Citigroup in talks to buy to hedge fund Old Lane for $600 mn; fund boss Vikram Pandit may get to head Citi’s alternative investments unit

Global banking giant Citigroup is in talks to buy Old Lane, a hedge fund firm co-founded by ex-Morgan Stanley senior executive Vikram Pandit. If such a deal happens, Mr. Pandit would probably be on his way to heading the bank’s alternative investments unit, and probably, also the top job at the world’s largest bank.

The purchase price for Old Lane is estimated to be around $600 mn. Old Lane is thought to have more than $4 bn of assets under management. The alternative investments unit is the smallest of Citigroup’s four main businesses. In 2006, profit at the unit fell 11% to $1.28 bn, and revenue dropped 15% to $2.9 bn. The unit at year-end oversaw $49.2 bn of assets, including $10.7 bn of Citigroup’s prop money.

Vikram Pandit is a former head of Morgan Stanley’s institutional securities division. Once considered a potential successor to former Morgan Stanley chief executive Philip Purcell, Pandit left the investment bank in March 2005 as part of an exodus of senior bankers and traders. He later founded Old Lane with his Morgan Stanley colleagues John Havens and Guru Ramkrishnan.

Read more in The Economic Times article.

Major financial houses in race to acquire UTI Securities stake

Major international financial powerhouses Citigroup, Macquarie Bank, Standard Chartered, Societe Generale and Kuwait-based Global Investment House are in the race to acquire 49% stake in UTI Securities. UTI Securities is currently owned by the Securities Trading Corporation of India (STCI).

STCI had bought 100% stake in UTI Securities for Rs. 265 crores in 2006 from the Specified Undertaking of UTI (SU-UTI). It is now looking to sell 49% stake to a strategic partner. As per the deal, STCI has a minimum lock-in of 51% stake in UTI Securities for three years, which will end in 2008.

The company will now divest 49% stake to a strategic partner, preferably a foreign investor, considering the expertise they would bring in. The talks were at an advanced stage and a prospective strategic partner would be short-listed soon.

Read more in the Business Standard article.

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.

Trinity Capital makes another pre-IPO investment in Fortis Healthcare for Rs. 87 crores

UK-based private equity fund Trinity Capital has increased its stake in Ranbaxy group-promoted Fortis Healthcare Limited to 4% from 1%, through an additional investment of Rs. 87 crores in 6 mn equity shares of Fortis Healthcare. Earlier, in January 2007, Trinity had made an initial investment of Rs. 28 crores for 2 mn equity shares of Fortis Healthcare. The private placements have been in the run up to the initial public offer, to be announced by Fortis Healthcare, during the first quarter of the financial year 2007-08.

Fortis Healthcare currently has a network of 11 hospitals, primarily in North India, and 16 satellite and heart command centers (including one heart command center in Afghanistan). The hospitals include multi specialty hospitals as well as super-specialty centers, providing tertiary and quaternary healthcare to patients in areas such as cardiac care, orthopedics, neurosciences, oncology, renal care, gastroenterology and mother and child care.

The book running lead managers to the issue are JM Morgan Stanley, Citigroup Global Markets and Kotak Mahindra Capital.

Read the article in Business Standard.

Morgan Stanley, Citigroup, Actis buy 6% in NSE

Global banks Morgan Stanley and Citigroup and private equity firm Actis today collectively bought a 6% stake in the National Stock Exchange (NSE) for an undisclosed sum. The stake sale takes the combined foreign direct investment in the NSE to 26%, the maximum limit for foreign ownership in domestic stock exchanges. Morgan Stanley will buy 3% in the NSE, while Citigroup and Actis will acquire 2% and 1%, respectively.

Domestic financial institutions IDBI (2%), State Bank of India (1.5%), SBI Capital Markets (0.50%), Corporation Bank (0.265%), Union Bank of India (0.125%), Bank of Baroda (0.89%), Canara Bank (0.385%) and Oriental Bank of Commerce (0.335%) are selling their stakes to the three new investors.

