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.

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Indian economy showing signs of overheating, says The Economist

The latest issue of The Economist presents an alternative picture to the all-pervasive ‘India Shining’ story. The cover story says that even though India is growing at a rate comparable to that of China, it would not be possible to sustain this pace and that there are some worrying indications of the Indian economy overheating.

· Inflation has risen to 6% despite lower oil prices, above the 5.5% upper limit set by the Reserve Bank of India (RBI).
· Capacity utilization is higher than at any time in the past decade and severe skill shortages have caused wages to spiral upwards.
· Bank lending to firms and households has expanded by 30% over the past year; lending on commercial property up by 84% and home mortgages by 32%.
· India’s stock market is one of the emerging countries’ most expensive, with a price-earnings ratio of more than 20.
· House prices in many big cities have more than doubled over the past two years.
· India’s deficit widened to more than 3% of GDP in the three months to September.
· India is heavily dependent on short-term portfolio capital inflows, rather than foreign direct investment, which is longer-term.
· India’s total fiscal deficit, including off-budget items such as oil and power subsidies is close to 8% of GDP, the biggest among the main emerging economies. India also has the highest ratio of public debt to GDP, at 80%.
· India spends 4% of its GDP on infrastructure investment, compared with China’s 9%. In absolute dollar terms, China spends seven times as much on its infrastructure.
· India’s labour laws are among the most restrictive in the world.
· Quality of public services, from education and health to the provision of water, is dreadful, to say the least.

Read the complete article in TheEconomist.com.

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Seagate to acquire EVault Inc.

Seagate Technology LLC, the world’s largest maker of hard-disk drives, has agreed to acquire EVault Inc., an online data storage service provider, for about $185 million in cash, as per a news release issued by the Company

Seagate, a $9.2 billion company that’s based in the Cayman Islands but operates out of Scotts Valley, is expanding beyond its core business of making the disk drives that have long powered computers and more recently, electronics as well.

The move marks the biggest step yet by the largest maker of computer hard drives to boost its nascent storage services business. It would widen Seagate’s service offerings in a growing arena fueled by the demands of companies and individuals to store and keep backups of massive amounts of digital data.

EVault, a privately held company based in Emeryville, specializes in providing automatic backup and data recovery services to small- to medium-sized businesses. It was founded in 1997, has more than 250 employees and serves more than 8,500 customers worldwide.

EVault is the most recent acquisition in the broader storage solutions area and the third for Seagate in the area of services. In 2005, it acquired Mirra Inc., a maker of personal servers that allow consumers or small businesses to easily upload and share files, and recover them later if needed. Seagate also acquired ActionFront Data Recovery Labs, a provider of professional data recovery services.

The deal with EVault is expected to close in Seagate’s fiscal third quarter following regulatory approvals, the company said.Read article from Business Standard

BNP Paribas to take 33% Geojit stake for Rs 207cr

From Business Standard

October 26, 2006

French financial services group BNP Paribas will pick up 33.35% stake in stock broking company Geojit Financial Services for Rs 207 crore. The board of Geojit Financial Services today approved a proposal to issue upto 7.96 crore equity shares of Re 1 each to BNP Paribas at Rs 26 per share, aggregating to Rs 207 crore, the company said in a statement. This preferential allotment works out to 33.35% of the fully diluted equity post ESOP (Employees Stock Ownership Plan), it said. The offering to BNP Paribas will be in the form of equity and warrants convertible into equity. UTI bank advised Geojit Financial Services on this transaction. With two decades of experience in intermediary services, Geojit has a network of over 380 offices rendering trading and related services. Geojit manages Rs 4,500 crore assets for a customer base of 4,25,000. The company, with 2000 employees is into equities, derivatives, internet trading, portfolio management services, depository services, mutual funds, life insurance, commodity trading, margin funding and equity research. For the year ended March 2006, the company recorded Rs 101.79 crore revenue and net profit of Rs 22.71 crore. Geojit has offices in Dubai, Abu Dhabi, Sharjah and Muscut through its joint venture Barjeel Geojit. The company along with partners from Saudi Arabia, Oman and UAE is setting up another brokerage company in Saudi Arabia utilizing Geojit’s expertise, experience and technology in this sector.

TV 18 in talks to buy out Crisil wire service

From Business Standard

October 26, 2006

Television 18, owner of the business news channel CNBC-TV18, is in talks with rating agency Crisil to take over its news wire service Crisil MarketWire (CMW). This comes close on the heels of another broadcast company Zee acquiring news agency UNI. International credit rating agency Standard & Poor’s (S&P) holds the majority stake in Crisil. Both the companies have already formed an alliance and are now exploring various opportunities including transfer of ownership of CMW to Television 18. The other possibilities included transfer of CMW’s workforce to Television 18 and using the distribution channel of Television Eighteen. Crisil CEO and Managing Director R Ravimohan said all options were being explored but declined to comment on the contours of the deal that is likely to be struck between the two entities. Raghav Bahl, Managing Director of Television 18 also declined to comment on possible acquisition of CMW. He said: “As of now, we have collaborated to form products jointly. This initiative will be two-way flow from both the parties and will be beneficial for TV 18 shareholders. We have got tremendous expertise in it.” CMW is the new avatar of the erstwhile Bridge News. The core team of journalists from Bridge News shifted to Crisil in 2001 when the news agency closed shop in India and formed CMW. It used to support its news with database sourced from India Quotation System (IQS). “Reuters has recently bought IQS and this has queered the pitch for CMW as its subscribers would like to have data along with news which it is not in a position to offer now,” said a media analyst. CMW provides domestic financial newswire in India with a team of 35 journalists, according to its website. Sources said if the talks on an outright did not yield any result there could be an arrangement whereby the entire team of CMW would be shifted to Television 18. “This is in sync with Television 18’s business model,” the analyst pointed out.

SAIL to join the global acquisition binge

From The Economic Times

October 25, 2006

Having missed the takeover action so far, Steel Authority of India Ltd (SAIL), which would soon be dethroned as India’s largest steelmaker, too wants to join the global acquisition binge. The company management is keen on leveraging its competitiveness and mineral reserves to acquire companies overseas. SAIL chairman and managing director Sushil Kumar Roongta made the PSU’s intent of having a global footprint clear and told a news agency on Tuesday that it was open to good opportunities in the international market. A senior SAIL executive said the PSU wanted to leverage the large coal and iron ore mining rights to takeover companies in Europe. “This would enable SAIL’s entry into new markets and aid faster growth besides, reducing the risk of price fluctuations in the global market,” the source added. But company executives said the government policies on M&A by PSUs was something that could prove to be a deterrent. At the time when private sector steel companies in India are leveraging their new-found competitiveness to consolidate their position in the international markets, SAIL executives have suggested a policy on M&A that PSUs can adopt. For instance, even PSU chiefs did not have sufficient freedom in negotiating prices. For every move, state-run firms have to seek government nod, and when a deal size is over Rs 500 crore, cabinet-nod is mandatory. Even finance ministry has suggested a clear-cut policy on M&As for PSUs to ensure that they maintain the competitive edge and act as a counterfoil to private players, but the government has not moved. North Block also wants directives to be issued on pricing and swap ratios to ensure that PSUs do not have to run to the government since there have been numerous instances of valuations being questioned in the past. Only last year, the swap ratio for IBP’s merger with Indian Oil had been questioned and was cleared after several months of delays.

Mahindra & Mahindra in talks to buy German firm

From The Economic Times
October 25, 2006

India Inc’s appetite to shop abroad seems to be growing by the day. India’s utility vehicle major Mahindra & Mahindra (M&M) plans to add another German forging company, Schoeneweiss & Co, to its already loaded shopping cart as part of attempts to grow its auto component footprint across the globe. Though company officials refused to comment on the matter, sources close to the development said M&M is in advanced talks to buy the firm and a deal is expected soon. Sources further stated that the deal would be pegged at close to $150-200 million. “We would not discuss our M&A strategies. All I can say is that we continue to look at opportunities across the globe, but our focus now would be low-cost countries,” said Mahindra Systems and Automotive Technologies president Hemant Luthra — the man driving M&M’s merger and acquisition strategy. “But if some deal comes across at an absurd price, why not?” Luthra added. Schoeneweiss is a major supplier to leading commercial vehicle manufacturers like DaimlerChrysler, MAN, Scania and Volvo. In addition, its client base include global car-making biggies like Audi, BMW, DaimlerChrysler, Volvo, Bentley, Skoda and Volkswagen. The acquisition, sources said, will add to M&M’s customer base besides giving it access to newer markets and technology. This comes close to the heels of M&M buying a 67.9% stake in another German forging company Jeco Holding at an enterprise value of around Rs 830 crore. This was the latest in a series of forging company acquisitions by M&M. In addition, the firm is also said to be looking at some acquisitions in the domestic market as part of plans to grow its auto component business to a $1-billion unit by the year 2010.

Jina Ventures & H&M Global Selection Makes Three Investments

From Google News

October 25, 2006

New York-based investment bank-cum-private equity fund Jina Ventures and its limited partner Japan-based H&M Global Selection have invested in three Indian companies over the last six months. Jina/H&M has closed $1 million additional equity investment in Uma Precision, the Pune-based manufacturer of precision assemblies, systems and machined parts for the automobile industry. That takes the total investment of Jina/H&M in Uma to $3 million. Uma is planning an IPO shortly. Jina/H&M’s other investment is $2 million in Universal Power Transformers, a leading privately-held manufacturer of electric transformers and power distribution systems. UPT plans on completing an international acqusition and increasing India capacity over 100 per cent in 2006-07. The private equity fund has also invested $1.5 million in Lok Housing & Construction, a publicly listed construction company focused on middle income housing. It has land holdings of over 1,000 acres in Mumbai. The deal was closed in September 2006. They plan to invest more in the coming months. Jina Ventures and limited partners in Japan and the US have allocated $50 million to India investments during Q4 2006 and Q1 2007. This will be invested in real estate, construction, retail, e-commerce and manufacturing.

