JM Financial’s Infinite India to invest $400 mn in Indian real estate

Infinite India Investment Management, a private equity initiative anchored by the JM Financial Group, has launched a real estate fund. The fund plans to invest $400 mn in residential, commercial and retail sectors. Kartik Sharma, the Chief Investment Officer at Infinite India reveals that his decision is based on the fact that fundamental demand drivers in the realty sector are very strong, with respect to job creation and housing demand.

Kartik Sharma’s view of the Indian real estate market and opportunities:

On avenues of investment – Tier I and Tier II markets, where they have already made 5 investments; with capital being relatively tight in the market, in terms of debt capital and IPO action likely to be relatively slow for a little while, optimistic about private equity funds in providing finance for various real estate development projects

On direct participation in projects or backing existing companies planning to come into IPOs –done both so far and will actually continue to do both; invested in both project level investments as well as entity level deals

Time horizon for completely investing $400 mn and kind of returns expected – to invest the capital in the next 2-3 years; since investing in an emerging market illiquid security, expecting reasonable returns somewhere in the neighbourhood of 30%

On being bullish on the real estate sector given the inflationary pressures and the regulatory problems – fundamental demand drivers in terms of job creation and in terms of housing demand are very strong; also nascence of the Indian market with lots of pockets of inefficiency as well as in-house good expertise in terms of deal structuring

Top management re-jig at JM Financial post-Morgan Stanley break-up

Nimesh Kampani, after the separation of his firm JM Financial with JV partner Morgan Stanley, is re-organizing his operations to exploit future opportunities in the fast-growing Indian investment banking industry, with a view to give foreign investment banks, who are opening offices in India, a run for their money. A new management structure is being formalized for the group flagship company JM Financial by Mr. Kampani, who has carved up the operations of JM Financial into seven strategic business units to be managed by independent managing directors.

The investment banking business is split into corporate finance, M&A and global capital markets. Dipti Neelkantan, 48, who joined JM as a research analyst 25 years ago, has recently risen to the rank of MD & COO of the investment banking business. She is in charge of overall operations. Two MDs have been appointed for the corporate finance division, which is scaling up its operations. Nimesh Kampani’s son Vishal Kampani, 30, and BK Bansal, 53, will be heading this division. Adi Patel, 38, has been designated as head of the M&A division, while Atul Mehra, 39, has recently been elevated to the post of MD (global capital markets). Adi Patel, Atul Mehra and BK Bansal have been with JM for more than 15 years.

JM Financial is bringing in talent from outside to run the new-age businesses. Last month, Nityanath Ghanekar, 61, joined as CEO and MD of the mutual-fund business from global consulting firm PricewaterhouseCoopers. A few months ago, Dilip Kothari joined JM to head its private equity business from Olympus Capital. Rajeev Chitrabanu, 35, is CEO and MD of the financial services business, which includes wealth management and IPO distribution. Subodh Shinkar, 39, is the new COO of the division.

While Vipin Gupta, 35, is the MD of the fast-growing commodity business, Basant
Agarwal, 40, heads the special situations fund. JM Financial is also planning to create independent divisions for the fixed-income and research portfolios.

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.

JM Financial invests Rs. 120 crores in Sona Group

JM Financial India Fund, a $ 200 mn corporate private equity fund promoted by JM Financial Limited and Old Lane Partners LP will invest Rs.120 crores in the Sona Group. The investors have an option to invest another Rs.40 crores at a later stage. The investments include that in Sona Group companies including Sona Koyo Steering Systems Limited, Sona Okegawa Precision Forging Private Limited and other Sona Group Companies in the auto-ancillary space.

The Sona Group is an auto ancillary manufacturer with a diversified product range and enjoys industry leadership position in steering systems and precision forged gears. The investment by JM Financial will be used to expand capacities in the Sona Group’s subsidiary companies to meet domestic and export demand as well as for potential acquisitions.

Read the press release on Moneycontrol.com.

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.

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.