CVC International allowed investing in Flemingo Duty Free Shops by FIPB

Citicorp Venture Capital International’s proposal to acquire 15% stake in Flemingo Duty Free Shops Private Limited (FDSPL) has been approved by the Foreign Investment Promotion Board (FIPB). Flemingo Duty Free runs duty-free shops at various airports and seaports. The deal is valued at more than Rs. 100 crores. The Ministry of Finance had already given the go-ahead to the investment. However, the proposal was awaiting approval pending with the FIPB.

Flemingo would initially issue 1 mn convertible preference shares to CVC International for about Rs. 1000 each, total amounting to Rs. 100 crores. These preference shares would then be converted into equity at a later date for a premium. Citicorp’s shareholding in Flemingo would be up to a maximum of 15% of the paid-up equity of the company.

The current shareholding structure of Flemingo Duty Free Shops includes 51.22% equity stake held by Flemingo International, a company based in British Virgin Islands, and a 24.87% stake held by various NRIs. After conversion of Citicorp’s preference shares; Flemingo International, NRIs and Citicorp would respectively hold 43.54%, 21.14% and 15% in FDSPL, taking the total FDI to 79.68%.

Read more in The Economic Times article.
Related Post:
Flemingo Duty Free Shops sells 15% stake to Citigroup Venture Capital International; awaits regulatory nod

RBI refuses Catholic Syrian Bank to let PE firm AIF Capital Development up stake above 5%

The Reserve Bank of India (RBI) has refused clearance to allow the preferential allotment of about 15% stake in Thrissur-based Catholic Syrian Bank to Asian private equity firm, AIF Capital Development. This has made a dent in (CSB) capital raising plans. The Foreign Investment Promotion Board (FIPB) has cleared the proposal but the RBI guidelines restrict any single private equity firm’s holding in a private sector bank to 5%.

Strangely, AIF Capital has 5.56% stake in Yes Bank, a new generation private sector bank. In addition to Yes Bank, AIF Capital’s portfolio in India includes Bharti Tele-Ventures and GVK Industries.

CSB had a capital adequacy of 11.24% at the end of March 31, 2006 and has been struggling to raise capital. It is imperative for CSB to raise capital to adhere to the RBI’s norms on minimum capital requirements for private sector banks, which require all private sector banks to increase their net worth to a minimum of Rs. 300 crores. CSB’s net worth in at the end of 2005-06 was around Rs. 215 crores.

Read more in the Business Standard article.
Related Post:
Catholic Syrian to sell 15% stake to AIF Capital Development; seeks RBI nod for sale

SEBI-RBI tiff stymies realty venture capital

The differences between the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have stalled foreign venture capital real estate funds from setting up shop in India. The RBI is insisting that funds floated by foreign venture capital investors (FVCIs) be brought on a par with real estate funds coming through the foreign direct investment (FDI) route for regulatory purposes.

At present, the FDI in the real estate sector is permitted through the automatic route and does not require the Foreign Investment Promotion Board (FIPB) nod. But fund houses have to adhere to certain project and financial restrictions.

The rules governing venture financing are liberal and allow funds to park money and withdraw it at their will. But financial conditions governing FDI rules require these funds to stay here for a minimum three years. Repatriation of any of the initial investment by funds before the stipulated period requires FIPB approval. The project conditions governing FDI rules prohibit sale of undeveloped land – a developer may purchase undeveloped land but must develop it before selling it. Also, it states that at least 50% of the project must be completed within five years from the date of obtaining statutory clearances.

Nearly 20 FVCI applications to invest in the Indian real estate sector are pending with the RBI, but have been approved by SEBI. Investments in the pipeline are estimated to be worth around $2 bn.

Article in The Financial Express.

JM Financial’s PE fund referred to CCEA; approved by FIPB

JM Financial Trustees Company’s proposal to set up a Rs. 900 crore-private equity fund has been referred to the Cabinet Committee on Economic Affairs (CCEA). The Mumbai-based trust will mobilize funds in the domestic and the overseas markets to make private equity investments in Indian companies. The Foreign Investment Promotion Board (FIPB) has already provided an in-principle approval to the fund.

The fund plans to invest in IT and IT-enabled services, manufacturing, pharmaceuticals, healthcare and media through separate schemes (and not through units of equity shares). Since such investments are not permitted through the automatic route, the application was first submitted to the Board and then referred to the CCEA. The trust has sought approval to float an offshore fund which would raise monies from high net-worth individuals, NRIs / PIOs, corporate and financial institutions from countries such as the US, the UK, UAE, Qatar, Saudi Arabia, Hong Kong and Singapore. The fund will be established in Mauritius and will be a global business license-category I company.

The proposal has attracted Schedule 5 of the Foreign Exchange Management Act (FEMA) notification of 2000. Accordingly, the fund can make the proposed investment but is restricted between equity and debt instruments in a 70:30 ratio. Also, if the FII plans to invest 100% in dated government securities, including treasury bills or non-convertible bonds and debentures, it will have to form a 100% debt fund registered with the Securities Exchange board of India (SEBI).

Article in The Economic Times.

The Blackstone Group invests $275 mn in Hyderabad-based media company Ushodaya Enterprises

The Blackstone Group, one of the world’s biggest private equity firms, has invested $275 mn in Ushodaya Enterprises Limited (UEL). UEL owns Eenadu, ETV and Ramoji Film City. The investment in the Hyderabad-based media house is touted to be the biggest in the Indian media sector. Blackstone will get board representation in Ushodaya. The investment is a part of the fundraising that Ushodaya has initiated upon. The company intends to raise $465 mn of which Blackstone has made an initial investment of $275 mn while the balance $190 mn will be by way of bank financing. The transaction is now subject to regulatory approvals from the Foreign Investment Promotion Board (FIPB) and the Ministry of Information and Broadcasting. Kotak Investment Banking was the sole investment banking advisor to the transaction.

Read the press release here.

Lehman Brothers gets government approval to trade in G-Secs

Lehman Brothers Securities has obtained permission from the Foreign Investment Promotion Board (FIPB) to trade in government securities. The financial sector giant plans to invest Rs 225 crore here through a number of downstream subsidiaries, which will directly trade in securities. The downstream subsidiaries of Lehman Brothers will also take up underwriting, merchant banking and other financial services, apart from functioning as primary dealerships (PDs) for trading in government securities.

Read The Economic Times article.

Star to buy 20% stake in radio company MBPL

Rupert Murdoch-controlled Star Group will pick up 20% equity in radio company Music Broadcast Private Limited (MBPL) from private equity firm India Value Fund Advisors (IVFA). MBPL runs its radio service under the brand ‘Radio City’, which is operational in major cities like Mumbai, Delhi, Bangalore, Lucknow, Hyderabad, Chennai and Jaipur. The company also won licenses in the second round of FM radio bidding and has plans to launch services in cities like Nagpur, Surat, Ahmedabad and Baroda.

The two companies had technically approved the deal and now Star would be seeking governmental approval to make the investments. Star will be approaching the Foreign Investment Promotion Board (FIPB) to seek permission for making the investments.

This will be Star’s second coming in the Indian FM radio business, after its stint with MBPL earlier where it was responsible for content supply and ad-sales, though without putting in equity. Star did not have any stake in the company at that time as the Government had not opened the sector to FDI. However, with the government allowing 20% equity in private FM radio as well as laying down a favourable policy regime, in the form of a revenue share regime, Star has made a comeback in the segment through equity participation.

Read the article in The Financial Express and The Economic Times.