The group is making a foray into the retail business through a wholly-owned subsidiary Bharti Retail.

Bharti Enterprises has surplus cash and is looking at new investment opportunities to deploy these funds in an optimal manner. The company is clear that it does not want to be a mere financial investor and wants to invest with a long-term horizon and help the investee company or business in creating value. It is possible that the company may also incubate new businesses.

Bharti Enterprises will also look at investments in mutual funds and sundry other financial instruments. Bharti Enterprises move to enter the strategic investment space is in line with other business families and high net worth individuals who have branched out into private equity. Prominent examples include Azim Premji, who has started Azim Premji Investments, and Dabur’s Burman family who have made investments in their personal capacity in companies such as Punjab Tractors and Vishal Mega Mart. Bharti Enterprises will differentiate itself from others in that it will make direct investments as a company and play a far more active role.

Read more in The Economic Times article.

Sony Pictures company buys 51% in Chennai-based animation firm FrameFlow

Chennai-based FrameFlow, a three year-old animation and visual effects company has sold 51% stake to US-based Sony Pictures Imageworks (SPI) for a reported $5 mn. FrameFlow has been renamed as Imageworks India. Founded in the year 2003, FrameFlow has a state-of-art production facility in Chennai employing 80 people delivering solutions to the visual effects industry. SPI will invest in infrastructure and proprietary technology software, besides offering high-end training, and expect to generate revenues of $20 mn over the next three years.

Read The Economic Times article

Shell buys out BPCL’s 49% stake in Bharat Shell

Shell Overseas Investments has bought out Bharat Petroleum Corporation Limited’s (BPCL) 49% stake in Bharat Shell. Both companies want to focus on their own specific lubricants brands in the growing lubricants market in India. The financial details of the deal have not been disclosed. Bharat Shell was a 51:49 JV between BPCL and Shell Overseas and was incorporated in 1993 for marketing Shell’s lubricants in the country. The joint venture has an authorized capital of Rs. 250 crores and a paid-up capital of Rs. 200 crores. Bharat Shell also markets LPG to both domestic and industrial consumers.

Read more in the Business Standard article.

HDIL in talks with PE funds for pre-IPO stake sale

Mumbai-based real estate developer Housing Development and Infrastructure Limited (HDIL) is in talks with private equity and real estate funds such as ICICI Ventures, Kotak Realty and HDFC Realty for selling a 4% stake for about Rs. 550 crores. It is quite possible that these three firms together can subscribe to the pre-IPO portion.

HDIL is in the process of diluting 4% stake in the company as part of its pre-IPO placement. It plans to do an IPO to raise over Rs. 2000 crores some time soon. HDIL has developed approximately 72.8 mn square feet of saleable area and 5.5 mn square feet of rehabilitation housing area so far. The company is in the process of expanding its property development activities to other parts of India.

Article in The Economic Times.

LN Mittal to buy 49% stake in HPCL’s Bathinda refinery for Rs. 3300 crores

Indian-born British steel magnate LN Mittal will pick up a 49% stake in the Rs. 16,700 crore-greenfield refinery project at Bathinda in Punjab with an investment of around Rs. 3300 crores. The refinery is being set up by Hindustan Petroleum Corporation Limited (HPCL). This is the first foreign direct investment in the refinery sector. HPCL will sign a JV with Luxembourg-based Mittal Investments for the 9 mmtpa Guru Gobind Singh Refinery project and allied facilities at Bathinda. Mittal Investments is wholly owned by the Mittal family and is registered in Luxembourg. It holds 38% in Mittal Steel Company.

Earlier, on two occasions, HPCL failed to forge alliances with British Petroleum of the UK and Saudi Aramco of Saudi Arabia. HPCL and Mittal Investments will hold 49% equity each in the project, while the balance 2% will be held by financial institutions. It is expected that a formal agreement between the two partners will be signed during the proposed visit of Mr. Mittal on March 2. Public sector Oil India (OIL) may also join the project at a later date and may get a 10-15% stake in the project out of HPCL’s 49%. The HPCL board had cleared the JV proposal on Monday. The project is expected to be commissioned by 2010.

Read The Economic Times article.

Canaan Partners to invest in 3 companies; deals to close by year-end

Canaan Partners, a US-based early-stage venture capital firm, which was last year in the news for its $2.5 mn investment in online matrimonial portal BharatMatrimony.com, has short-listed three more such deals. These are likely to get funding by the end of the year. The company is also exploring options to bring an Indian adaptation of Shutterfly, a US-based photograph printing and publishing portal.

Canaan Partners is looking at investing $2-5 mn in the first phase and around $15 mn in the next stage. The companies identified are all technology-based; however, it is also looking at start-ups in the services and telecom space.