Early this year, the parent company of the New York Stock Exchange (NYSE) and three global financial institutions, General Atlantic, Goldman Sachs and Softbank Asian Infrastructure Fund, bought 20% in NSE, valuing the exchange at $2.3 bn. NYSE had paid $115 mn for its 5% stake. Recently, Germany’s Deutsche Boerse and Singapore Exchange (SGX) bought 5% stake each in the Bombay Stock Exchange (BSE) for just over $ 42 mn. Yesterday, it was reported that the Calcutta Stock Exchange also plans to sell a 51% stake and has invited bids from investors and strategic partners, in keeping with Indian regulations that require broker-owned exchanges to reduce the stake held by members to 49%, in a bid to make exchanges professionally run. PricewaterhouseCoopers is the advisor to the proposed sale.

Read the Business Standard article.
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Citigroup, Blackstone, IDFC, IIFC tie-up for $5bn India Infrastructure Financing Initiative fund

US-based financial services giant Citi and private equity major Blackstone have joined hands with infrastructure finance companies IDFC and India Infrastructure Finance Company Limited (IIFC) to set up a $5 bn (Rs. 22,000 crores) fund to finance the India Infrastructure Financing Initiative. According to government estimates, infrastructure development in India would require $320 bn in the next five years. The India Infrastructure Financing Initiative will have equity and quasi-equity of $1 bn and $3 bn long-term debt. The equity financing programme will be managed by IDFC and the fund will be invested in greenfield, brownfield and operating projects. Debt financing will be channeled through IIFC, in several tranches over the next three years for projects appraised by IDFC, certain banks and financial intermediaries. IDFC, Citi and Blackstone will together invest $250 mn while the balance is expected to come from reputable international investors as well as select domestic institutional investors, including IIFC.

Read the article in Business Standard and The Economic Times.

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.

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

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

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

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

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

Read the articles in The Economic Times and Business Standard.

Deutsche names Sanjay Sharma head of India equity capital markets

Investment banking in India is bearing witness to many high-profile people movements of late. After Citigroup’s investment banking head Surojit Shome’s move to Lehman Brothers India, we now hear of Merrill Lynch old hand Sanjay Sharma quitting Merrill to lead Deutsche Bank’s Indian equity capital markets operations. Sharma’s vacancy is being filled by Sumeet Puri, who will be moving from his post as Asian equity syndicate head from Hong Kong (See Related Post).

Indian equity capital markets volume jumped 22% to more than $19 bn last year, as total investment banking revenue hit a record $413 mn. Indian stocks rose more than 45% in 2006. Deutsche ranked second in investment banking revenues behind Citigroup, with $42 mn in revenues from underwriting stock and bond deals and advising on mergers.

Investment banks like Lehman Brothers, Goldman Sachs and UBS are expanding their
India teams as the country’s companies become bigger global players. Lehman last month poached Citigroup’s Surojit Shome as head of investment banking for India. Bankers, particularly non-resident Indians, are keen to move to Mumbai and New Delhi as top salaries approach the same levels as those in Singapore and Hong Kong, and the market yields increasingly large and interesting transactions. However, intense competition between banks has taken a bite out of fees, with equity deals only paying an average of 1.6%, compared with 2.3% for Hong Kong offerings and up to 7% for initial public offerings in the United States.

Read the article in Reuters.com.

Deutsche Bank’s real estate arm in talks with Emaar-MGF for investments worth $200 mn

Deutsche Bank’s real estate arm is in advanced stages of talks with real estate major Emaar-MGF to invest around $200 mn in the company. If the transaction goes through, it could possibly be the biggest deal in the real estate sector in India. As of now, the largest private equity transaction in the realty space has been Morgan Stanley Real Estate Fund’s $125 mn investment in Mumbai-based Oberoi Constructions (See Related Post).

Deutsche Bank’s investment will be done through its New York-based real estate arm RREEF. RREEF is one of the biggest real estate investors in the world with over $65 bn in assets under management. It currently has seven separate funds around the world which make investments in real estate and infrastructure. It provides services in fund management, investment management, asset management, property management, leasing, research, construction and development.

The stake Emaar-MGF will dilute is not known as the transaction is expected to be a quasi-equity deal. RREEF will hold convertible debentures in the company. Last year, Citigroup and New York Life Insurance had picked around 2% equity in Emaar-MGF Land for a consideration of $100 mn. Evolvence India Fund had recently invested $41 mn in Emaar-MGF.

Emaar-MGF is a joint venture between the Dubai-based real estate company Emaar Group and India-based MGF Developments. It plans to hit the capital market sometime in the third quarter of 2007. It is expected that the JV will dilute about 5-10% of its equity in the IPO. On the hospitality front, Emaar-MGF recently entered a 50:50 JV with French hospitality chain Accor. The JV aims to build and operate a chain of 100 budget hotels with an investment of $300 mn. Of this, the first 20 are likely to come up on Emaar-MGF’s existing land bank.