Global Access buys 33% in Bigshare for Rs 55 cr

From The Economic Times

October 25, 2006

US private equity firm Global Access Holdings has acquired 33% stake in Bigshare Services, a Mumbai-based registrars & transfer (R&T) firm for approximately Rs 55 crore. Global Access made the acquisition through its share R&T-arm Transfer Online. As part of the deal, Transfer Online’s president and CEO Lori Livingston will be joining the board of Bigshare Services. Bigshare is one of the leading R&T agents in the country with a client list of more than 300 companies, which includes Dr Reddy’s Laboratories, Wartsila India, Jain Irrigation Systems, Kopran, Venkateswara Hatcheries and DCW. Currently, there are no global alliances in India in the R&T sector other than the technology tie-up that Hyderabad-based Karvy has with Computershare of Australia. Leading foreign banks like Citibank, HSBC and Deutsche Bank are believed to evaluating options to enter the domestic R&T sector. “The financial services and capital market business are booming in India,” Vincent R Molinari, CEO, Global Access Holding, told ET. “Our investments in Bigshare will help us to tap the growing Indian financial market immediately. The country is witnessing more and more public offering every year. We feel this is the right time to enter the Indian market,” he said. Mr Molinari, however, was reluctant to divulge the financial details of the deal. However, industry sources said that Global Access has invested around Rs 50-55 crore to buy 33% in Bigshare. Transfer Online, with over 200 clients, is one of the leading stock transfer agent and financial services provider in the US. The firm also has operations in Canada and Europe.

Bhilwaras in talks with PE funds for power business

From The Economic Times
October 25, 2006

The LNJ Bhilwara Group is all set to give its energy portfolio a new punch. The Rs 2,400-crore diversified conglomerate is incorporating a new company, Bhilwara Energy (BEL) as a flagship entity in the power business. BEL will serve as a holding company for the group’s existing power generation firms, Malana Power Company (MPCL) and AD Hydro Power (ADHPL), which is a subsidiary of MPCL. BEL is now in talks with 3-4 private equity firms to raise Rs 250 crore in the first phase, and the deal is expected to crystallise in the next six weeks. LNJ Bhilwara chairman, Ravi Jhunjhunwala confirmed the development, when contacted. “Apart from being a holding company for all our power ventures, BEL will focus on smaller or less than 100-MW projects and let MPCL target large power projects,” he told ET. LNJ which is looking to ramp up its power generation capacities to 1,500MW in next 5-7 years, plans to invest close to Rs 7,000 crore during the period. “The first phase of investments will come from private placement and for the subsequent phase we shall look at an IPO and even GDRs,” Mr Jhunjhunwala said. He, however, declined to name the PE firms the company is in talks with, but sources say they are infrastructure-focussed private equity majors, including IL&FS and IDC. The company proposes to hold majority equity stake of 51% in MPCL. By acquiring 51% equity stake in MPCL, the company would acquire 45.9% holding of AD Hydro Power indirectly, since MPCL has 90% stake in ADHPL. BEL will focus on diversifying the group’s portfolio into the power business. It’s now planning to enter power transmission, distribution, trading and generation from non-hydro sources like thermal heat, wind power and nuclear energy. The company is looking at developing or acquiring new greenfield power projects in states like Himachal Pradesh, Uttaranchal, Sikkim, Madhya Pradesh, Chattisgarh and Arunachal Pradesh and is keen on projects involving renovation and modernisation of old power stations. LNJ Bhilwara had earlier signed a JV with SN Power Norway in ’04 to boost its hydro power initiatives. The group is also providing consultancy services in energy generation in India, with major emphasis on hydroelectric power, under Indo Canadian Consultancy Services, a joint venture with a Canadian firm, RSW International.

Financing of Tata-Corus Deal by Corus advisor Credit Suisse

From FinanceAsia.com

October 25, 2006

Sell-side advisor to Corus, Credit Suisse, becomes the lead financing bank for Tata Steel in India’s largest leveraged buyout to date. The financing package accompanying Tata Steel’s $8.23 billion leveraged buyout of UK steel producer Corus is multi-faceted. The deal, which sees Tata assume some debt on the Corus balance sheet and agreed pension liabilities, comprises a $3.88 billion equity contribution from Tata Steel, a fully underwritten non-recourse debt package of $5.63 billion, and a revolving credit facility of $669 million. The deal represents India’s largest cross-border outbound acquisition ever and also the largest leveraged buyout (LBO) attempted by an Indian company. Tata Steel appointed ABN AMRO and Deutsche Bank to advise on the transaction and raise the required financing for the acquisition. But somewhere along the way, the appointed banks were unable to commit the debt required. Sources close to the deal suggest the transaction was almost derailed at this stage. So Corus turned to a bank it was close to, Credit Suisse, to resolve the impasse. Credit Suisse was advising Corus on the Tata deal. The two have a long-standing advisory relationship built over a number of years working together on various transactions. Credit Suisse bought into the story of the strategic fit between Corus and Tata Steel and was prepared to back Tata Steel’s ability to extract the synergies necessary to make the acquisition a success. In order to finance the transaction, Credit Suisse had to approach the Takeover Panel in the UK for approval. Strict Chinese Walls had to be erected within the bank to separate the advisory and lending teams. Credit Suisse was apparently willing to pick up the entire financing, say our sources, but Tata Steel requested that ABN AMRO and Deutsche be part of the consortium. A Credit Suisse spokesperson has confirmed that it is “the lead financing bank on the deal and is leading the provision of financing at the request of its own client, Corus”. Sources say that of the £3.3 billion of financing being raised at the SPV level, Credit Suisse will provide 45% and ABN AMRO and Deutsche will pick up 27.5% each. The $1.8 billion bridge debt being raised at the Tata Steel level in India is being shared between Standard Chartered and ABN AMRO. An ABN AMRO spokesperson says it is pleased to be “the only bank participating at both levels of the financing” namely the UK SPV and the Indian holding company. In addition, Standard Chartered is providing subordinated debt of £196 million to Tata Steel. Deutsche Bank had no comment. The ability to finance the aspirations of Asian companies that are going global will become a differentiating factor. The banks that are going to lead the M&A charge in Asia will be the ones that can front the finance as well as provide the advice.

Trikona Capital Invests $20 Million In Thane Township Project

From Google News
23 Oct 2006

UK-based real estate investment fund, Trinity Capital – better known as Trikona Capital – has invested £10.75 million ($20.09 million) in a township project in Thane, near Mumbai. Trikona will pick up 16 per cent stake in the project owned by Kapstone Constructions Pvt. Ltd , with an option to increase the stake to 21 per cent for an additional investment of £3.5 million ($6.5 million). The township will be called “Rustomjee’s Township”. The total cost of the project is £265 million ($495 million). Kapstone Constructions Pvt. Ltd, is part of the Keystone Group, a leading Indian real estate developer. The Thane project plans to develop over seven million sq ft including a mix of residential, commercial and IT space as well as retail malls, educational, recreational and healthcare facilities.

Info Edge to raise up to Rs 1.7 bn in IPO

From Indiatimes Infotech
October 23, 2006

Internet firm Info Edge (India) Ltd plans to raise up to Rs 1.7 billion in its forthcoming initial public offer, at a price band that could value the company at $188 million at the top end. This, in turn, could translate into a 57 percent premium to the valuation it got from private equity investors earlier this year. The company would sell 5.32 million shares, or nearly a fifth of its post-issue equity base, in a book-built range of 290-320 rupees a share. The issue would remain open between Oct. 30 and November 2, according to the National Stock Exchange Web site. The company sold a 5 percent stake in May 2006 to Kleiner Perkins Caufield & Byers Holdings, which has also backed Google Inc, and another venture capital firm, Sherpalo for a total of $6 million. The company runs job search portal naukri.com and real estate Web sites. The company had a revenue of Rs 840.59 million and a net profit of Rs 132.9 million in the year to March 2006.

EXL Service to List on NASDAQ

From Global Services

October 23, 2006

The N.Y.-based firm with operations in India has fixed the offer price at $13.50. EXLService Holdings, the holding company of EXL Service, a NY-based offshore BPO firm focused on the financial services and insurance sector with an India-based model will be the second such firm to list in the American stock market and the first on NASDAQ. Mumbai, India-headquartered WNS listed on NYSE in July. EXL Service’s issue size is pegged at $67.5 million, a little less than its earlier proposed size of $75 million. WNS had raised $224 million in its IPO. It has taken EXL, which was the first offshore BPO firm to file for an IPO in the U.S.A., way back in December 2004, almost two years to list. Citigroup, Goldman Sachs, Merrill Lynch and Thomas Weisel Partners were listed as underwriters for the offering, in a filing made by the company on Oct.19 ’06. EXL Service, headquartered in New York, and having facilities in Pune and Noida, India, recorded revenues of $74 million in 2005, against $60.5 million in 2004. The Proforma revenues of EXL (with the acquisition of an analytical-services firm, Inductis, having a similar offshore model in July, 2006) for the first six-months in 2006 stands at $60.4 million. It derives close to 85 % of its revenue from insurance and financial services segments. It derives more than 60% of its revenues from its top three clients — Aviva, Dell (including Dell Financial Services) and American Express. Its other major clients include IndyMac Bank, Prudential Financial and Centrica. EXL, like WNS and the biggest pure-play offshore BPO firm, Genpact, is majority-owned by private-equity firms — Oak Hill Partners and Financial Technology Ventures who hold 49.6% and 16.5% respectively. The ownership of these firms would come down to 38.6% and 12.9% respectively. Apart from ownership pattern, EXL Service shares a few more similarities with the top two BPO firms. Like Genpact and WNS, EXL became independent from its then parent Conseco in November 2002 in a management buyout. EXL, however, had started as an independent firm, unlike Genpact and WNS which started as captives of GE and British Airways respectively. It was subsequently been acquired by Conseco. It again became independent when Conseco filed for Chapter 11. These three firms also account for the largest share of offshore BPO work in the insurance domain. EXL intends to use the net proceeds from the offering to repurchase or redeem all of its issued and outstanding Series A Preferred Stocks; repay all of its outstanding senior promissory notes payable to certain stockholders; for working capital and general corporate purposes. EXL Services is likely to trade on the NASDAQ under the symbol EXLS.

