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Indian Economy Weekly Review

Indian Economy Weekly Review

Published in Economy & Finance , Business
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  • 1. TOP HEADLINES IDFC Project Equity Buys ICICI Venture’s Stake in Sahyadri Hospitals. PE-backed Shree Ganesh Jewellery Buys 55% In Two Solar Power Firms. Fares rise due to Kingfisher cancellations. SBI decides on Rs 1,650-crore relief package for Kingfisher. BSE to launch green index today. JP Morgan Raising $500M India-focused Offshore Realty Fund. Future Groups Big Bazaar brings new recipe to boost sales. PE-backed Agre Developers Sells 20% In Gupta Infrastructure For $6M. Azure Capital Set To Raise Two New Realty Funds Of $60M Each. Citigroup to Exit India’s HDFC With $2.1B Sale. Kingfisher Airlines gets offer from 2 desi investors for Rs 800 cr: Vijay Mallya Raymond’s Auto Components Arm Acquires Trinity India For $11M MCX IPO subscribed 54 times; gets bids worth Rs36,000 crore 1
  • 2. Weekly Economic ReviewEnd of the week markets are upbeat following a slew of positive data fromUnited States. The S&P 500 ended near a 10-month high, at 1363.46, up 0.4%,the Dow closed at a 52 week high, up 0.4% and the Nasdaq Composite gained0.8%, reports Wall Street Journal.Asian markets were trading marginally higheron Friday morning following positive cues from the United States.Japan’s NikkeiStock Average was up 0.2%, China’s Shanghai was trading flat and Hong Kong’sHang Seng gained 0.3%, reportsHousing Development Finance Corp. Ltd (HDFC) will be in the focus asCitigroup divests entire 9.85% stake in HDFC to raise $2.07 billion. Citigroup isselling its entire stake to reinforce its capital base in preparation for newinternational standards that will come into force in January 2013, reports Mint.Citigroup will sell 145.2 million shares at Rs. 630-703.55 each on Friday.Kingfisher Airlines has told the Director General of Civil Aviation (DGCA) that itwill make 16 more aircraft operational next week, taking its total fleet size to44, reports. Currently Kingfisher Airlines has only 28 aircrafts which can fly 170flights a day and new aircraft could provide the beleaguered airline anopportunity to increase its daily service. Kingfisher Airlines has receivedrecapitalization offers from two large Indian investors for Rs 800 crore, airlinechairman Vijay Mallya said. The investor would pick up 24% stake if the dealwas clinched, he added.The MCX IPO, which closed on Friday, was oversubscribed 54 times; with theretail portion oversubscribed by a record 24 times till 6 pm. Bankers to theissue had to seek extra time from exchanges for uploading investorapplications. The bids from institutions and high net worth investors andcorporate were oversubscribed 49.12 times and 150.35 times, respectively.MCX is the first Indian bourse to be listed. 2
  • 3. Inside The StoryIDFC Project Equity Buys ICICI Venture’s Stake In SahyadriHospitalsIDFC Project Equity, which manages the India Infrastructure Fund, hasacquired a significant minority stake in Sahyadri Hospitals Ltd (SHL) foraround Rs 190 crore. The deal includes buyout of the stake held by ICICIVenture Fund Management Company Ltd in the Pune-based specialtyhospital chain. The deal will be IDFC Project Equity’s first investment inthe healthcare space, helping it diversify further from power utility andtransportation segments.PE-backed Shree Ganesh Jewellery Buys 55% In Two SolarPower FirmsCredit Suisse PE Asia-backed Shree Ganesh Jewellery House Ltd hasforayed into solar power generation business by buying controllingstakes in two companies – Alex Astral Power and Alex SpectrumRadiation – for an undisclosed sum, the company has said. The Kolkata-Based company has acquired 55 per cent stake in each firm. Although thecompany did not disclose the amount invested, according to a mediareport, Shree Ganesh Jewellery paid Rs 100 crore ($20 million) to buy thestakes in the two power firms. Alex Spectrum is reportedly close toCommissioning a 5 MW solar project in Rajasthan while Alex AstralPower has already commissioned a 25 MW solar power plant in Gujarat.Fares rise due to Kingfisher cancellationsCashing in on Kingfishers flight cancellations, major airlines have jackedup their fares on many busy air routes by 10-25 per cent over the pastfew days. On the busiest Delhi-Mumbai route on which the one-wayairfares average about Rs 4,500-5,000, the prevailing ticket prices of 3
