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Weekly Finance Economic Newsletter

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Weekly newsletter

  1. 1. 1 Top News Fairfax-led consortium offers to buyout BlackBerry for $4.7B. New Vernon-backed Celebrity Fashions allots shares worth 24% stake to SBI in lieu of debt. Germany’s Brenntag acquires chemical distribution arm of Zytex for $14M. Carlyle-backed Infotech is in talks to buy US firm. Oberoi Realty IPP subscribed almost 2x; promoters sell shares worth around $30M. Vodacom in talks to buy Tata's South African telco Neotel for over $500M. Distressed assets investor WL Ross pays Rs 1.1Cr to SEBI to settle Spicejet case. Asian Development Bank to lend $500M for renewable energy project in Rajasthan Weekly Indian Economy Movement India's headline inflation shot to a six-month high in August, driven by a 245 per cent annual jump in onion prices, hardening the case for Reserve Bank of India (RBI) governor Raghuram Rajan to keep interest rates high at his first policy meeting later this week. Food inflation accelerated to a three-year high of 18.18 per cent in August, government data released on Monday showed, driving the benchmark Wholesale Price Index up by a stronger-than-expected 6.1 per cent. Economists had expected a slight pick-up to 5.8 per cent from 5.79 per cent in July. Monday's data is a grim reminder of the economic pressures facing the new central bank governor as he steps in to deal with India's worst economic crisis in more than 20 years.
  2. 2. 2 Rajan has already warned he does not have a "magic wand," but as he has been dubbed "The Guv" by a gushing Indian media hopes are high that he can find a formula to calm inflationary pressure, stabilise the rupee and at the same time spark a revival in economic growth. The higher inflation number dampened market expectations that Rajan would begin to rollback some of the measures put in place by his predecessor in a bid to arrest a sharp fall in the rupee since May. Those steps included draining liquidity from the banking system. The rupee, stocks and bonds all pared earlier gains after the data, with the rupee trading at 62.70 to the dollar as of 1500 IST, up about 1.3 per cent on the day but still down more than 12 per cent so far this year. The benchmark BSE Sensex and the broader Nifty both turned slightly lower, while bonds also reversed earlier gains. Food prices Onions are a staple ingredient in many Indian dishes and rising prices of the vegetable anger voters and can quickly become a political issue. India is due to hold its largest-ever general election within eight months. Onions cost 245 per cent more in August than a year before, while other vegetables shot up by 77 per cent. Eggs, meat and fish were up nearly 19 per cent. Farmers are expecting food prices to start moderating from October onwards as supplies rise from crops planted after the much better monsoon season. However, heavy rainfall has resulted in flooding in some areas of the country making it difficult to get produce to market. More price pressure could come in the form of a government plan to hike retail fuel prices by nearly 10 per cent to ease its oil subsidy burden, which has risen after the rupee's fall and on higher crude prices. Analysts estimate that such an increase in diesel prices would directly add 0.5 per cent to headline inflation.
  3. 3. 3 Inside The Story Fairfax-led consortium offers to buyout BlackBerry for $4.7B Hyderabad-born Prem Watsa-led Canadian financial services firm Fairfax Financial Holdings Ltd (Fairfax) is leading a consortium of investors who have offered to take the mobile handset maker BlackBerry private in a $4.7 billion transaction. Fairfax currently owns 10 per cent of BlackBerry.BlackBerry said on Monday it has signed a letter of intent agreement (LOI) under which a consortium of investors led by Fairfax may buy the Canadian smartphone maker for $4.7 billion.According to the agreement, BlackBerry shareholders would receive $9 in cash for each existing share of BlackBerry they currently hold. The consortium would acquire for cash all of the outstanding shares of BlackBerry not held by Fairfax. Fairfax, which owns approximately 10 per cent of BlackBerry’s common shares, intends to contribute the shares it currently holds into the transaction. New Vernon-backed Celebrity Fashions allots shares worth 24% stake to SBI in lieu of debt. Celebrity Fashions, a Chennai-based manufacturer of garments and the parent company of garment brand Indian Terrain, has allotted shares representing over 24 per cent stake of the firm to its lender State Bank of India (SBI), as a part of debt restructuring exercise.Celebrity Fashions disclosed that it allotted 74,69,100 equity shares on a preferential basis to SBI. The company’s scrip last traded at Rs 4.1 a share; so the share allotted is valued at Rs 3 crore.The company also allotted 2,51,04,500, 1 per cent cumulative redeemable preference shares of face value Rs 10 each to SBI. Germany’s Brenntag acquires chemical distribution arm of Zytex for $14M Germany-based chemical distributor Brenntag has signed an agreement to acquire the chemical distribution division of the Zytex Group, a Mumbai-based biotechnology food formulation and manufacturing company, for €10.2 million ($13.7 million), as per a company statement. Post acquisition, the division will become part of Brenntag’s Indian arm which is located in Mumbai.This acquisition would help Brenntag further strengthen its nutrition and health business in India by adding new customer segments and products to its portfolio as well as expand its strategic relationships with key global suppliers.
  4. 4. 4 Carlyle-backed Infotech is in talks to buy US firm Infotech Enterprises Ltd, an Indian software services provider to aerospace and automotive industries, plans to acquire at least one company in the US this year to expand in its biggest market. The firm, backed by Carlyle Group LP, will use part of its Rs 600 crore ($96 million) cash for the purchase. The Hyderabad, India-based company has acquired nine rivals in the US and Europe since 1997. The company might spend about $25 million on the acquisition Oberoi Realty IPP subscribed almost 2x; promoters sell shares worth around $30M. The institutional placement programme (IPP) of Oberoi Realty, the second-largest realtor in the country according to market capitalisation, through an offer for sale by the promoters, was subscribed 2x. The share sale by the promoters fetched around Rs 190 crore ($30 million) for their 3.49 per cent stake.The company's CMD and promoter Vikas Oberoi had offered to sell 11.4 million shares with a floor price of Rs 158 per share. The issue saw bids for 21.6 million shares, bulk of it on the BSE with an indicative price of Rs 167. Vodacom in talks to buy Tata's South African telco Neotel for over $500M. Vodacom Group is in talks to buy Tata Communications' stake in South African telecoms operator Neotel for more than 5 billion rand, Bloomberg reported on Friday, citing a person familiar with the matter.Vodacom is the South African unit of Vodafone Group Plc. Tata owns more than 60 percent of Neotel, a provider of fixed-line service and data.The talks are set to become exclusive, Bloomberg said. Distressed assets investor WL Ross pays Rs 1.1Cr to SEBI to settle Spicejet case Billionaire investor Wilbur Ross-headed global private equity group WL Ross has paid Rs 1.1 crore to Security Exchange Board of India (SEBI) to settle its pending case over its past share transactions in Indian carrier Spicejet India Ltd.WL Ross had picked stake in Spicejet five years ago and later sold it to Kalanithi Maran of Sun Group.
  5. 5. 5 It also alleged that the shares and voting rights under Sale and Purchase Agreement were segregated and separately transferred prior to completion of the open offer formalities in violation of regulation 22(16) of SAST Regulations. Asian Development Bank to lend $500M for renewable energy project in Rajasthan The Asian Development Bank (ADB) will provide a loan of $500 million (Rs 3,100 crore) to build a power transmission system at the Bhadla park in Rajasthan to deliver clean electricity from wind and solar power projects to the state and national grids, the development financial institution said on Friday.The loan will be provided in three tranches; the first tranche is worth $152 million. The second tranche of around $220 million and the final loan of around $128 million are expected to be released later in 2014 and 2015, respectively. The investment programme is expected to be completed by early 2018.

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