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Indian Economy Weely Newsletter

Indian Economy Weely Newsletter

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  • 1. Top HeadlinesVinod Khosla-backed Praj Picks 50.2% In Neela SystemsFor Rs 64CrTVS Capital Nears First Close After Raising Rs 200Cr ForTop-up FundGeneral Atlantic To Invest Up To $125M In Fourcee InfraPearson In Talks To Buy Educomps 50% Stake In IndiacanGhari moves out Wheel, to be No 1 in laundry marketHealthkart Raises Rs 27Cr From Sequoia Capital, OmidyarClearwater Capital Makes Open Offer For Kamat Hotels’StakeThomas Cook decides to sell its India arm to raise funds;shares rise 1
  • 2. Weekly Economic ReviewThere’s good news for India’s economy. New data shows industrial output hasrebounded in November after dropping into negative territory the previousmonth. The index of industrial production stood at 5.9% in November. Therevised figure for October shows a fall of 4.7%. November’s IIP is highest sinceJune. And it’s also better than most street estimates. Still, the index is knownfor its volatility and may not be seen as a sure indicator of broader economicrevival.Food inflation remained in negative territory in the last week ofDecember. India’s food price index fell 2.9% in the period to 31 December.The previous week it was even lower at minus 3.36%.IT giant Infosys announced its quarter result this week, setting the tone forthe earnings season. Trouble was, the news wasn’t all good. While thecompany’s numbers are in line with street estimates, global uncertainty hasforced it to cut its guidance. Infosys has slashed its revenue growth forecastfor a second time this financial year. It now stands at just 16%. That’s incontrast to the previous range of 17-19%.Net profit rose 24.4% quarter-on-quarter to 2,372 crores. And margins wentup to 31.2% from 28.16% in the quarter before. Infosys’ numbers were helpedalong by a 7.36% depreciation of the rupee during the quarter, a factor thatcaused the firm’s rupee revenue to shoot up. Meanwhile Infosys CFO V.Balakrishnan said that even if clients slashed their I-T budgets in the comingmonths, outsourcing budgets were more likely to stay intact.Also in earnings, India’s biggest mortgage lender has reported profits, but hasstill fallen short of expectations. HDFC posted a 10% rise in net profit toRs981 crores on a year-on-year basis. Meanwhile its loan book expanded 21%to Rs1.32 trillion. And net interest income went up 18% to Rs1,235 crores,while net interest margin was at a stable 4.3%. 2
  • 3. Inside The StoryVinod Khosla-backed Praj Picks 50.2% In Neela SystemsFor Rs 64CrEngineering firm Praj Industries that makes ethanol equipments, hasacquired a majority stake in Neela Systems Limited (Neela) forapproximately Rs 64 crore($ 12 million), valuing the privately heldwater treatment firm at Rs 127.5 crore. Mumbai based MX Capital wasthe exclusive financial advisor for the seller.The public listed firm that isbacked by a number of marquee investors including ace stockmarket.investor Rakesh Jhunjhunwala, Tata Capital and Norwegiansovereign wealth fund, will buy 50.20 per cent of Neela.TVS Capital Nears First Close After Raising Rs 200Cr ForTop-up FundChennai-based private equity firm TVS Capital Funds Ltd, whichmanages TVS Shriram Growth Fund-IA, has raised firm commitments ofRs 200 crore and is soon expected to make a first close of its top-upfund. The funds have been primarily raised from ultra high networthindividuals (UHNWIs) and family offices, signalling the increasedophistication of investors entering this asset class.TVS Capital launchedTVS Shriram Growth Fund-IB in August 2011, targeting Rs 400 crorewith a green shoe option to raise another Rs 100 crore. The PE firm isnow close to making its debut exit and exploring new deal structureslike mezzanine and private investment in public equity (PIPE).General Atlantic To Invest Up To $125M In Fourcee InfraKicking off a big-ticket transaction in India in the New Year, globalprivate equity major General Atlantic is investing up to $125 million tobuy a minority stake in Fourcee Infrastructure Equipments PvtLtd,TheMumbai-based freight and logistics company.The investmentwill be through a mix of fresh capital infusion into the company and a 3