JustDial Gets Funding From SAIF Partners

From ContentSutra.com

October 23, 2006

Leading venture capital firm SAIF Partners has picked up an undisclosed stake in JustDial Services, a Mumbai-based “operator-assisted” telephonic search engine. JustDial, founded by VSS Mani, employs about 1,500 people, and it receives about 23 million calls a year from over 5 million unique users, in eight cities and nine languages. Ravi Adusumalli, General Partner, SAIF Partners, confirmed the investment in JustDial. The deal was closed last week. He, however, refused to divulge the quantum of investment or the stake taken in the company. The company will use funding to venture into new media delivery platforms like the internet and SMS, and will also foray into international markets like the US. Mani started his career with UDI (United Database Indian Pvt Ltd.) in 1987 where he learnt space selling in Yellow Pages. In 1989, he co-founded ASK ME Services, a tele information company. In 1996, Mani founded JustDial Services, which is an ‘operator assisted telephonic search engine’. JustDial is owned by A&M Communications. How does JustDial work? For instance, if a user is a looking for a hotel telephone number, he can call the JustDial call centre of the city and can instantly retrieve the number with the help of a JustDial operator. It’s free of cost. But in return, the JustDial operator will try to sell you a loan or will help you connect with a set of hotels who have signed up with JustDial directory. JustDial makes money from directory listing fee. Users get the numbers for free. An excellent service in Indian context, since Indians are more likely to pick up a telephone to hunt for a number instead of logging on to website to do a websearch. JustDial also has a web search service, by the way. In a way, JustDial does on phone what Google does on the web through contextual advertising. Adusumalli says JustDial has the largest database of commercial establishments in India with a market share of over 90%. “With presence across media – phone, print yellow pages, and soon to be launched internet and mobile SMS delivery platforms, the company has a formidable leadership position in the local search domain in India. The recent acquisition of a nationwide helpline number positions JustDial to scale across the country, as against 8 cities currently. JustDial will be leveraging the latest round of funding to pursue an international growth strategy, starting with a foray into the US market with its flagship telephonic search services,” says Adusumalli.

3i, India’s Raman Roy linked with bid for United Utilities’ Vertex

From Forbes.com
October 23, 2006

Investors led by 3i Group PLC, including Indian serial BPO entrepreneur Raman Roy, could acquire UK-based BPO firm Vertex from United Utilities PLC. The report said the offer would value Vertex at between 750-800 mln usd. While United Utilities values Vertex at about 900 mln usd, sources say the bid by Raman Roy could see success because private equity players such as KKR which were rumoured to be in the race have decided not to participate in the bidding.

South Korea’s Daewoo Electronics creditors sign deal to sell firm to Videocon

From Forbes.com

October 23, 2006

Creditors of Daewoo Electronics have signed an initial deal to sell the country’s third-largest electronics maker to a consortium led by Videocon Industries of India, Yonhap news agency reported. The memorandum of understanding signed last Friday calls for the consortium to buy the electronics firm for 700 bln won, it said. The consortium is made up of consumer electronics maker Videocon and Ripplewood Holdings, a US private equity fund. It was picked as preferred bidder for the Korean company in early September. The acquisition price is subject to change after a month-long review, Yonhap said, citing creditors, including the Korea Asset Management Corporation and Woori Bank. Daewoo Electronics is a former unit of the Daewoo Group which collapsed in 1999 after incurring 80 bln usd of debts. Daewoo Electronics last year posted net profit of 93.9 bln won on sales of 2.15 trln won. It ranked behind Samsung Electronics and LG Electronics. It produces a range of goods including TVs, air-conditioners and washing machines.

Videocon to buy Daewoo Electronics

From Financial Express
October 23, 2006

Creditors of South Korea’s Daewoo Electronics have signed an initial deal to sell the country’s third-largest electronics maker to a consortium led by Videocon Industries of India, officials said on Monday. The memorandum of understanding signed on Friday calls for the consortium to buy the electronics firm for $730 million. The acquisition price is subject to change after a month-long review, the creditors – including Korea Asset Management Corporation and Woori Bank – were quoted by Yonhap news agency as saying. The consortium is made up of Indian consumer electronics manufacturer Videocon and Ripplewood Holdings, a US private equity fund. It was picked as preferred bidder for the Korean company in early September. Daewoo Electronics is a former unit of the Daewoo Group, which collapsed in 1999 under USD80 billion in debts. Last month the firm expressed strong support for the proposed takeover but appealed for greater investment. The takeover is the “only realistic option” to save the firm, which is now in the seventh year of a debt workout programme, Daewoo Electronics said in a statement. “The reason for our active push for a merger and acquisition is the company’s desperate need for investment in technology development,” president Lee Seung-Chang told reporters at the time. “It has no meaning at all to have a new owner without any business investment coming along. We want a bigger level of investment than now.”

Largest shareholder says Tata bid undervalued it

From Daily News & Analysis
October 21, 2006

The biggest shareholders in Corus has said that it believed Tata Steel’s 4.3 billion pound agreed takeover bid undervalues the Anglo-Dutch steel maker.Standard Life Investments, which owns 7.9 per cent of the company, noted that the acquisition of Corus brings many advantages to Tata, including elevating it into the top five of global steel producers and an as yet unquantified amount of synergy benefits. “The offer from Tata does not attribute significant value to Corus shareholders from achieving what we understand to be the substantial savings available from the joining of the two businesses,” it said. Standard Life, however, declined to say if it would vote against the deal. But a spokesman for the investor said, “The 455p-a-share offer is lower than we would have expected the board of Corus to agree to and recommend.” Tata said the deal valued Corus at 7.9 times underlying EBITDA which is higher than Mittal’s takeover of Arcelor earlier this year. Herve Mangin, a fund manager at Axa, thinks the bid is too low and that Russian Severstal or Brazil’s CSN could react. “Corus is the only sizeable asset in Western Europe that can be bought. At the moment Tata’s bid multiple is at least 10 pc below average recent deals in the sector,” he said. As part of the deal, Tata is putting 126 million pounds into the Steels Pension Fund and raising contributions to the main British Steel Pension Scheme from 10 per cent to 12 per cent until March 2009. Meanwhile, unions representing more than 20,000 British steel workers are seeking urgent talks with Tata Steel in the wake of the agreed bid. The five-union National Steel Coordinating Committee will be seeking guarantees over their members’ jobs, pay and pensions as well as reassurances over the future of the UK’s steel-making capacity. The combined Tata and Corus would produce about 24 million tonnes a year, with the bulk coming from Corus, pushing it to number five in the global steel league. Tata is already expanding its Jamshedpur operation from 5 million to 10 million tonnes and plans further developments in India. Corus directors have recommended the deal and pledged their own holdings, including the chief executive Philippe Varin’s 4m pound stake, to the offer.Corus has agreed to pay a 43m pound break fee if the recommendation is withdrawn. The offer needs the backing of 50 per cent of shareholders and 75 per cent of the shares tendered.

Citi arm, Trikona in race to invest $100 mn in Omaxe

From The Economic Times
October 20, 2006

Citigroup’s venture capital arm, CVCI and Trikona Capital are both in a race to take an equity stake in Delhi-based real estate company, Omaxe. The deal is pegged above $100m, which will help Omaxe expand its real estate footprint. When the deal comes through, sources say, it will result in Omaxe offloading 20-25% equity in the company. Sources also said, the deal could unfold either as a pre-IPO placement that Omaxe had been talking about for some time now or as a co-investment in a special purpose vehicle (SPV) for specific projects. When contacted, Omaxe CMD Rohtash Goel confirmed the plans to raise $100m, but declined to emphasise. “We are in talks with several people for raising funds and will eventually float an IPO,” he told ET. “More than funds we are also looking for a brand of investors, which can bring some value to the table and add to our image.” Sources say, this is being done keeping in mind the IPO expected to materialise early next year. The company plans to raise Rs 1,000 crore from the IPO. Aashish Kalra, MD, Trikona Capital declined to comment. “What I can say is that we will be doing deals in excess of Rs 1,000 crore by this year-end,” he told ET. Ajay Relan, MD, CVCI denied any such development. The current policy allows pre-IPO placement from the domestic private equity funds and foreign funds that have wholly-owned subsidiaries in India. Omaxe is a Rs 750-crore company, which currently has 100-m sq ft of area under development spanning over 32 cities. It has already delivered 11 projects consisting of nine residential and two commercial properties valued close to Rs 400 crore. Omaxe, which is a medium-level player in the realty sector hopes to join the likes of DLF, Unitech, Parsvnath Developers and Ahluwalia Contracts India, which have already filed prospectus for public offers. On the other hand, Trikona Capital has been working on cobbling together deals for over two years and this will result in a spate on partnerships over the next year. Trikona has also partnered with the likes of IL&FS for infrastructure wherein it has invested $100m. It is also partnering with HDFC for real estate. Trinity Capital, the first of its funds will invest primarily in commercial development sites, while the PE fund will focus on residential development. The real estate market is projected to cross the $100bn mark by ’15 and according to PE experts over $5bn-worth real estate focused funds have been launched in ’06 alone.