Read The Economic Times article.

IL&FS Investment Managers to invest Rs. 130 crores in Ansal SPVs

IL&FS’ PE arm IL&FS Investment Managers (IIML) will invest in two special purpose vehicles (SPVs) being floated by Ansal Properties and Infrastructure (APIL). IL&FS will reportedly get 49% equity in the SPVs with an investment of about Rs. 130 crores.

The two SPVs will develop projects in Gurgaon. While the first SPV is being floated for an integrated township, the second SPV will develop an IT special economic zone (SEZ). IL&FS is the second private equity fund to commit investments in an APIL SPV in the last six months. Earlier, HDFC Realty Fund had taken 33% equity in an APIL SPV for developing an SEZ in Greater Noida.

In recent times, APIL has also attracted private equity investment in the holding company by diluting promoters’ stake. The company had raised Rs. 175.8 crores through a 5% private placement with Citigroup in October last. Later, in November, George Soros had bought close to 1% equity in the company for Rs. 25 crores through the secondary market.

Read the article in The Economic Times.

Indiabulls’ overseas real estate arm raises Rs. 1200 crores from LSE’s AIM

Indiabulls Real Estate’s overseas arm, Dev Property Development has raised Rs. 1200 crores from the London Stock Exchange’s AIM market. Investors include LN Mittal, Fidelity, Capital Research and the Singaporean government having picked up large stakes in the IPO. The company’s shares will start trading on the exchange from Monday. The Dev Property IPO was managed by Deutsche Bank, Citigroup and UBS. The lead marketing agent of the issue was CLSA and KPMG is the statutory auditor of Dev Property Development.

Dev Property Development will buy minority stakes in the projects of Indiabulls through a secondary sale of shares by the latter and by investing fresh equity capital in Indiabulls’ projects for a total consideration of Rs. 1055 crores. Indiabulls had received Rs. 437 crores by partial sale of its stake in Jupiter Mills and Elphinstone Mills development projects. Dev Property has also invested Rs. 618 crores in subsidiary companies of Indiabulls undertaking real estate projects. It would also have the right to co-invest along with Indiabulls in its future real estate projects.

Knight Frank has valued Indiabulls’ real estate projects at Rs. 21,569 crores and Indiabulls’ stake in its projects at Rs. 15,125 crores. Indiabulls’ real estate business has been de-merged to Indiabulls Real Estate and its shares are expected to start trading in February. All shareholders of Indiabulls Financial Services received one share of Indiabulls Real Estate for every share they held in Indiabulls Financial Services. In December, Indiabulls Infrastructure, a subsidiary of Indiabulls Real Estate, had sold 13.3% stake to LN Mittal and Farallon for a consideration of Rs. 447 crores.

Read The Times of India article.

CVC International invests $33 mn in infrastructure company Indu Projects

Citigroup Venture Capital International, the private equity arm of Citigroup, has invested Rs. 150 crores ($33 mn) in Hyderabad-based infrastructure and real estate player Indu Projects Limited. Indu Projects has placed 9% equity at Rs. 1214 per share, and post-issue, the company’s equity stands at Rs. 13.69 crores while its total valuation stood at Rs. 1650 crores. DSP Merrill Lynch was the financial adviser to the transaction. The proceeds of the private placement are intended to improve the company’s net worth and fund projects in the commercial and residential space that include construction of 28 mn sq. ft. of plinth area in Hyderabad, Bangalore, Pune, Coimbatore, Chennai and Nandyal (Andhra Pradesh). The company has over 30 mn sq. ft. of real estate development under way across the country.

Read the Business Standard and Moneycontrol.com article.
Related Post: IL&FS, Sabre Abraaj invest Rs. 125 crores into Ramky Infrastructure

UTI mandates banks for $250 mn

UTI Bank has mandated Citigroup and Deutsche Bank as lead managers for raising $250 mn via three-year floating rate notes, a source close to the deal said on Monday. Investor presentations will take place in Singapore on Tuesday. Timing of the issue launch and bond pricing will be decided subject to market conditions (Source – The Economic Times).

