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Weekly Indian Economic Review

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Weekly newsletter

  1. 1. Top Headlines IDG Ventures, SAIF Partners Invest $14M In Owner of FirstCry.com Warburg Pincus to Invest $50M in AU Financiers. France’s Legrand Acquires Numeric’s UPS Biz for Rs 837Cr. Gati Hives Off Bulk Of Logistics Biz Sells 30% To Kintetsu For $53M. Face book enemy Divya Narendra sets new mark as IPO looms. Helion Venture Partners’ Third Fund Reaches $219M. Marico buys Paras personal care brands. Manthan Systems Raises $15M from Norwest Venture Partners. MCX Eyes over $1B Valuation in IPO. Jacob Ballas Invests $20M In DBM Geotechnics & Constructions. Unitech rejects Telenor claims, to contest charges 1
  2. 2. Weekly Economic ReviewHigh demand for loans helped State Bank of India post healthy profits forthe third quarter. But bad loans have also shot up, raising concerns aboutthe bank’s performance. Profit rose 15% to Rs3, 263crore compared to thesame period the previous year. That was on a 26.7% increase in netinterest income to Rs11, 470crore. On the downside, non-performingloans are now at a record high up Rs40, 098crore compared to Rs23,438crore in the year-ago period. That in turn means, gross NPAs are nowat 4.61% on loans.Switching to the Economy, there’s finally a glimmer of hope for India’sstruggling Economy. Inflation has eased to its lowest in more than twoyears. The wholesale price index rose 6.55% in January. In December itstood at 7.47%. Finance minister Pranab Mukherjee said he was nowconfident inflation would drop to around 6% by March-end.But not everyone is so confident inflation will ease. Some economists haveargued that the low figure is largely because of the base effect—sinceinflation stood at 9.46% last January. Others point out seasonal factorshave cut down food inflation in December and January, bringing downoverall inflation as well.State-run Indian Oil Corporation is considering a hike in petrol prices ifcrude oil continues to remain at around $115per barrel. Growth in petrolconsumption so far this fiscal is just 5.2% compared the usual 10%.And finally, the great Indian demand for gold seems to have waned. Areport from the World Gold Council says demand fell some 42% in theOctober to December quarter. It says the main culprits were volatile pricesand a weak rupee. The fall in demand came despite the festivel 2
  3. 3. Inside The StoryIDG Ventures, SAIF Partners Invest $14M in Owner ofFirstCry.comIDG Ventures India led a $14 million Series B investment into Brainbees Solutions Pvt Ltd., which owns the FirstCry.com andGoodLife.com brands. SAIF Partners, the first institutional investorin Brainbees participated equally in the round; having earlierinvested $4 million in the company in May 2011.IDG VenturesManik Arora joins Ravi Adusumalli & Mukul Arora from SAIFPartners on the board of the company. IDG Ventures US arm hasbeen an investor in BabyCenter.com in the late 1990s and thecompany was acquired by eToys in a stock deal. The investment willbe utilized for marketing, adding new business categories andbrands, and expanding warehousing space. In addition, Brain beeswill accelerate its growth in existing categories, recruit employeesfor expanding the supply chain and overall customer experience.Warburg Pincus to Invest $50M in AU FinanciersPrivate equity major Warburg Pincus is picking up a stake in Jaipur-based AU Financiers (India) Private Limited for $50 million (Rs 250crore), said a source familiar with the development. The privatelyheld non-banking finance company (NBFC) is involved primarily incommercial vehicles and SME loans. The firm has earlier risenfunding from Motilal Oswals private equity fund and World Bankarm International Finance Corporation (IFC). AU Financiers ispromoted by first generation entrepreneur Sanjay Agarwal. It alsoprovides vehicle loans, business loans against property and smallloans to customers mainly in semi-urban and rural areas. As of June2011, the company had a loan portfolio of Rs 1,508 crore. 3
  4. 4. France’s Legrand Acquires Numeric’s UPS Biz for Rs837CrFrench electrical and digital building infrastructure major LegrandGroup has acquired the UPS business of Numeric Power Systems Ltdfor Rs 837.08 crore ($171 million). It is also the second majoracquisition by Legrand in India, after it agreed to buy the switchgeardivision of Indo Asian Fusegear Ltd for Rs 600 crore in 2010.Thetransaction has been done in the form of an asset sale whereBombay Stock Exchange-listed Numeric Power Systems has sold theUPS business to Legrand’s wholly owned subsidiary Indo AsianElectric Pvt Ltd and the two parties have entered into a businesstransfer agreement.Gati Hives off Bulk of Logistics Biz, Sells 30% ToKintetsu For $53MGati Ltd’s stock price crashed 10 per cent to hit the lower circuit ofthe day after it announced a deal with Japanese logistics firmKintetsu World Express (KWE) to sell 30 per cent stake in itsExpress distribution & supply chain (EDSC) business for Rs 267crore ($53 million).For the 12 months ended June 30, 2011, GatiDrew three-fourth of its total consolidated revenues of over Rs1,200 crore from the EDSC business. More importantly, over 95 percent of the segment profits came from the EDSC business, which isnow hived off into a separate venture. Other businesses of Gatiinclude what it calls ‘coast-to-coast’ (shipping) besides fuel sales.These two businesses generated around Rs 220 crore in revenues,with segment profit of Rs 2.5 crore.The new joint venture willsupport the large customer base of Kintetsu which has operations inIndia – simultaneously strengthening its distribution capabilities forthe Indian market. The JV will also invest in high-end 3PL facilities,including temperature-controlled warehouses. 4