Jindals set to aquire Thai steel major

From The Economic Times
OCTOBER 20, 2006

Call it the great Indian shopping festival, if you will. But the number of Indian companies announcing acquisitions abroad over the last couple of weeks has created a stir globally. The latest to join the shopping binge is Jindal Steel. It is close to buying out ThaiNox, Thailand’s largest stainless steel company, for $325 million. Sources close to the company say it is part of Jindal’s strategy to consolidate its presence in the southeast Asian market. If the deal goes through, this will be Jindal’s second acquisition in the region after it acquired Indonesia’s Maspion Steel in 2004. When contacted, a spokesperson for Jindal said, “We keep looking at opportunities to expand our business and routinely evaluate them. Right now, we have not firmed up our plans.” For acquiring ThaiNox, sources say, Jindal will use $50 million of internal accruals to fund the acquisition and the rest will be raised through borrowings. Listed on the Thai stock exchange, ThaiNox produces 2,00,000 tonnes of steel. It is in the middle of expanding capacities to 3,00,000 tonnes. For Jindal, this acquisition will almost double its cold-rolling capacity from the existing 3,50,000 tonnes. Cold rolling is a process in which metals like steel are passed through rollers at low temperatures to produce sheets of thin steel. ThaiNox — formed in 1990 through a joint venture between Arcelor of France, Nippon Steel of Japan and the Mahagitsiri Group of Thailand — is now controlled by the Thai partners. While Arcelor has already exited the company, Nippon Steel still holds close to 5% in the company. Apart from Jindal, some Taiwanese companies as well as Posco, the world’s third largest steel player, are also said to be in the race for ThaiNox. ThaiNox supplies 60% of its premium-quality stainless steel products for applications in various types of industries within the country, and exports 40% of its total output to more than 30 countries all over the world.

Dalmia Cements to invest Rs. 14.5bn in greenfield plant

From Myiris.com

20 October 2006

Dalmia cements plans to set up a four million-tonne-per-annum (mtpa) capacity greenfield cement plant in Andhra Pradesh for an investment of Rs 14.5 billion, reports Business Line. The expansion will be funded by raising external money and would take the total cement capacity controlled by the company to about 12 million tonnes. Actis, the private equity fund that picked up a 11% stake in Dalmia earlier this year, said that this plant will take Dalmia into the league of top-end cement companies in India. Dalmia Cements is also working out a strategy to establish greater shareholder linkage and a strategic alliance with OCL India. This process would include the promoters of Dalmia Cements selling their existing holding in OCL (estimated at about 20 per cent) to Dalmia Cements. Further, Dalmia Cements would also be putting in new money into OCL, which is also on an expansion mode. Following the completion of this process, expected by February 2007, Dalmia Cements would have a substantial shareholding in OCL. Earlier in July this year, Dalmia Cements had received shareholders approval to raise Rs 7 billion through the issue of securities in domestic or international markets. The shareholders approved the issue of preference shares, debentures, depository receipts, warrants or other securities convertible into equity shares to domestic or foreign investors.

Premji looks for acquisitions in consumer care

From The Economic Times
OCTOBER 19, 2006

Acquisitions would continue to be a dominant theme for Wipro. The company is now honing on large acquisitions, says Wipro chairman Azim Premji. “The growth rate of revenues in our acquisitions is significantly ahead of the company’s growth rates. We intend to look at large deals,” he added. Typically, Wipro has done deals in the $20 million to $25 million range (cost of acquisition). Wipro is not just looking at overseas acquisitions, but is also keen on domestic buyouts, be it in the IT space or consumer care. The six acquisitions consummated during the last 10 months brought in revenues of Rs 136.8 crore for the second quarter (Q2) ended September 30, 2006, while for the six-month ended September 30, 2006, this was pegged at Rs 193.3 crore. Analysts at some of the broking firms tracking IT sector say that the ‘string of pearl’ acquisition strategy of Wipro is not to be seen as revenue or earning accretive, but was vital from a cross-sell opportunity. It would be pertinent to mention here that Wipro is aggressively pursuing an end-to-end solution strategy which is bearing fruit for arms like Wipro BPO. The profit before interest, taxes and depreciation (PBIT) for the acquisitions was only Rs 1.4 crore in Q2, while the six-month period saw a loss of Rs 8.2 crore.

GTL to buy Genesis Consultancy for USD 9 mn

From Myiris.com

October 19, 2006

GTL will be acquiring Genesis Consultancy, a UK based firm, through IGTL Solutions (UK), a 100% subsidiary of its international arm, International Global Tele-Systems (Mauritius). The acquisition is valued at USD 9 million in an all cash deal with 100% buy-out. It is expected to contribute significantly to GTL`s service offerings in network management and professional services and strengthen its presence in European market. Genesis enjoys strong relationship with Nokia networks for worldwide support and has presence in European, USA and APAC markets. The company provides network management and professional services to telecom operators and OEMs. For the calendar year 2006, Genesis` revenue is expected to be USD 14 million and is likely to grow at a rate of around 35% for calendar year 2007. The company has zero debt and around USD 1.9 million in cash.

BCCL buys stake in NowPos

From The Times of India
October 19, 2006

Bennett Coleman and Company publishers of The Times of India, and The Economic Times acquired a stake in NowPos Online Services, (NowPos short for Now Possible), a niche voice technologies products company based in Hyderabad. Incorporated in 2005 by a group of entrepreneurs led by Ayyappa Nagubandi, the company launched its first innovative product in February 2006 the world’s first voice email (vMail) in Hyderabad. The firm was rated by Frost & Sullivan at the top of Top 20 Broadband Innovations in Asia Pacific, the only Indian firm to be named in the list. NowPos was also named by Red Herring as the Top 8 Indian Start-ups to watch out for. Apart from its track record and aggressive growth plans, BCCL’s decision to acquire a stake in NowPos was influenced by the professional management at the company and their commitment to excellence. Ayyappa Nagubandi, leader (title equivalent of CEO), NowPos, said, “The partnership with BCCL has come at the right time for NowPos, which is poised for a major expansion in India in terms of its technological products, and its first expansion abroad. NowPos has ambitious growth plans and is a valconic fountainhead of innovation and continuing to enjoy premier investor confidence is a proof of our strong strategic plans and management and operational abilities.” N Prasad, chairman of Matrix Lab and the spearhead of the incubating investors of NowPos, said, “The continuing all-round strides being made by NowPos and its string of early successes reiterates my faith in this company as a leader in the making. I am delighted to note the coming in of BCCL as a group alongside us at NowPos, which will make the future success ever greater.” Ayyappa added, “Voice in mail was the start of our declaration of what is Now Possible and we are now working to achieve our mission with an aggressive launch of several innovative products, applications and tools which will transform the content format predominance of text and move it to voice.”

Swiss Re to buy 3.57% in Yes Bank for Rs 120 cr

From Business Standard

October 19, 2006

Leading global reinsurer Swiss Reinsurance Company will buy a small “strategic” stake in Yes Bank, which would be a prelude to co-operation in areas like risk mitigation products for rural and micro-finance sectors. Swiss Re will buy 3.57 per cent stake in the newest private sector bank for Rs 120 crore, subject to necessary approvals. Rana Kapoor, managing director & CEO of Yes Bank, said, “The areas of future co-operation would include risk mitigation products for agri-rural markets and the micro-finance sector. The other area would be weather derivatives. We would also look at sustainability through corporate social responsibility initiatives.” The capital raising committee of the board of directors of Yes Bank today approved allotment of up to one crore equity shares on a preferential basis at Rs 120 per share to Swiss Re. The price is at 17 per cent premium over yesterday’s closing price of Rs 102.50 of Yes Bank shares on the Bombay Stock Exchange. An EGM of the shareholders of the bank will be held on November 20 to consider the preferential allotment. “We see this as a strategic financial investment and see Swiss Re as a long-term partner,” said Rana Kapoor. The bank would sign a memorandum of co-operation with Swiss Re for risk mitigation products after the closure of the share purchase agreement. Launch of the products would happen in the following two-three months. Peter Gujer, executive team member, Swiss Re Asset Management, said, “The investment represents a good opportunity to build a long-term partnership with a rapidly developing banking platform in India.” “The Indian macro economy in general and the banking sector in particular have significant growth potential and we believe that Yes Bank, based on its operating principles and a strong execution culture, is particularly well positioned to establish a successful business model within the sector,” he said. Post- issue, the promoters’ holding will come down to 37.2 per cent from 38.6 per cent. Rabobank’s stake will fall to 19.3 per cent from 20 per cent and the holding of private equity investors including Citicorp International, Russell AIF and ChrysCapital to 17.9 per cent from 18.5 per cent. “We planned to raise $150 million of capital by March 2007. We have already raised $26.5 million through this investment and another $40 million through a lower Tier II issue from the domestic market. We will raise another $90 million before March 2007,” said Kapoor. Dhananjay Date, MD of Swiss Re India, said, “I think once the proper closure of the agreement is done, there could be further dialogue for India. But first we need to be given a branch licence in India for which we are struggling since the last four years. Swiss Re is always on the look out for opportunities to invest,” he added.

Warburg co-head Prasad quits

From Daily News & Analysis

October 18, 2006

A cold call made seven years ago from Express Towers in Nariman Point to an office bang opposite Qutub Minar remains the defining moment in private equity in India. Pulak Prasad, then an associate with Warburg Pincus, was reaching out to Akhil Gupta, then group director of Bharti Enterprises. The call – and due-diligence later – came the most famous deal to have been struck in the domestic investment banking firmament to date. Warburg Pincus decided to pay $300 million — about Rs 1,300 crore — for a 20% stake in Bharti Tele-Ventures, then a New Delhi-centric cellphone operator, owned by Bharti Enterprises. The New York-based global venture capital and buyout firm has made gains six-and-a-half times that – or around Rs 8,000 crore — in the six-and-a-half years since. But on Tuesday, the man behind the deal put in his papers. Speculation is rife that continuing ‘joint leadership’ at Warburg may be why he is exiting. One of the most revered investment bankers locally, Pulak is planning to raise a hedge fund and will perhaps be based out of Singapore. He will stay on at Warburg till December. A peer running his own advisory in Mumbai, who did not wish to be named, told DNA Money: “Pulak’s one of the rare investment bankers who has it all – great intellect, great ethics and is a great person.” The 37-year-old IITian started life in a Hindi-medium school in Bihar, cantered through IIM Ahmedabad, and was one of the first recruits of McKinsey & Co from its hallowed portals. Interestingly, it was a head-hunter’s cold call that persuaded Pulak to join Warburg Pincus in 1998 as an Associate. The army-man’s son was named managing director for India in September 2002, along with Rajesh Khanna. Both were shifted to Mumbai from Singapore in 2002, where they had been transferred in the interim. But it has not been apple pie and fatherhood all the way. Perhaps the biggest drag among Warburg’s picks has been Moser Baer, where money was pumped in twice in the last 6 six years. Warburg may not have lost money here, but it indeed lost out on the opportunity costs.The dotcom bust also hit Warburg – sources say it may have invested as much as $50 million plus during that period, but by then Bharti was gaining traction. Pulak himself has often said the key reason for Bharti’s success has been Sunil Mittal and his team. But rest assured, Mittal knows Pulak’s value. India’s telecom czar is insistent on keeping Pulak on Bharti’s board, though traditionally, private equity players resign from boards once they exit their investment in the company. He also remains a director of Aryan Coal Benefications, dotcom major Rediff, Sintex Industries, Radhakrishna Foodland (another Warburg underperformer), Venture Infotek, and BPO major WNS (another big winner).