  • 4. Other airlines ranged between Rs 6,555 and Rs 7,305. Similarly, on theDelhi-Bangalore sector, one-way fare rose from an average of Rs 6,000-7,500 to about Rs 12,000-14,000. The Delhi-Kolkata route saw a jumpfrom Rs 5,000 to Rs 6,500. Travel agents also confirmed the development,saying large-scale cancellations by Kingfisher on some of the popularsectors Bangalore-Delhi have almost doubled.SBI decides on Rs 1,650-crore relief package for KingfisherThe country’s largest bank, the State Bank of India (SBI), has decided toextend a Rs 1,650-crore relief package — smelling strongly of abailout that the government said it had no plans to give — to liquor baronVijay Mallya’s bleeding Kingfisher Airlines (KFA).A source confirmed thatthe bank had decided to extend a new line of credit that included Rs 700crore as short-term working capital loans and Rs 500 crore as bankguarantees as a cover for the airline’s payables to vendors. SBI has alsodecided to extend the tenure of the existing loans of Rs 250-300 crorethat would be due for repayment next year. Besides, SBI or PunjabNational Bank (PNB) is likely to offer bank guarantees of Rs 160-200crore to the income tax (I-T) department, the source said.BSE to launch green index todayThe Bombay Stock Exchange (BSE) will on Wednesday launch a newindex called BSE-GREENEX measuring the performance of companies interms of carbon emissions, an official of IIM, which co-developed themodel, said. The index, developed by the BSE in collaboration with thepremier B-school Indian Institute of Management, Ahmadabad (IIM-A),will enable investors take more informed investment decisions aboutcompanies in the energy-intensive sectors, among others."A model hasbeen created in collaboration with the BSE, where BSE-100 companieswere evaluated on the basis of greenhouse emissions in the last fourfinancial years from 2007-08 till 2010-11," Project Coordinator at IIM-AAmit Garg said."The companies were tested in different combinations ofcarbon emission intensity, market capitalization, and turnover," he said, 4
  • 5. adding that the index will have fair representation of firms from virtuallyall the sectors. The top-ranking companies from each sector like power,steel, cement have made it to the new index called BSE-GREENEXcurrently comprising less than 30 companies, Garg said.JP Morgan Raising $500M India-focused Offshore RealtyFundInternational financial services group JP Morgan is raising a new India-focused offshore real estate investment fund worth close to $500 million.A person privy to the development said, “The amount being so huge, itlooks difficult that they will be able to raise that much as internationalinvestors are taking time to warm up to Indian real estate. They mightclose it at $300-350 million. The first phase of the fund is up for closing inMarch this year.”Sources further added that the fund had already lockedthree deals with realty developers before it set out to raise money. Thedeals took place in Mumbai, Chennai and Pune, but details of the projectcould not be verifiedFuture Groups Big Bazaar brings new recipe to boost salesFuture Groups Big Bazaar is making its biggest move into Indianhouseholds yet. The value retail chain is not just retailing grain, butgrinding it, kneading the dough and even making chapattis for itsconsumers-at no extra cost. Such services, including de-seedingpomegranate, grating coconut as well as cutting pineapple and jackfruiton the spot, are presently offered only at its prototype Rajaji Nagar storein Bangalore, but will soon be rolled out in all the 12 family Big Bazaaroutlets across the country."The idea is to take care of all the pains ofcooking, to reduce the negative labour that families do not typicallyreward the women for," says Ashni Biyani, director of Future Ideas, theinnovation and incubation cell of Future Group. 5
