Credit Suisse forms JV with GE for emerging markets infra fund

Zurich-based universal bank Credit Suisse has entered into a joint venture with General Electric (GE) for an infrastructure fund. The fund will invest in emerging markets with a substantial portion devoted for investments in the Indian infrastructure sector. The size of the fund is estimated to be around a $ bn-plus. The fund-raising is currently going on. The announcement of the fund comes in the wake of the resumption of Credit Suisse’s institutional broking business in India, after a gap of six years. Credit Suisse was suspended from trading in India for two years from April 2001 to April 2003 by the Securities and Exchange Board of India (SEBI) for alleged price manipulation.

The bank has roped in the services of V Anantharaman as head of investment banking in India. Mr. Anantharaman was earlier the head of corporate advisory services at Standard Chartered Bank.

Read the Business Standard article.
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Credit Suisse launches Indian brokerage operations

GE’s India lighting brand CEMA bought by US-based Saratoga Partners

Saratoga Partners, a New York-based buyout investment firm, is buying out GE’s consumer lighting business in India, including the CEMA brand and the manufacturing facility in Gujarat. The financial details of the transaction are not available. Saratoga Lighting Holdings has also entered into an agreement for using the GE brand in the domestic consumer lighting business. CEMA and GE brands together account for over 2% of the domestic consumer lighting market estimated at Rs. 2500 crores.

CEMA Electric Lighting Products India Private Limited, the new legal entity formed during the acquisition, will function as a subsidiary of Saratoga Lighting Holdings. Saratoga Lighting is a portfolio company of Saratoga Partners, a US-based private equity firm that manages a group of investment limited partnerships. It focuses on the global lighting industry and has operations in several countries including USA, China and India.

Read The Economic Times article.

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

Scandent to sell stake in Cambridge Solutions; Apollo, Fidelity, EDS approached

The Economic Times reports that the Scandent Group is selling its majority stake in Cambridge Solutions. Investment bank Lehman Brothers is scouting for buyers for Cambridge which has a large BPO operation in the US. Some US-based funds such as Apollo, Fidelity and strategic players like global IT major EDS have been approached. An information memorandum has also been drafted for the prospective buyers. Cambridge is expected to fetch a valuation of anything above $300 mn, making it the second largest domestic deal in the BPO industry, after the $500 mn sale by General Electric of its 60 % stake in India’s biggest BPO outfit Genpact to Oak Hill Partners and General Atlantic in 2004. At present, the group of original promoters-this include serial entrepreneur Ramesh Vangal, former Pepsico CEO Christopher Sinclair, McKinsey honcho Rajat Gupta, US-Canadian Bronfman family of Seagram fame, the Chanderia family and current CEO Satyan Patel-holds 59.15% stake in Cambridge.

Reliance Industries may bid for GE Plastics

Reliance Industries Limited (RIL) is reportedly planning a bid to acquire the plastics division of US-based industrial conglomerate General Electric (GE). This would be the largest outbound acquisition deal by an Indian company. The last acquisition made by RIL was German specialty polyester manufacturer and market leader Trevira for €80 mn (Rs. 430 crores). Early last year, Reliance Industries had made an unsuccessful $8-billion bid for British Petroleum’s Innovene.

GE Plastics had estimated revenues of $7 bn and is valued at around $10 bn. The plastics division contributes about 8% to GE’s total revenue and 5% to its net profit. However, factors such as increasing raw material costs, rising competition and a downtrend in the automobile industry, have hurt the company’s bottomline in the recent past. In the first three quarters of 2006, GE plastics’ revenue was flat at $5 bn, but operating profit dropped 13% to $560 mn. The possibility of the sale of the plastics business has been speculated for long time ever since GE chairman Jeffrey Immelt hinted that GE might pull out of some of its commodity businesses.

Reliance may not be the only one to bid for the GE unit; global petrochemicals majors such as Dow Chemicals, Rohm and Haas, PetroChina, BASF and DuPont as well as private equity funds, including Apollo Management, Blackstone Kohlberg Kravis Roberts (KKR) should also be interested in acquiring the company. US-based investment banking giant Goldman Sachs has been reportedly mandated by GE to coordinate with private equity firms and other companies interested in bidding for the company’s plastics division.

Reliance’s 3.5 mn tonne plastics business is largely commodity-led. Even though 30% of the volumes are exported, most of it is through the trading route, where margins are relatively low. It has a negligible presence in the superior engineering plastics business, which is largely used by auto components and consumer durable manufacturers. Reliance sees a good strategic fit with GE Plastics, if acquired.

Reliance is said to be exploring options for the bid; possibly a tie-up with Dow Chemicals. The US major has signed a MoU with Reliance to set up a unit in Reliance’s Jamnagar SEZ. In turn, Dow would offer a substantial stake in its struggling petrochemicals unit in the US. A formal announcement is expected anytime. Sources say the bid for GE Plastics is contingent on whether Reliance is able to expand its strategic relationship with Dow Chemicals.

Read the articles in The Economic Times – 1 2 and Business Standard.