Sequoia to pick up Paras Pharma stake

From Daily News & Analysis
October 18, 2006

After Actis, it’s the turn of Sequoia Capital India to invest in Paras Pharmaceuticals, the owners of leading over-the-counter brands such as Dermi Cool, Moov and D’Cold. The private equity fund will invest $13 million for a minority stake in the company. Earlier, Actis invested $42 million in Paras, which is ranked 40th in India in terms of turnover in 2005. Sources said with the Sequoia move, the promoters of Paras have managed to place nearly 35% of their stake with the two private equity investors. “The investments are a mix of both, a buyout of stake from the promoters and some new equity,” investment banking sources said. Paras is founded by Girish Patel and Devendra Patel, who built a strong business through a combination of excellent brand building and the development of a strong distribution network. Paras is credited to have developed innovative brands and within a short span created leading national brands. There are at least 15 brands in its portfolio, two of which, Moov and D’Cold, are in the top ten of OTC brands in India. Paras is well placed to ride the boom in the fast moving consumer goods and pharmaceutical sector space. The FMCG sector is expected to register a compounded annual growth rate of 9% until 2010, while personal care is expected to grow at 14%.

Indian listed property funds 6 months away – IL&FS

From ndtvprofit.com
October 18, 2006

Listed property funds will probably make their debut in India early next year, according to asset management firm IL&FS, which plans to launch such a fund as well as a $500-$750 million infrastructure investment fund. India said in June it wanted to allow real estate mutual funds (REMFs) to set up to give individual investors access to a thriving property market, but market regulators are still drawing up guidelines for the listed securities. Industry players said plans to force the funds to disclose their net asset value on a daily basis, like other mutual funds, were unworkable because the assets were buildings rather than traded shares. Shahzaad Dalal, managing director of IL&FS and a member of a consultative panel to regulators, said it would take around six months to finalise the rules. “It’ll be in March or April next year,” Dalal told Reuters in an interview on the sidelines of a conference in Hong Kong. REMFs are likely to be similar to real estate investment rusts (REITs) in other countries, paying out income as dividends, but India will allow them to be more active in property development than is the case in many Asian markets. The funds will offer a valuable exit option for a slew of international property investors who have pledged an estimated $5 billion to build property in the country since it eased rules on foreign funding in the construction industry early last year. IL&FS closed a private equity property fund this year worth $525 million, 85 percent of which was provided by foreign investors, including U.S. pension fund CalPERS. Dalal said assets built by the fund would be sold into an REMF around the end of 2007, adding that investors should expect India’s first listed property funds to be worth around $100 million to $200 million. In the meantime, IL&FS’s private equity fund, with around $1.5 billion of spending power after debt leverage, is building townships in cities such as Pune and Hyderabad, and some commercial property in technology hubs such as Bangalore. “We’re involved in all types of property, focusing on mid-income housing, with some IT buildings in special economic zones, and a bit of retail,” Dalal said. IL&FS is also planning an infrastructure fund, with foreign investors expected to stump up 80 percent of the equity. “We’ll launch an infrastructure fund shortly. It’ll be worth somewhere between $500 million and $750 million,” Dalal said.”It’s for India’s infrastructure privatisation — roads, ports, oil and gas, water, power — mostly existing assets but some brownfield and greenfield.” He added that the companies set up to funnel the investment into India would use debt to double or treble the fund’s buying power.

India needs US$40bn in next 5yrs for infra financing: ASSOCHAM

From Indiainfoline.com
October 17, 2006

The Infrastructure Committee of ASSOCHAM says domestic savings need to be supplemented by limited access to foreign savings with priority for foreign equity capital as India would need foreign equity of US$5-7bn per year in infrastructure. The Infrastructure Committee of The Associated Chambers of Commerce and Industry of India has projected infrastructure financing requirement of foreign equity capital to the extent of over US$40bn in next five years and has suggested that the role of long-term financial institutions such as insurance companies, provident and pension funds and NBFCs be enhanced for financing infrastructure projects. The ASSOCHAM Infrastructure Committee chaired by Dr. Rajiv B Lall, MD & CEO, Infrastructure Development Finance Company (IDFC) and its other members drawn from JM Morgan Stanley, World Bank, SREI Infrastructure Finance who submitted the Chamber’s recommendations to Dy. Chairman, Planning Commission says that domestic savings need to be supplemented by limited access to foreign savings with priority for foreign equity capital as India would need foreign equity of US$5-7bn per year in infrastructure. ASSOCHAM President, Anil K. Agarwal said, “In addition, targeted access to long term debt finance from overseas would help. As for intermediation, the Committee observed that even though the bank credit to infrastructure has been growing rapidly, it would be neither feasible nor desirable for banks to finance the bulk of incremental financing needs. Therefore, the role of long-term financing institutions such as insurance companies, provident and pension funds and NBFCs has to be enhanced. To do so, the corporate bond market needs to be strengthened by implementing the Patil Committee recommendations expeditiously”. Agarwal added that priority needs to be given to the recommendations relating to the development of market for securitized assets. Some liberalization is necessary in the investment guidelines of these institutions, matched by greater reliance on the judgment of the Boards managing them. Rajiv Lall said, “in policy and regulation, the committee focused its attention primarily on road, urban and power sectors, while acknowledging the Government’s increasing commitment to establish clear and stable regimes in all infrastructure sectors. In the road sector, the Committee noted that the state highways–which constitute 4% of road network, but carry 40% of traffic—are grossly under-funded and recommended that the facilitating framework created by Madhya Pradesh should be replicated in other states. The key components of the Madhya Pradesh model include a special legislation for state highways, a master-plan (including a comprehensive database, a schedule for implementation based on prioritization and identification of corridors for PPPs) and creation of a state highway authority. The Central Government needs to play a more active role in steering development of state highways and formulating a common framework. The Infrastructure Committee of ASSOCHAM has identified some initiatives that would strengthen the three pillars of infrastructure: availability of long-term finance, policy and regulatory frameworks and capacity to implement those frameworks, said Lall. In the urban sector, it was noted that fiscal autonomy of urban local bodies is critical for efficient delivery of urban infrastructure services and that to promote autonomy, there is a need for a new (own) tax for ULBs. The Committee recommended the introduction of a Local Benefit Tax (say 1 % of the sales turnover at the final stage), while reiterating the need to continue with the ongoing property tax reforms. The new tax would piggyback on VAT and would not require any new skills, manpower or rules on the part of urban local bodies. While boosting the revenue of all local bodies significantly, the new tax would help JNNURM cities to meet their financial obligations for availing JNNURM projects. Further, there is a need to create specialized nodal units for the urban infrastructure in every state, which would act as repository of scarce project development skills and help small local bodies to access capital markets through pooled financing. Appropriate lessons can be learnt from TNUDF in this regard. Agawral said that in the power sector, the Committee noted that although the legal, policy and regulatory frameworks are already in place, the implementation issues have not been adequately addressed. Payment security is still a major constraint to financial closure of large projects, underscoring the need for accelerated distribution reforms with accent on private sector participation. On the fuel front, the Committee recommended expeditious development of coal resources and creation of a clear framework for privatization of coal mines for use in power generation. As regards rural electrification, the committee noted with concern that the problem of groundwater depletion can potentially become more widespread if the current program to expand rural access to power becomes successful, unless the institutional problems relating to groundwater extraction are expeditiously addressed. While the so-called public sector functions are becoming more open to private sector participation, actual transfer has been slow. In many cases, this has been due to the lack of capacity in the public sector to implement new frameworks. To provide hand-holding to state government departments on a continuous basis, cross-sectoral PPP units need to be set up at the state level in every state. They would be responsible for: disseminating lessons and experiences across sectors, improving the quality of PPPs by making available better transactions skills, and assisting in inter-departmental coordination. The Central Government should provide financial and technical assistance to states to set up these units. Further, managers in public sector organizations (at different levels) need to be trained and sensitized to more effectively design, assess, market and execute viable PPP projects. One way of implementing the training process is through government funding of specialized PPP programs in the top training and academic institutions in the country. The other alternative is to have dedicated institutes which could be the subsidiaries of leading infrastructure financing companies. These institutes would have the advantage of accumulated domain knowledge (in private financing) and well developed relationships (with both government entities and prominent private sector sponsors) of their parent companies.