  • 6. PE-backed Agre Developers Sells 20% In GuptaInfrastructure For $6MAgre Developers Ltd, promoted by Kishore Biyani-led Future Group andbacked by ICICI Ventures and Kotak Private Equity, has sold its 20 percent stake in Gupta Infrastructure (India) Pvt Ltd, a private joint venturewith Nagpur-based Gupta Group, for Rs 29.87 crore ($6 million), thecompany has disclosed in a filing to the Bombay Stock Exchange.Agre Properties & Services Ltd, a wholly owned subsidiary of AgreDevelopers, held the stake. The deal amount would be paid in tranchesbetween March 3 and May 31, 2012.Gupta Group was founded by lateMahadev Prasadjee Gupta and has interests in coal, infrastructure, power,mining and logistics business. The JV had also developed a shopping mall-cum-multiplex in Raipur, Chhattisgarh.Azure Capital Set To Raise Two New Realty Funds Of $60MEach.Bangalore-based private equity firm Azure Capital Advisors Ltd isplanning to raise two new funds dedicated to the real estate space. One ofthese will be a rental yield fund while the other will focus on Mumbairedevelopment projects. The rental yield fund, called India Realty Fund II,will be the second fund from Azure’s stable and the firm is planning toraise Rs 150 crore for the same, with a greenshoe option of additional Rs150 crore. It will be filing with the Securities and Exchange Board of India(SEBI) within the next three weeks and may seal a first close after raisingRs 30-40 crore. The fund will look to invest in Mumbai, Pune, Bangaloreand Chennai, and will target commercial properties close to centralbusiness districts (CBDs).Citigroup to Exit India’s HDFC With $2.1B SaleCitigroup Inc. (C) plans to exit an almost seven-year-old investment inIndia’s largest mortgage lender with an offer to sell its stake in HousingDevelopment Finance Corp. for as much as 102 billion rupees ($2.1 6
  • 7. Billion). The U.S. bank is offering 145.3 million shares at 630 rupees to703.55 rupees apiece, or as much as a 10 percent discount on the closingprice of HDFC shares yesterday, according to a term sheet obtained byBloomberg News. The stake represents the New York-based lender’sremaining 9.9 percent holding in Mumbai-based HDFC. Citigroup joinsEuropean and U.S. banks including HSBC Holdings Plc and Goldman SachsGroup Inc. in selling Asian assets as global rules for higher risk buffersforce lenders to boost capital. Citigroup, the third-largest U.S. lender byAssets, also plans to raise as much as $20 billion in debt this year to makepayments on a 2008 emergency credit program.Kingfisher Airlines gets offer from 2 desi investors for Rs800 cr: Vijay MallyaThe beleaguered Kingfisher Airlines has received recapitalization offersfrom two large Indian investors for Rs 800 crore, airline chairman VijayMallya said. The investor would pick up 24% stake if the deal wasclinched, he added. Mallyas senior executives have said that there areinvestors who would pump fresh equity in the hope of divesting the stakeat a gain to strategic investors after government allows foreign carriersare allowed to invest in Indian airlines. The union cabinet is expected todecide on allowing foreign airlines to take up to 49% in domestic carrierssometime next month. Mallya said there was no agreement with thelenders for a fresh loan yet, and also denied any deal with a foreign airlineas speculated in media recently. State Bank of India (SBI) led consortiumof 18 banks will meet next week to discuss whether or not to extend freshloans to Kingfisher, based on a new feasibility report from SBI Caps.Raymond’s Auto Components Arm Acquires Trinity IndiaFor $11MRing Plus Aqua Ltd, the auto components arm of the textile and apparelmaker Raymond Ltd, has acquired a majority stake in Pune-based TrinityIndia Ltd. Although the company did not disclose the deal value in itsofficial communiqué to the stock exchanges, various media reports stated 7
  • 8. That Ring plus Aqua had bought 78 per cent stake in the company for Rs54 crore ($11 million), citing a top company executive. The deal wasfunded by internal accruals and facilitated by Equirus Capital.MCX IPO subscribed 54 times; gets bids worth Rs36, 000croreRiding high on a record-breaking demand from retail, institutional andhigh networth individual (HNI) investors, the initial public offer (IPO) ofthe country’s top commodity bourse Multi Commodity Exchange (MCX)got over-subscribed by more than 54 times on Friday and attracted bidsworth about Rs36,000 crore. Overall, the MCX IPO, which happens to bethe first for the year 2012, got subscribed by 54.09 times on the last dayof bidding—thus attracting the highest over-subscription level since theAnil Ambani-led Reliance group’s R-Power IPO in January 2008, whichwas subscribed nearly 73 times. 8