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weekly indian economy review,

weekly indian economy review,

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  • 1. Top Headlines Max India in talks to sell polypropylene business. SBI to cut vehicle, SME loan rates. DHFL Snaps Out Of Talks To Buy Milestone Capital. Tano Capital To Invest In Kalpataru Power Subsidiary. Chernin Group Secures $200M In Private Equity Xander’s PE Arm Invests $40M In Chennai’s Appaswamy Realty Project. Eros To Buy Out Remaining 76% In B4U For $53.1M ChrysCapital Invests $56.2M In Intas Pharmaceuticals Rabobank Part-exits Yes Bank; Sells Stake For $86.2M Weekly Economic Review India’s biggest software company, Tata Consultancy Services, has posted quarterly numbers in line with market estimates. Net profit for the fourth quarter rose 3.3% quarter on quarter to Rs2, 895crore. And revenues increased a modest 0.4% to reach $10.17 billion. The rise in revenues may be modest, but it’s also a milestone. TCS is now the first Indian IT firm to have quarterly revenues greater than $10 billion. And while TCS reported its numbers after market hours, its shares dropped 2.77% on the BSE to 1059.25 on a day the Sensex lost 1.6%. The Reserve Bank may have cut its repo rate last week. On Monday,chairman Pratip Chaudhuri said the cash reserve ratio or CRR was more significant than the repo when it came to costs. RBI had already cut the CRR by 125 basis points since January, but got no concrete response from banks. Also, its 50 basis points cut in the repo last week only managed to prompt a handful of lenders to reduce their base rates. India’s biggest bank has finally agreed to cut the rates on some of its loans.On Tuesday,Pratip Chaudhuri, the chairman of State Bank of India announced it was making its loans to small and medium enterprises 1
  • 2. Cheaper. Loan rates to SMEs will now be cut by 1.5-2 percentage points.Banks have been reluctant to make loans cheaper despite the ReserveBank’s 50 basis points cut in policy rates last week.Authorities may have to complete their auction for 2G spectrums muchearlier than anticipated. On Tuesday, the Supreme Court gave thegovernment another three months to auction 2G spectrum that wasfreed after 122 licenses were cancelled. The court has rejected a pleafrom the department of telecommunications asking for 400 days. TheSupreme Court’s decision will actually provide some relief for thetelecom firms that lost their 2G licenses in February. Tuesday’s decisionwill allow them to operate until 7 September without new licenses.Their previous deadline was 2 June.India has just got a downgrade. Fiscal challenges at home and slowgrowth abroad have prompted a major ratings agency to cut the outlookfor the country. On Wednesday Standard and Poor’s slashed India’soutlook to “negative” from the earlier “stable”. On the bright side, it keptthe country’s long-term sovereign rating of BBB-. But S&P also warnedthat a further downgrade was possible in the next three years. Thatmove would bring India into the ‘junk’ category. The downgrade couldweaken the rupee and make overseas loans more expensive for Indiancompanies. Finance minister Pranab Mukherjee described thedowngrade as a timely warning, but added that India had already takensteps towards fiscal consolidation. The country’s fiscal deficit for 2011-12 is estimated to have been 5.9% of GDP. The target for this year is5.1%. Inside The StoryMax India in talks to sell polypropylene businessInsurance and hospitals group Max India (MAXI.NS) is looking to divestits polypropylene business for an enterprise value of about 8 billionrupees as part of plans to exit its non-core business. The Delhi-basedcompany is in advanced negotiations with at least two overseas firms inEurope and the United States to sell its polypropylene films 2
  • 3. business."The transaction is expected to close sometime this quarter," itsaid, citing one official.SBI to cut vehicle, SME loan ratesThe countrys largest lender, State Bank of India (SBI), will reduceinterest rates on vehicle and SME loans in the coming one or two days.An SBI official said the decision was taken during a meeting held by thebank late on Friday. Auto loan rates are expected to come down by 50bps, but there was no clarity on the extent to which SME loan rates willbe cut. The official, however, added that no decision has been taken onthe broader base rate and benchmark prime lending rate as yet, and afinal decision on this could be taken in the coming week.DHFL Snaps Out Of Talks To Buy Milestone Capital.Dewan Housing Finance Ltd (DHFL) has once again walked out of thenegotiations to buy Milestone Capital Advisors Ltd, one of the largestHome grown alternate assets management firms, according to a sourceprivy to the development.In March this year, Milestone Capital had re-entered negotiations with DHFL for a sell-off, eyeing a deal worth Rs200-220 crore ($40-45 million).