Garnett & Helfrich Capital expands operations to India

From AltAssets.com
October 18, 2006

Garnett & Helfrich Capital, a US private equity firm specialising in venture buy-outs, has announced that it will expand its operations to India. Garnett & Helfrich will locate their new office in the financial centre of Mumbai with the aim of supporting its portfolio companies in the region and identifying new acquisition targets for its venture buy-out fund. Garnett & Helfrich has also announced that it has acquired a controlling stake in Celunite, a privately-held company with headquarters in Sunnyvale, California and development centres in Pune and Hyderabad, India. Garnett & Helfrich is a $350m private equity fund focused exclusively on the emerging venture buy-out segment for mid-sized technology spin-outs. The firm specialises in spinning out businesses from large global technology companies and growing them as focused, standalone businesses. Terry Garnett, managing director, Garnett & Helfrich, said, ‘India is a hub of technology innovation and talent, thus it is critical that we continue to expand our portfolio companies’ presence in the region by helping them build new partnerships, recruit local talent, and identify and evaluate acquisition targets.’ ‘We will also leverage our Mumbai-based operations to identify new investments in leading technology sectors such as open source mobile platforms like Celunite,’ Garnett continued. Garnett & Helfrich investments include Wyse Technology, Ingres and Blade Network Technologies.

DQE to raise $100 mn for spread

Business Standard
October 18, 2006

Hyderabad-based gaming and animation major DQ Entertainment Limited (DQE) is planning to raise around $100 million to provide its private equity investors an exit route and support its major expansion plans. “We are keeping all options open, including an IPO, to raise funds to the tune of $100 million. The company currently has five private equity investors, and this fund-raising will provide an exit route to them. Besides, we intend to utilise a major portion of the funds for our expansion plans. An announcement with regard to our fund-raising plans will be made by next month,” DQE managing director and chief executive Tapaas Chakravarti, told reporters here on Tuesday. DQE’s private equity investors include IL&FS Investment Managers Limited, India Value Fund, International Finance Corporation (IFC) and TDA Capital Partners. The company is constructing a campus on a three-acre land allotted by the state government at Hitec City in Hyderabad. It has tied up with a city-based realty major for developing the 8 lakh-sqft project. Under the agreement, the developer would provide 2 lakh-sqft of space to DQE, Tapaas said. “We are currently investing $30 million in installing hardware, software and other equipment, and in training gaming and animation professionals. Once the campus is complete, we plan to ramp up our headcount to 6,000, from the existing 3,000, by the year 2008,” he said. The company is also setting up a plug-and-play animation facility in Visakhapatnam that will house around 300 professionals, besides opening an office in Singapore to market and publish its products shortly. DQE currently has marketing offices in Paris, London, California, New York and Tokyo. DQE opened a new gaming facility in Hyderabad on Tuesday, involving an investment of $6 million. The facility will create next-generation gaming assets exclusively for the UK-based $3.3-billion Electronic Arts Limited, the world’s leading interactive entertainment software company. Inaugurating the facility, state IT secretary Ratna Prabha said the government was contemplating setting up an ‘Animation City’ in an extent of 100 acres to house an animation training academy and companies that are into animation and gaming industry.

Pre-IPO VCF investment will be locked in for 12 mths: Sebi

From Financial Express
October 17, 2006

The Securities and Exchange Board of India (Sebi) has tightened the investment guidelines with respect to venture capital funds (VCFs) and foreign venture capital investors (FVCIs) registered with it. The regulator has decided to impose a lock-in period of 12 months on all pre-initial public offer (IPO) investments made by VCFs/FVCIs. Prior to this amendment in the DIP guidelines, shares held by VCFs and FVCIs were exempted from the lock-in period. The amendment regarding lock-in will be applicable to all offer documents, which are yet to be registered with the Registrar of Companies (RoC). Sebi said, the move is in order to make the Indian primary market more efficient and transparent. As per the new policy, shares held by Sebi-registered VCFs or FVCIs for a period of at least one year as on the date of filing the draft prospectus with Sebi will attract a lock-in of one year. Also, shares issued to Sebi registered VCFs/FVCIs upon conversion of convertible instruments will also attract a lock-in of one year. That is if, during the period of one year prior to the date of filing draft prospectus with Sebi, if any convertible instrument is converted into equity, than these shares will also attract a lock-in, provided that the period of holding such convertible instruments as fully paid up, together with the period of holding shares resulting from conversion, is at least one year as on the date of filing the draft prospectus with Sebi. The amendment gains significance as there are close to 80 VCFs registered with Sebi while there are more than 51 Sebi registered FVCIs. The players in the industry said the move by the regulator may be to discourage the entry of fly-by-night operators who want to take advantage of the booming Indian corporate sector. Also, some of the players were of the opinion that even if this provision of lock-in may prove to be a dampener for some, investments in deserving Indian companies will continue as private equity players who are qualified institutional investors, have faith in the long term India story.

NDTV posts July-Sept net profit of 37 mln rupees

From Reuters.com
October 17, 2006

News broadcaster New Delhi Television Ltd. said on Tuesday it had posted a net profit of 37 million rupees on revenue of 545 million rupees for the July-September quarter. The company had made a net loss of 52.7 million rupees and revenue of 430 million rupees in the same period last year. The board also approved setting up a unit, NDTV Ventures, for expanding into non-news areas like entertainment and lifestyle channels and boosting its presence in the Internet. “The model enables NDTV to raise funds for its future businesses beyond news. The new company will incubate and operate focussed verticals,” the company said in a statement. The company would also launch city-centric information and entertainment channels in four centres “pretty soon”, Chairman Prannoy Roy told reporters. “We are looking to move into the main area of media which is entertainment,” Roy said. “Much of the work has already started on many of the projects and next year you will see them rolling out.” NDTV Ventures would start as the company’s wholly-owned subsidiary, but might raise funds through private equity or an initial public offer later. NDTV group had set a revenue target of $500 million in 5 years, Roy said.

Kotak pvt equity fund invests 30% of corpus in seven firms Mumbai

From Business Standard

October 17, 2006

Kotak Mahindra has invested about 30 per cent of its $160 million private equity fund in seven high-potential companies in India, even as it is in the final stages of making investments in two more companies. Nitin Deshmukh, head of private equity at Kotak, said the group is bullish on the alternative asset classes in India, which, in addition to private equity, also include real estate and venture capital, among others. The group, which recently raised $100 million for its real estate fund from domestic investors, is expected to garner another significant amount for this fund from overseas investors. The private equity fund titled India Growth Fund has been able to invest in a range of sectors, from home textiles to machine tools, agro-biotech to software products and drug discovery to aviation, Deshmukh said. “We are looking at investments in the range of $5-15 million per company, with a maximum limit of $20 million,” he said. “Out of the seven private equity transactions, four are proprietary transactions,” Deshmukh said, adding that the two forthcoming PE deals, which will be announced next month, will also be proprietary transactions. The PE investments by Kotak include home textiles company Sabre International, CNC machines maker Bharat Fritz Werner, agri-biotech company Metahelix Life Sciences, software product company Four Soft, power control equipment firm Dynaspede Integrated and South-based full-service airline Paramount Airways. Kotak, through its partner SEAF Management LLC of the USA, is assisting Indian companies to find new markets and relationships in geographies, such as South America, Eastern Europe, Central Asia and even China.

Wanbury to buy Farmaceutica’s generics business

Business Standard

October 17,2006

The board of directors of Wanbury, which met today, approved a proposal to acquire the branded generic business of Industrial Farmaceutica Cantabria, SA through Cantabria Pharma SL, a Spanish company, for approximately euro 50 million (approximately Rs 300 crore). According to a release issued by Wanbury to the BSE today, the meeting also cleared a plan to conduct a posal ballot for seeking shareholder nod to give loan(s) / guarantee(s) in favour of Cantabria Pharma SL, and Wanbury Holdings BV, a wholly-owed subsidiary company up to Rs 400 crore. The postal ballot will also seek shareholder approval to borrow euro 34 million for investment in Wanbury Holdings BV and/or Cantabria Pharma SL.

Tatas, Corus reach pact for $9bn deal

From The Economic Times
October 17, 2006

Tata Steel’s talks with the Corus management ahead of its possible bid for the British steel maker have been successful, people close to the development said. This might pave way for the Indian company to follow up with a formal offer valuing Corus at about $9bn. A formal announcement is expected by the end of this month. Tatas plan to float Singapore-based special purpose vehicle for takeover; group to raise $3.5bn, financial institutions to provide the rest. Combined entity to be 6th largest steel maker with annual capacity of 23m tonnes. World’s second largest steel deal to put Tata in Top 10 club. “The British steel maker has positively responded to Tata Steel and is convinced about the synergy between the two companies’ operations,” said sources. The development almost puts to rest the intense speculation in the British media about Russian and Brazilian companies also vying for a stake in Corus. The deal, slated to be the biggest ever in the history of India Inc, is estimated to be worth $9bn, sources said. While Tata Steel and the Group holding company Tata Sons will raise almost $3.5bn, the rest will be raised through financial institutions. A source involved with the transaction added that the Tatas may float a special purpose vehicle in Singapore for the purpose. Standard Chartered Bank, ABN Amro and Deutsche Bank are working on raising the fund for the Tatas. Top officials from Tata Steel are travelling to Singapore this week for a board meeting of subsidiary company NatSteel, which was acquired in 2004. “From Singapore, they might go to London for talks with the Corus management,” sources said. A Corus spokesperson declined to comment, citing that the company is in offer period (according to British takeover code) and will make formal announcements “in case of any developments”. A Tata Steel spokesperson said the company does not wish to comment on speculative reports based on unconfirmed sources. Tata Steel shares rose 01% at Rs 511.35 at the BSE on Monday, when a bullish Sensex recorded a new high. Tata Steel had been talking to the Corus management for some time now. It wants its bid to be perceived as friendly and is anxious to avoid the political furore that greeted Mittal Steel when it made its unsolicited bid for Arcelor in January. The deal, if and when it happens, will further consolidate the global steel industry and will put Tata Steel among the top 10 steel companies in the world. The new entity will become the sixth largest steel manufacturer with annual production of at least 23m tonnes per annum. At present, Tata Steel occupies the 55th spot with production at 5.2m tonnes per annum and Corus, with 18m tonnes, is the eighth largest globally. The deal, which will be the second largest in the global steel industry, will also put an end to Corus’ anxious search for a partner with captive raw materials and operations in emerging markets. The company does not own any iron ore mines and has been facing rising fuel costs in its largely Europe-based facilities. As earlier reported in ET and as has been a practice in other Tata acquisitions, Tata Steel will retain the top management of Corus in the new entity. The Indian company is also expected to unleash major human resource initiatives to rope in Corus’ almost 50,000 employees. Other than getting access to specialised steel-making and Corus’ considerable R&D expertise, Tata Steel would also inherit the British steel maker’s market presence in auto and construction sectors. It would also fit in with Tata Steel’s strategy of becoming a low-cost, efficient supplier of hot metal to value-added steel plants in major markets. The acquisition of Singapore’s NatSteel and Thailand’s Millennium Steel was a part of this grand plan.