  • 4. secondary transaction to buy out some stake of the existing investors,the sources add. This will be the third round of funding for the company.Pearson In Talks To Buy Educomps 50% Stake In IndiacanPearson Plc., the worlds largest education service provider and one ofthe leading media groups, is in advanced stages of discussion withEducomp Solutions Ltd to buy out the latters 50 per cent stake inIndiacan, a vocational education company formed as a joint venturebetween the two companies.While the details of the companysvaluation are not known, sources close to the development peg the dealvalue (for 50 per cent stake) in the range of Rs 350 crore ($70 million)to Rs 500 crore ($100 million).In 2009, Pearson Plc. invested $17.5million in Indiacan (then known as Educomp Vocational Education PvtLtd), thereby valuing the company at $36 million.Ghari moves out Wheel, to be No 1 in laundry marketTwenty-five years after launching a laundry brand inspired by Nirma,Ghari detergent appears to have edged out, at least temporarily,Hindustan Unilevers Wheel from the number one slot in the Rs 13,000-crore laundry industry. Ghari, manufactured by Kanpurbased RohitSurfactants Pvt Ltd (RSPL), had a higher share in October andNovember than Wheel, a brand that contributes over Rs 2,500 crore, or12%, of the Rs 20,000-crore top line of Unilever Plcs Indian unit. "Asper value market share data, on a 12-month average share basis, the gapbetween Wheel and Ghari now stands at just 30 basis points; however,Gharis shares were higher than Wheel for the last two months," Saidmarket research firm The Nielsen Company. In November, Ghari had a17.4% share compared with Wheels 16.9%, according to peoplefamiliar with the numbers 4
  • 5. Healthkart Raises Rs 27Cr From Sequoia Capital, OmidyarTen-month-old Gurgaon-based start-up Bright Lifecare Pvt Ltd, whichruns the online health store Healthkart.com, has raised Rs 27 crore insecond round of funding from existing investor Sequoia Capital andanother new investor Omidyar. The fund raised is expected to be usedfor expansion of its product portfolio and developing an onlinemagazine.This comes as one of the first few e-commerce funding dealsin the New Year.Healthkart was reportedly looking to raise as much as$10 million, according to earlier media reports. Last April, the companyraised $1 million as seed fund from Kae Capital and Sequoia Capital.Clearwater Capital Makes Open Offer For Kamat Hotels’StakePrivate equity firm Clearwater Capital Partners has made an open offerto increase its stake in the hospitality company Kamat Hotels India Ltd(KHIL). The open offer for another 26 per cent stake comes asClearwater has converted its foreign currency convertible bonds(FCCBs) during the last two months. This has resulted in Clearwater’sstake in Kamat rising to more than 32 per cent, past the new open offerthreshold of 25 per cent.The deal might see Clearwater shell out up toRs 67.01 crore if the entire 26 per cent is subscribed. The offer is beingmade at Rs 135 per share, which is more than Kamat’s 52-week high. In2010, Clearwater Capital also made an open offer, increasing its stake to26 per cent in Vadodara-based Sayaji Hotels.Thomas Cook decides to sell its India arm to raise fundsThe cash-strapped UK parent of Thomas Cook has decided to sell itsIndian arm to raise money to bolster troubled global operations afterheavy debt and writedown pushed the worlds oldest travel firm to thebrink of collapse last year. Royal Bank of Scotland will find a buyer forThomas Cook India after the two foreign promoters pledged their entireholding in the Indian arm with the British bank on Wednesday. A person 5
  • 6. with direct knowledge of the development said Thomas Cook is valuingthe Indian business at around 700 crore. However, there may not bemany takers at that price. 6