The VC firm has an office at Gurgaon and is planning to set up two more offices this year in Mumbai and Bangalore. Canaan Partners has a cumulative capital investment capacity of $450 mn. In 2000, the venture capital (VC) firm had invested in Aztec Software, a software development firm, and in e4e, a diversified business-outsourcing firm.

Read the Business Standard article.

New Enterprise Associates buys 40% in HFCL Infotel for Rs. 375 crores

US-based private equity firm New Enterprise Associates (NEA) has acquired a 40% stake in HFCL Infotel for Rs. 375 crores. The deal has been signed and the transaction is likely to close in the next few weeks. The deal values HFCL Infotel at around Rs. 950 crores. HFCL Infotel offers CDMA-based wire-line, fixed wireless and mobile services in Punjab.

The Silicon Valley-based NEA has over $8.5 bn under management. It is one of the oldest and largest venture firms in the world. NEA had been scouting for buys in India and has opened an office in Bangalore and more recently, in Mumbai (read press release). In February 2006, it created an Indian arm, NEA-IndoUS Ventures with plans to invest $150-200 mn in India.

HFCL Infotel was being eyed by several PE funds wanting a slice of India’s telecom action. It is a loss-making unit of Himachal Futuristic Communications Limited (HFCL) incurred a loss of Rs. 25.6 crores during the quarter ended September 2006 and had accumulated losses of Rs. 70.25 crores, resulting in negative net worth of Rs. 8.54 crores.

The promoters now own 62% in HFCL Infotel, private corporate bodies hold just over 30% and 2.51% is held by the public. The private component is held between seven entities — Masita Capital Services, August Trading, IDBI (with the largest share with a little over 12% stake), Oriental Bank of Commerce, MKJ Enterprises, Mantu Housing Projects and Micro Management.

Read The Economic Times article.
New Enterprise Associates to buy 50% stake in HFCL Infotel

Teledata Informatics buys majority stake in eSys Technologies for $105 mn

Teledata Informatics, a Chennai-based IT company has acquired a strategic majority stake in eSys Technologies for $105 mn. The promoter of eSys, Vikas Goel, would continue to hold 49%, in the company. eSys Technologies is a Singapore-based distributor of hard drives and PC manufacturer. eSys is a $2 bn-privately-held firm started by an Indian entrepreneur. Teledata provides software and solutions for the marine, education, telecom and utility sectors. Teledata has picked up the stake in the Singaporean company through a fresh infusion of capital.

eSys derives nearly 95% of its revenues from distribution and manufacture of hardware. It distributes hard disk drives and other computer components. It also produces personal computers, some under contract manufacturing, while it also sells under its own brand name. eSys now manufactures more than 2 mn PCs annually at its facilities in Singapore, India, US and the Middle East.

Read the article in The Economic Times.

Merrill Lynch may up stake in India Infoline from current 14.1%

Merrill Lynch may acquire an additional stake in equity brokerage and financial services company India Infoline, over and above the 14.1% stake currently in the company. Merrill presently is negotiating with the company’s promoters.

If Merrill buys a further stake in India Infoline and its shareholding goes above 15%, it will have to make an open offer to the brokerage firm’s shareholders to pick up an additional 20%. At present, the promoters hold 36% stake, which is valued at about Rs. 600 crores at current market prices. The current market capitalization of India Infoline is Rs. 1670 crores. The deal would mark the entry of Merrill Lynch into retail brokerage business in India.

Read The Economic Times article.

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.

Tata Group forms Tata Realty & Infrastructure with Rs. 4500 crore-fund

The Tata Group has promoted a real estate arm, Tata Realty & Infrastructure, which will invest in infrastructure and real estate projects. The company has a corpus of Rs. 4500 crores. Dinesh Chandiok, the former CEO of Ansal Properties to head Tata Realty, will lead the initiative.

Apart from the Tatas, foreign investors too would be sponsors of the fund. There would be different fund schemes for different projects in phases. International Consultancy firm KPMG has been involved in strategizing the Tatas’ real estate business. Tata Realty would look at investing in housing complexes, special economic zones and construction of bridges, ports and airports.

Read more in The Times of India article.

Vornado, Uppal Group to finance Rs. 5000 crore-SEZ

New York-based Vornado Realty Trust, a leading operator of office buildings in the US, and Uppal Group, an Indian real estate player is forming a joint venture to fund a 263 acre-tax-free enclave in Gurgaon. The enclave will require a massive investment of Rs. 5000 crores and house information technology and other exclusive service businesses. Vornado will acquire a 50% stake in the project. The project will be paid for through a number of debt, internal accruals, and equity from both companies.

Read the article in Indianrealtynews.com.