Actis, GIC Invest $65 Million In Southern Food Company Nilgiri’s

From Google News

October 16, 2006

The much talked about Actis’ investment in Nilgiri’s group is through. The private equity fund has issued a statement saying it has invested $65 million in the south-based food brand Nilgiri’s group. GIC Special Investments Ltd of Singapore has joined Actis in making this investment. The Nilgiri’s group has been in operation for the last 100 years and is one of the best known food brands in South India. Its products include dairy and dairy products, bakery, chocolates and variety of other local foods and snacks. All of its products are sold under the brand “Nilgiri’s 1905”. It operates on a franchise model and its franchise network has a strong foothold in Bangalore and Chennai, as well as the Coimbatore and Erode markets. The funding provided by Actis will be used to expand the company’s South Indian franchise network and strengthen its supply chain and distribution capacity as well as to expand the group’s food manufacturing operations. Announcing the investment, Donald Peck, Managing Partner of Actis in South Asia said, “Actis’s value-add is in providing strategic direction to the group, bringing in new management, as well as best-of-breed industry practices.” Raja Chellayan, a member of the Nilgiri’s family, is the new chairman of the company. (Former Lotte India MD N C Venugopal may be Actis’ choice to run the company, although there is no mention of this in the statement). Actis invests in India through two funds – the $325 million Actis India Fund 2 and the $150 million South Asia Fund 2. This transaction is Actis’s fourth major investment in India this year (2006). In September, Actis invested $42 million in Paras Pharmaceuticals Ltd, one of India’s leading OTC healthcare and personal care companies based in Gujarat. In July, Actis invested $15.5 million to fund the expansion of Sterling Hospital, a business in which Paras is the other principal shareholder and one of India’s leading hospital brands. And in March, it invested $30 million in Dalmia Cement – a leading manufacturer of cement in South India.

Private Equity firms flock to IT sector, PE investors were involved in 32 deals worth $317 million

From CyberMedia India Online

October 13, 2006

Investor interest in Indian IT and the ITES companies is on the increase this year with PE firms investing in 32 deals worth about $317 million. According to a survey by Chennai-based research agency, IT and ITES re-emerged as the favorite industry among PE investors during the latest quarter. The manufacturing industry followed with 14 deals worth $289 million. PE firms are investing in various stages of a company’s growth. They have invested across all stages in this industry during the recent quarter – from early-stage (companies like Paymate and Travelguru) to growth stage (Insilica and IMImobile) to late-stage (Microland) to already listed companies (Allsec, Rich Crest and Subex). Most PE investors preferred late-stage and growth-stage investments. Some of the top investments in the IT sector in the July-September period include $100 million investment into Quatrro BPO by Olympus Capital; $18 million into inSilica by a group including Intel Capital, Flextronics, Crossbow Ventures, Dow Ventures and NewPath Ventures, Allsec Technologies that received $17 million from Carlyle. In terms of exits, PE and VC firms obtained exit routes in three IT and ITES companies during July-September 2006. The $224 million NYSE IPO of WNS Global Services, India’s second largest BPO firm, was the largest PE-backed IPO during the period. WP, which held a $64.7 per cent stake prior to the IPO, is estimated to have realized about $29.8 million as part of the issue. Other exits include GVFL exiting out of Parsec Technologies by selling its stake to the company’s promoters and M2W – the Chinese subsidiary of Mumbai-based Mobile2win (which had Softbank China and Siemens Ventures as investors) that was acquired by Walt Disney in September.

Integreon eyes private equity investors for buyout

From Indiatimes Infotech

October 12, 2006

Integreon, a Mumbai-based BPO, is all set to induct a private equity investor to do a management buyout from the existing set of venture capital funds in the company. HSBC Private Equity Fund is said to be interested in the investment, though the news could not be confirmed from the management or the fund. The management is raising close to $20m to buy out Insight Venture Capital and will then go to market to raise funds for acquisitions. Company officials refused to comment on the development, but a final announcement is expected to be made on Thursday. According to sources, the company is looking at growth capital and is likely to use fresh resources to fund an acquisition. Integreon is among the large content outsourcing companies from India. The company has around 1,000 employees and revenues of more than $15m. The company is funded by Insight Venture Capital, which had invested through ConnectCapital India. ConnectCapital is an Indian affiliate of Insight Ventures and has invested in number of BPO and outsourcing related companies in India. Integreon, which started out as a BPO, gradually took bigger steps to move to high-end outsourcing services. Currently, it operates in verticals like knowledge services, e-publishing, business administration services and discovery support services. Under knowledge services, Integreon offers research in areas of investment, business, market and legal research to forty five odd clients in the US and Europe. Integreon, which started operations in Mumbai in 2000, has been growing both organically and through acquisitions. The company has been targeting smaller BPO companies with domain expertise. In April 2003, the company acquired Contentscape, a company specialising in web content design and development for less than $5m. Prashant Chawla from Contentscape was then appointed as COO and country head of Integreon. In July ‘05, the company acquired Brahmy Solutions, a UK-based high-end analytics company for around $10m. Early this year, it acquired legal processing business of New York-based BPO Bowne for around $5-7m to provide financial and digital printing services. ConnectCapital is expected to sell majority holding to the new investor. The legal process and content publishing industry is a new emerging vertical in India. According to estimates, the total global spending on legal services is estimated to more than $250bn. The US alone accounts for more than two-thirds of the market. This shows that the market for servicing the US and other law firms is huge. India being a preferred outsourcing destination is getting lot of legal work from across the globe. Another advantage is that Indian legal system is quite similar to the US and Europe. Thus, legal firms in the US outsource work like litigation coding, patent drafting to their Indian counterparts since the cost arbitrage is substantial. Integreon competes with Pangea3, but is much bigger than its competitors in the legal outsourcing space. The company has recently bagged a large order from one of the largest legal firms in the UK to set up operations in Gurgaon.

IFC open to finance SEZs, invests in HDFC bank bondsThursday

From Zee News

October 12, 2006

International Finance Corporation, the private lending arm of World Bank, on Thursday said it is open to finance large special economic zones in India. “We are open to SEZs. We will be happy to finance large SEZs,” IFC executive vice president Lars H Thunell said here. He said the investment proposals should be good enough to be considered by the financial institution. Though the centre has cleared many SEZ proposals, funding these projects has become a problem as Reserve Bank has asked the banks to treat lending to SEZs on same parameters as to commercial real estte sector. That means banks have to give risk weightage of 150 per cent and make one per cent provisioning of the total amount lent to SEZs. IFC today invested USD 100 million in tier II bonds of HDFC Bank and gave USD 5,00,000 grant to an NGO to set up a fund to finance young entrepreneurs. The upper tier II bonds maturing in 15 years, carry an interest rate of 122.5 basis points (1.2 per cent) over Libor (London inter bank offered rate). “IFC`s investment in HDFC bank reflects our larger goal of developing and strengthening the financial sector in emerging markets,” Thunell said. This is the first domestic foreign upper tier II bonds issue after reserve bank came out with upper tier II norms, HDFC Bank Managing Director Aditya Puri said. The IFC investment (about Rs 450 crore) will help the bank, which raised Rs 740 crore in bonds after June this year, to significantly increase its capital adequacy ratio from 11.7 per cent.

Sale of Daewoo to Videocon in Trouble

From The Korea Times
October 10, 2006

The scheduled sales process of South Korea’s Daewoo Electronics to India’s Videocon is being delayed as there is disagreement over the sales price. Woori bank, one of Daewoo’s main creditors, said on Tuesday that it was uncertain when the two sides would agree on the conditions of the sale. The initial timeline for signing a memorandum of understanding (MOU) was the end of September. “The September deadline was only our hope”, said Park Ki-hoon of Woori Bank. “As of now, we cannot say when we will be able to bring about a result.” Daewoo, the third largest maker of consumer electronics in South Korea, has been in a workout program since 1999. Last month, creditors led by Woori Bank selected a consortium of Videocon and U.S. fund Ripplewood Holding as the primary bidder for Daewoo at a reported price of 670 billion won. The two sides said that they would sign an MOU within September and conclude the deal as early as December. But the talks have been prolonged as Videocon reportedly demanded a cut in the purchase price by up to 20 percent from its original bid. Woori’s Park refused to confirm the report, though he said some of it was true. A Daewoo official also admitted the discrepancy between Videocon’s offer and the creditors’ demands, and added the talks could break up. “If they fail to reach an agreement, then the reserve bidder will have their turn,” he said. MBK Partners, a private equity firm, was selected as the reserve bidder last month.Videocon is India’s largest consumer electronics maker, holding about 50 percent of the local TV market last year, mostly cathode ray tube TVs. The company has been looking for ways to strengthen its position in overseas markets such as the United States and Europe by buying out facilities of foreign firms. Last year, it acquired French firm Thomson SA’s color picture tube manufacturing facilities for $291 million, and the Indian unit of Swedish firm Electrolux for $76 million. Videocon is going to use the newly acquired facilities to produce flat-panel TVs as early as this December. MBK Partners, which could take over from Videocon, is a buyout fund set up by Michael Kim, a former senior executive of the Carlyle Group Asia. Financial News reported earlier this month that the fund is leading the bid for China Network Systems in Taiwan.