UB to acquire Whyte & Mackay for £500 mn

The United Breweries Group is close to acquiring Glasgow-based distillers Whyte & Mackay for nearly £500 mn (Rs. 4350 crores) by January-end. This will be the largest outbound acquisition by an Indian company.

United Spirits, a part of the group flagship United Breweries, might be the investment vehicle for the acquisition of Whyte & Mackay.

Citigroup advised Whyte & Mackay, while United Spirits was advised by UBS.

The acquisition follows United Breweries’ attempt to acquire Taittinger, the world’s sixth largest champagne company, for £400 mn.

Read more in the Business Standard article.

BankMuscat buys stake in domestic brokerage Mangal Keshav

Oman’s largest listed company, BankMuscat, is buying 43% stake in brokerage firm Mangal Keshav for an undisclosed sum. This acquisition makes BankMuscat the single-largest investor in the Indian financial services and securities sector from the Sultanate. The financial due diligence on behalf of BankMuscat was done by PriceWaterhouse Coopers India, while the legal due diligence was done by Amarchand Mangaldas. The transaction is expected to be completed in first quarter of 2007.

The Mangal Keshav Group was set up in 1939 and is one of the oldest brokerage houses in India. It is present in securities trading, commodities trading, insurance broking and IPO / mutual fund distribution space. The group is one of the top 20 brokers in the country by market share and is a member of all leading equity and commodity exchanges. It is also a member of the Dubai Gold & Commodities Exchange and has an office in Dubai.

As per Morgan Stanley research, the Indian equity markets is seeing one of the strongest rallies and trading volumes are expected to double to $3.2 trn in 2010 from about $1.6 trn currently. Morgan Stanley projects the Indian brokerage business to grow to $3.9 bn by 2015. Several leading international banks such as Citigroup, BNP, ABN-AMRO, etc. have announced their foray in the securities business in India.

Read the article in Business Standard.

International Tractors to divest 5% equity

International Tractors (ITL), makers of the Sonalika brand of tractors, is in for a fourth tranche of private placement by selling a 5% stake in the company to an undisclosed financial investor. This follows ITL privately placing 5% equity with JM Financial for around Rs. 125-150 crores. In March 2006, it placed 10% stake each in two group companies – ITL and utility-vehicle maker International Cars & Motors (ICML) – with UK-based private equity firm 3i for an estimated Rs. 300 crores. The 10% ITL stake netted around Rs. 200 crores for Sonalika, the balance coming from the 10% ICML stake. Before 3i, Citigroup and Yanmar had also bought stake in the group. The company had sold 10% stake in ITL and 20% in ICML to Citigroup in 2005.

Read the article in The Economic Times.

Top investment banks back out of DLF issue

Two of the book running lead managers (BRLM), involved in the mega-IPO of real estate behemoth DLF have backed out of managing the issue. Enam Financial Services and JM Morgan Stanley seemed to disagree over valuations of the company with the DLF management, and have withdrawn from managing the issue. They have been replaced Lehman Brothers and Deutsche Equities, as per the revised prospectus filed with the Securities and Exchange Board of India (SEBI).

Nimish Kampani, CMD, JM Morgan Stanley, also happens to be a member of the SEBI’s capital markets committee.

Kotak Mahindra Capital and DSP Merrill Lynch have been retained as the global coordinators for the issue, so have been Citigroup, ICICI Securities and UBS AG as the other book-running lead managers for the issue. SBI Capital Markets is the co-book runner for the IPO.

This is the second time in which investment banks have backed out of an IPO. Earlier, during the IPO of low-cost airline operator Deccan Aviation, the BRLMs SBI Capital Markets, JP Morgan and ABN-AMRO Rothschild had backed off, citing differences over valuation. The issue was finally handled by Enam Financial Services and ICICI Securities.

Read the Business Standard article.

Citigroup proposes $5 bn infrastructure fund; to tie up with IDFC

Global financial services major Citigroup is in talks with the Indian government to start a $5 bn debt and equity infrastructure fund in partnership with Infrastructure Development Finance Company (IDFC). Blackstone had also proposed a fund for infrastructure in India, the size of which is not known. Citigroup has proposed a total fund of $5 bn, of which $2 bn is intended to be equity and $3 bn for debt. Citigroup would operate the fund in association with IDFC. Citigroup CEO Charles Prince had proposed the fund at a meeting with Finance Minister P Chidambaram in New York earlier this year.

More details on The Economic Times.