Apollo Hospitals to buy UK-based healthcare unit

Apollo Hospitals is looking at acquiring a UK-based hospital chain estimated to be valued upwards of £1.2 bn, in partnership with private equity players. Apollo will provide its management expertise in such deals.

Apollo Hospitals has already expressed an interest in the British unit of Swedish healthcare company Capio that is owned by private equity groups Apax and Nordic Capital. The private equity owners of Capio were considering the sale of Capio’s British unit in response to antitrust concerns.

Apollo has also been looking at other hospitals including The Priory Group, owner of the famous rehabilitation centre for pop stars and fashion models. Priory Healthcare’s major shareholder ABN-AMRO has appointed Morgan Stanley to conduct a strategic review.

Read the Moneycontrol.com and Reuters.co.uk articles.

Indian Government to announce an incubation fund for entrepreneurs

The Indian government is proposing to set up an incubation fund which could be announced in the forthcoming Budget. The fund will help graduates from leading technical and management institutes with the seed money to float their ventures. The initiative will be on the lines of private venture capital funds. The fund will provide capital support and interest subsidy for a project. The proposal is being worked out on the basis of recommendations made by a committee under the Planning Commission.

While the government may provide seed money for the fund by way of token provision for the next fiscal, the industry may also be asked to take it forward. The industry may be involved in the identification and implementation of viable projects. Incubatee entrepreneurs may be allowed certain concessions. Besides, contributions to the fund by business houses could earn them deductions from income tax.

A Planning Commission committee on technology innovation and venture capital has suggested that all technical institutions should set up profit-sharing Enterprise Incubation Units to provide advisory services, help in filing patents and protecting commercially valuable intellectual property. The committee also has suggested that these incubation units should get grants of up to 50% of their expenditure and exemption from tax as long as returns are used for further innovation. The committee has also suggested that enterprises being developed at incubation centres should also be categorized a priority sector for extending concessional bank credit.

Read The Economic Times article.

Bank of India forms life insurance JV with Dai-Ichi Mutual Life Insurance and Union Bank

Bank of India has formed a life insurance JV with Japanese company Dai-Ichi Mutual Life Insurance Company and Union Bank of India. Bank of India will hold a 51% stake in the JV, while 26% will be held by Dai-Ichi and 23% by Union Bank of India. The bank is also contemplating a joint venture in Zambia soon. It has also entered into a strategic alliance with Union Bank of India and IDFC for loan syndication, international business, cash management, cheque collection and training.

Article in The Economic Times.

Tata Tea to divest stake in tea plantations to IFC, IL&FS, workers

Tata Tea will divest 80% in its North Indian Plantation Operations (NIPO), and will spin it off to a number of investors and workers. The value of Tata Tea’s 80% stake in NIPO, which consists of 24 estates in West Bengal and Assam, is pegged at Rs. 290 crores, with the entity’s total valuation at Rs. 359 crores. The separation of NIPO will be effective April 1, 2007.

The company will detach itself from plantation management with the divestment. A couple of years ago, Tata Tea handed over the management of its south Indian plantations to its workers. The management of the company will be vested with the workers and Tata Tea will handle the marketing and distribution of NIPO’s produce. World Bank PE arm International Finance Corporation (IFC) and ILFS will each pick up a 20% stake in NIPO. This will be IFC’s first overseas investment in the plantation sector.

Globally Managed Services (GBS), a firm promoted by Mumbai-based Assamese consultant Ranjit Barthakur may pick up 10-15% and the workers of the 24 estates another 15%. The balance will be held by a couple of agri-companies. The agri-companies are being roped in to cash in on Tata Tea’s multi-cropping activities, so that NIPO emerges as an agricultural company with tea as its mainstay.

IFC and ILFS may likely pay nearly Rs. 72 crores each for their acquisition, while GMS will pay Rs. 36-54 crores, depending on the size of its shareholding. The workers will have to shell out Rs. 54 crores; the amount is planned to be raised through loans from the company spread over 5-10 years.

Read more in the Business Standard article.

Spanish firm Gestamp to acquire 37.5% stake in TACO

Spain-based Gestamp Servicios SL will acquire 37.5 % stake in Automotive Stampings & Assemblies Limited, a Tata Group company for a consideration of around Rs. 36.31 crores. Gestamp would acquire up to 37.5% of the paid-up equity share capital of the company from one of the promoters, Tata AutoComp Systems Limited (TACO), and partly through an open offer to the shareholders at a price of Rs 94.96 per share.

Post acquisition, Gestamp along with TACO and Tata Industries Limited would become the promoters of the company. Yes Bank is acting as the financial advisor to Gestamp Servicios. After completion of the sale of shares as above, the company would become a joint venture of TACO and Gestamp. Gestamp and TACO would eventually have a 50:50 equity stake in the company.

Read The Economic Times article.