Pvt equity firms invest $5.4 billion in India till Sept 2006

From Business Standard

Oct 11,2006

Private equity firms made $5.4 billion worth investments in the country during the first nine months of 2006 and could infuse capital worth $ 7 billion by year-end. Highlights of the July-September quarter include Olympus Capital’s $100 million investment into Quatrro BPO Solutions, followed by Bank of Muscat and ICICI Ventures’ $90.7 million investment in Centurion Bank of Punjab. Among other major deals were ChrysCapital’s $66 million investment in UTI Bank, Warburg Pincus’ $66 million infusion into Aryan Coal Benefications and 3i’s $65 million PE investment in Gujarat Pipavav Port. Last quarter also saw venture capital investments against conventional fund raising instruments, getting prominence. A press release by Venture Intelligence said July-September quarter witnessed 100 venture capitalist deals amounting nearly to $ 1,894 million. The amount invested during the July-September quarter was 2.8 times than the same period last year and marginally higher than that during the April-June 2006 quarter. The study predicts that with opening of real estate sector, country could see higher venture capitalist investment this year. With the October-December quarter being a traditionally strong quarter for PE investments in India and with Real Estate investments being opened up further, we can expect to close the year with over $7 billion in investments. Information technology firms were on priority list of venture investors with this sector witnessing 32 deals worth $317 million, followed by manufacturing sector with 14 deals worth $ 289 million. The investors also preferred to invest at early stage companies as these investments grew to 20 per cent against last quarter’s 17 per cent. The share of PE investments in late-stage (35 per cent), growth-stage (15 per cent), PIPEs (14per cent ) and buyouts (4 per cent) was similar against immediate quarter, the study showed.

FabIndia plans major retail expansion with Rs 275 cr

From BharatTextile.com
October 09, 2006 11:06 PM

The retail handloom and handicrafts major, FabIndia aiming to increase outlets from the current 42 to 150 in the tier-III towns is planning to invest Rs 275 crores, William Nanda Bissell, MD of FabIndia Overseas Pvt. Ltd. said here on October 08. Currently, FabIndia are lining up new outlets for Amritsar, Shimla, Luchnow, Jamshedpur, Bhubaneshvar and Jalandhar; however further target is said to be the southern part of the country. William informed that company plans to raise funds through a combination of private equity, debt and internal accruals but the IPO route has been ruled out. However, in the past couple of years, FabIndia has entered tier-II cities on the back of rising disposable incomes.

Promoters of Fortis plan stake sale to Soros fund

From The Times of India
October 07, 2006

The promoters of Fortis Healthcare, a company promoted by the founders of Ranbaxy Laboratories, is close to selling a portion of their stake in the company, ahead of the proposed initial public offering (IPO). A fund owned by George Soros — Soros Private Equity Partners — and Blue River Capital are investing $50 million for a 10% stake in Fortis, according to sources. The private equity placement values Fortis at $500 million. When contacted Fortis Healthcare officials were unavailable for comment. Recently, the hospital chain filed a draft prospectus with Sebi for an IPO of around 57 million shares. The money raised will be used for repayment of loans taken to acquire Escorts Heart Institute and Research Centre and for expansion. Part of proceeds will also be used in the construction of two hospitals in National Capital Region. Out of the net offer to the public, at least 60% would be allocated to qualified institutional buyers, 5% of which will be available for MFs. Non-institutional investors would be allotted up to 10% of offering, while retail investors would be issued not less than 30%. JM Morgan Stanley, Citigroup Global Markets and Kotak Mahindra Capital are lead managers.

Providence buys 14%, Citi unit 6% in Idea

From Daily News & Analysis
October 05, 2006

The dealstreet buzz is that mobile telecom player Idea Cellular has offloaded a total of 20% stake in two private equity firms—Providence Equity Partners and Citicorp Venture Capital (CVC). It is learnt that Providence has picked up a 14% stake, while Citigroup’s private investment unit, Citicorp Venture Capital, has bought 6% stake, in Idea Cellular. A formal announcement on the Idea deal is expected in a day or two. Sources said Providence may have paid about $200 million for its 14% stake.When contacted, Idea Cellular officials were not available for comment. Idea Cellular’s IPO is also scheduled over the next few months. Merchant bankers have already been mandated for the Idea IPO. The Aditya Birla group holds nearly 98.3% stake in Idea Cellular, the fifth largest cellular company in India. In April, Birlas had purchased the entire 48.12% holding of the Tata group, which was its joint venture partner in Idea, for Rs 4,406 crore. Following that deal, Idea Cellular was valued at over Rs 9,000 crore. After buying the Tata stake in Idea, the Aditya Birla group had announced that it would sell around 33% of Idea Cellular. However, sources pointed out that only 20% has been offloaded so far. Significantly, the Idea deal coincides with a company announcement that it had attained a mobile base of 10 million in the country. Even as Idea operates in nine out of a total of 23 circles, it has applied to the government seeking a pan-India presence. Idea recently got the government permission to start its services in the lucrative Mumbai market as well. Providence is a $4.25-billion US-based private equity fund specialising in equity investments in communications and media companies around the world, according to information available on its official website.

Mirae Asset, Credit Suisse to set up AMCs; EM Capital launches two India-specific funds

From Business Standard

October 05, 2006

Foreign investors are not tired yet of chasing the India growth story. Korean financial services firm Mirae Asset and Swiss financial house Credit Suisse on Tuesday announced plans to set up asset management business in India and US-registered EM Capital Management LLC announced launch of two India-specific funds, each having over $200 million corpus. The two funds will invest in Indian capital markets and the private equity sector, respectively. Yet another entity, Kuvera Capital, a UK-based hedge fund, is expected to start investments in the Indian stock markets, sooner than later. All these announcements were made on Tuesday in Mumbai, on the first-day of the 3-day `Funds World – India 2006’ conference. The EM Capital India Discovery Fund will be different from other foreign institutional investors (FIIs) in its India strategy. “We will invest only in mid-cap and large small caps listed on Indian capital markets,” said its chief executive officer Seth R Freeman. Significantly, the near-peak levels in benchmark stock indices in India is not deterring these investors. “India, I presume, is different from other countries. India can afford to have a price to earnings ratio of 16.5 (one-year forward) as this was backed by a 20 per cent growth in corporate earnings and 8-9 per cent growth in the economy,” said Brad Durham of Emerging Portfolio Fund Research, which tracks foreign portfolio investments. Korea’s Mirae Asset, which is into broking to insurance and asset management, planned to enter the asset management business in India, its spokesman told Business Standard. Mirae Asset, which has already $800 million invested in the Indian equities through its Singapore office, is expected to raise another $200 million from Korean investors for investments in Indian stocks. “We raised $800 million from Korean about 18 months back for Indian equities. We are bullish of India,” the spokesman said. R E (Sandy) Shipton, head of asset management at Dubai International Financial Centre (DIFC), said Kuvera Capital, a hedge fund promoted by UK and Indian investors, has set up operations in DIFC for operations in the Indian equity markets. Durham of EPFC said the growing flow of funds into India was mainly owing to the realisation that the country’s economy was fuelled more by domestic demand, rather than exports. “In the third quarter (July-September), there was an outflow of funds from all emerging markets, except India. During the quarter, India saw an inflow of $ 600 million,” he said.

Buyouts on the rise in India, private equity revs up buyout tempo

From Business Standard

October 05, 2006

The domestic private equity (PE) segment, which has attracted investment worth billions of dollars in the last 12-18 months, is set to witness a host of buyout deals in the coming months where controlling interest in local businesses will change hands. Till now, most of the private equity deals involved sales of minority stakes in companies to private equity funds. However, the trend is set to change as cutthroat competition in almost all sectors is forcing managements of small and medium companies to exit their stakes to PE funds. PE funds bring in professional management to run the company and offload stakes later at a much higher value. PE funds Actis, Standard Chartered Private Equity (SCPE) and Warburg Pincus, which are specialised in acquisition transactions, have started executing such deals in the country. Recently, Actis bought controlling stake in south-based supermarket and dairy products firm Nilgiris Dairy for Rs 300 crore, making this perhaps the first major buyout deal. Barings PE fund’s investment in MphasiS BFL also happened to be an acquisition deal. Barings took the stake in the BPO as a pure private equity investment after it had sold off the stake to EDS. The competitive pressures following the opening up of several sectors will force managements to make way to professional management teams, which are backed by financial investors,” said Nainesh Jaisingh, head of private equity (India) at Standard Chartered, which has made PE investments in six companies in the country worth $175 million till now. Buyout deals typically involve MBO (existing management buyouts), MBI (new management buy-ins) and LBO (leverage buyouts). Some of the recent global acquisitions by domestic companies – Tata Tea’s acquisition of Energy Brands, Dr Reddy’s takeover of Betapharm, Suzlon’s acquisition of Hansen Transmissions, to name just three – were done through buying out PE fund’s stake in these companies. According to sources, at approximately $3.5 billion, total investments by private equity investors during the first six months of 2006 already surpassed the investments made during the entire 12 months of 2005, which were $2.2 billion. SCPE, which previously struck acquisition deals in Singapore ($450 million acquisition finance Nat Steel in 2005) and Malaysia (SCPE was the leading investor in the management buyout of Unza Holdings), is likely to announce at least one buyout transaction in the country soon. Anil Khatod, managing director of Argonaut Private Equity, which has committed $65 million in PE deals in India, said the three fundamental requirements for acquisition deals – opportunity to unlock significant unrealised value in the entity, availability of financing and maturity of financial markets and an open regulatory environment – were beginning to take shape in the country. “Valuations in India are rich at this time, but there is also a lot of potential for growth and creating significant value. There is plenty of liquidity in private equity market, and financial markets are maturing along with the opening of regulations. These factors make India a good emerging environment for buyout deals,” he said. Argonaut, Khatod said, was looking at deals in several distinct sectors including manufacturing, infrastructure, technology and services in coming months. “Real estate is the only sector we have stayed away from so far,” he said.