  5. 5. Face book enemy Divya Narendra sets new mark asIPO loomsDivya Narendra is named as an enemy on whoownsfacebook.com, awebsite that lists the shareholders of Facebook. This enemy is nowlooking to count his spoils of war. If the social networking site gets avaluation of $100 billion in its upcoming initial public offer,Narendra will be richer by about $20 million. The Harvard-educatedIndian-American has held a 0.022% stake in Facebook since 2008 aspart of his settlement with founder.Helion Venture Partners’ Third Fund Reaches $219MHelion Venture Partners, an early-to-mid-stage venture capital firm,has raised over $219 million for its third India-focused fund a fewWeeks ago, according to sources with direct knowledge of thedevelopment. With the current fund, the firm’s assets undermanagement will reach over $570 million across its three India-focused funds. According to sources, Helion Venture Partners III,LLC has raised the amount from 31 investors. While it was earlierindicated that Helion would raise $200-250 million for its thirdFund, one source said that $219 million might not be the final closeof the fund. E-mail queries sent to Helion’s senior managingdirectors Kanwaljit Singh and Ashish Gupta did not elicit anyresponse at the time of filing this articleMarico buys Paras personal care brandsConsumer goods maker Marico will acquire the personal carebrands of Paras Pharmaceuticals from Reckitt Benckiser for anundisclosed sum. The portfolio includes hair gel brand Set Wet, age-defying cream Recova, lip balm Dr Lips, hair serum Livon anddeodorant brand Zatak.Marico refused to share the transactiondetails, but said the deal will go through in the next few months. Theacquisition would be funded through a “judicious mix” of internal 5
  6. 6. Accruals, equity and debt, it said.Dabur India and Emami wereamong the players in the race to acquire the Paras brands, which areexpected to generate a turnover of Rs150 crore this fiscal. As per thescheme of arrangement, Reckitt will transfer the personal caredivision to a separate company, called Halite Personal Care India PvtLtd, in which Marico will acquire 100% equity stake.Manthan Systems Raises $15M from Norwest VenturePartners.Manthan Systems, a business intelligence and analytics solutionsprovider for the retail and consumer packaged goods industries, hasraised $15 million (Rs 75 crore) in series C funding from NorwestVenture Partners. The funds raised will be used to expand productofferings besides inorganic expansion. Manthan is also on thelookout for companies in similar domain, with similar customerbase, which it can acquire.Atul Jalan, founder and CEO of ManthanSystems, told that The next step would be a public issue as a naturalcorollary after 3-4 rounds of funding. However, he did not give atimeframe for the proposed public issue. “Our deep focus on retailanalytics, business intelligence and customers is what has helped uscreate some of the most innovative products in the businessintelligence and analytics space. In addition, we have always beenheedful of the fact that the sophisticated analytics we create need tobe easy to adopt, deploy and use,” he said.MCX Eyes over $1B Valuation in IPOPrivate equity-backed commodity bourse company MultiCommodity Exchange of India (MCX) has set the price band for itsmaiden issue that will see half a dozen financial investors in thecompany part-exit, with some generating superlative returns of over100 x and some might just recover their original investment value.The public issue is being eagerly watched as it is one of the biggestissues to hit the Indian bourses in a while and the first this year. It is 6
  7. 7. Also important as MCX is the largest commodity bourse by turnoverand the issue will make it the first bourse to list in India. Analystssay that this issue will test the market for more primary issues.MCXhas set a price band of Rs 860-Rs 1,032 a share for its initial publicoffer under which its existing investors, including its main promoterFinancial Technologies India Ltd, are offering 6.4 million shares forsale. The issue will be worth Rs 550-660 crore. However, thecompany will not get any money from the issue.Jacob Ballas Invests $20M In DBM Geotechnics &Constructions.Private equity firm Jacob Ballas has invested Rs 100 crore ($20million) in privately held DBM Geotechnics and Constructions PvtLtd through NYLIM Jacob Ballas India Fund III to buy an undisclosedminority stake in the Mumbai-based company.DBM is intogeotechnical services and is also engaged in EPC services, mainly inthe areas of foundation engineering and marine infrastructureconstruction.DB Mahajan, chairman and managing director of DBM,said, “We believe NYLIM-JB’s understanding of the Indianinfrastructure sector and global best practices will help DBM toexpand business to new heights and create value for allstakeholders.”Unitech rejects Telenor claims, to contest chargesUnitech on Thursday said it would refuse demands forcompensation from Norwegian operator Telenor and contest thecharge that it had broken agreements in acquiring 2G airwaves fortheir joint venture, Uninor.“At best, Telenor group can invoke theprovisions between the governments for protection of theirinvestment in India, but they shall have no valid claim on Unitechand any demand from Unitech shall be contested,” the Indiancompany said in a release.Unitech said the Supreme Court’s 7
  8. 8. Cancellation of all 22 of Uninor’s licences did not leave theinfrastructure company liable for damages. 8