“DHFL had gone through the duediligence process but the transaction is not happening due todifferences over valuation. In fact, DHFL is not looking at buying others’assets anymore and will focus on its own fundraising”Tano Capital To Invest In Kalpataru Power SubsidiaryPrivate equity firm Tano Capital is investing in Shree Shubham LogisticsLtd (SSLL), a group company of Kalpataru Power TransmissionLtd.While the investment amount could not be immediately ascertained,it is believed that the PE firm is putting up to $15 million into thecompany.An e-mail query sent to Hetal Gandhi, managing director ofTano India Advisors Ltd, did not elicit any response till the time ofwriting this article. A spokesperson of Kalpataru Power did notcomment officially till the time of writing this article. 3
  • 4. Chernin Group Secures $200M In Private EquityThe Chernin Group, the entertainment and digital media company PeterChernin founded after leaving News Corp in 2009, has secured about$200m in new funds from a group of investors led by Providence EquityPartners, one of the sector’s most prominent private equity groups.MrChernin, who spent 12 years as Rupert Murdoch’s closest lieutenant,said the new partnership would have the resources to pursue “any dealof any size” around the world, from making multibillion-dollar bids toincubating start-ups. Its first potential deals were “very close” and couldbe announced within weeks, he said.Xander’s PE Arm Invests $40M In Chennai’s AppaswamyRealty ProjectThe private equity arm of the global investment firm Xander Inc hasinvested $40 million in a pre-leased IT Park of the Chennai-baseddeveloper Appaswamy Real Estates Ltd (AREL).A source privy to thetransaction said, “Xander’s private equity arm will hold 100 per centequity stake in the project. The investment has come in AREL’s projectcalled Futura, located on Old Mahabalipuram Road in Chennai. Theproject was granted approval by the Software Technology Parks of India(STPI) and it is a ready property with tenants in place.”PayPal and eBayare the anchor tenants at the facility, spread across 0.56 million sq. ft.and boasting twin towers.According to market sources, Xander islooking at an internal rate of return of 11.5-12 per cent from thisinvestment.Eros To Buy Out Remaining 76% In B4U For $53.1MBollywood films producer and distributor Eros International Plc isacquiring the remaining 76 per cent stake it does not own in the digitalbroadcasting firm B4U Television Network in a cash-plus-stock dealworth $53.1 million (Rs 270 crore). Eros International Plc, which ispromoted by the Lulla family, is listed on London’s AIM exchange and isthe parent firm of the Indian public company Eros International MediaLtd.B4U was formed as a media joint venture between billionaire steel 4
  • 5. baron Lakshmi Mittal, Gokul Binani and the Lulla family. Currently, theMittals and the Binanis are reportedly the majority stakeholders.ChrysCapital Invests $56.2M In Intas PharmaceuticalsPrivate equity major ChrysCapital is investing Rs 300 crore ($56.2million) in Ahmedabad-based Intas Pharmaceuticals Ltd, increasing itsexisting stake of 11.2 per cent in the fast-growing pharma company.With this investment in place, Intas has deferred its initial publicoffering (IPO) where it planned to raise Rs 425 crore in fresh capitalbesides a secondary sale.“The company has deferred its listing plan forthe time being and intends to re-file for an IPO once market conditionsstabilise,” a statement said. ChrysCapital, which invested Rs 48 crore for11.2 per cent stake in 2005, had plans to make a partial exit from Intasin the IPO.Rabobank Part-exits Yes Bank; Sells Stake For $86.2MNetherlands Rabobank sold three-fourth of its 4.7 per cent stake inIndian private lender Yes Bank for about Rs 453 crore ($86.2 million)on Thursday. A group of Indian financial institutions, including BajajAllianz Life Insurance and Citigroup Global Markets, among others,bought the shares.The shares were sold at around Rs 357.03 a piece, at2.54 per cent discount to Yes Banks last traded price onWednesday.“This is part of Rabo’s monetization plan. It spotted an exitopportunity after Yes Bank’s results yesterday. The bank has a smallstake remaining in Yes Bank and it will exit that too at the nextopportunity,” a Source said. 5