Indian Economy newsletter

1. Top Headlines
 Shareaholic raises $3M Series A funding led by Kepha
Partners.
 EILSF invests $12.5M in eye care chain Dr. Agarwal's
Healthcare.
 CIL to pick 50% in IOC's explosives division to form equal
JV
 Ybrant Digital debuts on stock market with $822M market
cap
 Nexus Ventures-backed Cloud startup Aryaka raises $25M
in Series C
 Reliance MediaWorks' unit to raise $110M from PE fund
 BofA plans $3B of new cost cuts
Executive Summary
India’s biggest company Reliance Industries provided a glimmer of hope
for corporate India by posting better than expected first quarter
earnings. While the company’s profits fell for a third quarter in a row,
the drop was less steep than many had anticipated. Net profits stood at
Rs4,473crore, a fall of 21%. Sales rose 13.4% to Rs94,926crore. One of
the most keenly watched numbers from RIL is the gross refining
margins from its oil refinery in Jamnagar, the largest in the world. Once
again, RIL beat estimates, with a GRM of $7.6 per barrel.
The Reserve Bank wants to tighten the rules for debt recasts. On Friday
an RBI panel proposed stricter norms for loan restructuring. The panel
recommended hiking the provisioning set aside for recast loans. It also
called for an increase in promoters’ contributions during a
restructuring. RBI will now wait until 21 August for comments on its
proposals.
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2. The IMF has cut down its projections for India’s economy. Its latest
update to its April World Economic Outlook says weak global markets
and falling demand at home will mean slower growth. IMF’s projection
for the calendar year 2012 is 6.1%. Its forecast in April was 6.8% of
GDP. India grew at 5.3% in the January-to-March quarter, and there
have been few signs of a revival since then. IMF’s new report called
India a rising concern, citing a large fiscal deficit and the weakening
rupee.
Indian power engineering companies are going to get a breather. The
cabinet has approved a proposal to impose duties on foreign power
generation equipment. A 5% import duty will come into effect shortly. It
will be accompanied by a 12% countervailing duty to make up for excise
on Indian products- and a special additional duty of 4%.Adding them up,
the effective tax rate on foreign power equipment will 21%. The new
duties will help Indian power companies like BHEL and L&T. But they
will hurt Chinese power engineering firms and their Indian clients like
Lanco and Reliance Power.
India will continue to maintain its commercial presence in the much
coveted South China Sea. A senior executive from state-run OVL has told
Mint the company will continue exploring for oil in Block 128 off the
coast of Vietnam. The area is at the heart of a territorial dispute
between China and several south-east Asian countries. Earlier, China
had protested the presence of an Indian surveying ship in the region.
Inside The Story
Shareaholic raises $3M Series A funding led by Kepha
Partners.
Boston and New Delhi-based Shareaholic, Inc., which runs the content
sharing site Shareaholic Inc., has risen $3 million in Series A funding led
by Kepha Partners. All existing investors including General Catalyst
Partners, NextView Ventures, 500Startups, Boston Seed Capital, and
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3. angels also participated in the round.The company had earlier raised $2
million from General Catalyst Partners, NextView Ventures, Dave
McClure of 500 Startups, Nicole Stata of Boston Seed, Edward Roberts of
MIT, Dharmesh Shah of HubSpot and others. Prior to this, the company
has raised $355,000 as angel funding in 2009, when it crossed the 100-
million user mark. The new investment takes Shareaholic’s total funding
to $5.35 million.
EILSF invests $12.5M in eye care chain Dr. Agarwal's
Healthcare
Life Sciences-focused private equity fund EILSF (Evolvence India Life
Sciences Fund) has acquired a minority stake in Chennai-based Dr.
Agarwal's Healthcare, its second investment in the healthcare services
segment. EILSF will pick up the stake for Rs 60 Cror.
CIL to pick 50% in IOC's explosives division to form equal
JV
Coal India (CIL) will sign a memorandum of understanding with Indian
Oil Corporation (IOC) to take over 50% in its explosives division, which
will be spun off into a different company where CIL and IOC will have
50% stake each. CIL's move comes just after Competition Commission of
India (CCI) imposed a penalty of 60 crore on 10 private explosives
manufacturers following its complaint that they had formed a cartel.
The competition regulator found that Gulf Oil Corporation Ltd, Ideal
Industrial Explosives Ltd, Solar Industries India Ltd, Blastec India Pvt
Ltd and Indian Explosives Ltd, among others, had formed a cartel to
supply explosives to Coal India.
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4. Ybrant Digital debuts on stock market with $822M market
cap
Hyderabad-based digital marketing solutions company Ybrant Digital
Ltd has completed its reverse merger with IT outsourcing services
provider LGS Global, to become yet another digital media firm to be
listed on the stock market.On debut, the company’s share price rocketed
7.6 per cent to close at Rs 94.95 a unit. At this price, the company
commands a market cap of Rs 4,522 crore or $822 million.The
combined consolidated provisional revenues for the financial year
ended March 31, 2012, are pegged at Rs 1,320 crore and the profit after
tax (PAT) at Rs 190 crore. This means the firm is trading at 23.8x its
FY12 net profit. Although not strictly comparable, among other large
and listed digital media firms, Info Edge (India) is currently trading at
35x its FY12 net profit.
Nexus Ventures-backed Cloud startup Aryaka raises $25M
in Series C
Cloud WAN Optimisation as a Service provider Aryaka, which has offices
in the US and India, has received $25 million in Series C funding from
venture capital investors. The funding led by InterWest Partners and
Presidio Ventures also saw existing investorsNexus Venture Partners,
Trinity Ventures and Mohr Davidow Ventures investing afresh.The
funds will be used to support the California-headquartered company’s
market penetration and global reach.“Market traction has been
tremendous as small, mid-sized and large enterprises realise that
networks and applications require a new, more sustainable approach,”
Ajit Gupta, founder, president and CEO of Aryaka, said in a statement.
Reliance MediaWorks' unit to raise $110M from PE fund
Reliance MediaWorks Ltd. said that one of its units has signed a term
sheet to raise Rs 605 crore ($110 million) from a leading international
private equity fund, in what would be the single largest PE transaction
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5. in Indian media sector in over five years. The potential investor has
signed "an indicative non-binding proposal to acquire a substantial
minority stake" in the film and media services division of the Anil
Dhirubhai Ambani Group (ADAG) firm.Reliance MediaWorks and the
potential investor have agreed to exclusivity for the next 90 days. The
proposed investment is subject to completion of customary detailed
due-diligence, definitive documentation, completion of subsidarisation
of the film and media services business, and approvals as may be
necessary," said a company statement. Reliance MediaWorks share
price shot up in early trade and was at Rs 64, up by 8.57 per cent at
10:24 am on Wednesday.
BofA plans $3B of new cost cuts
Bank of America Corpsaid it plans to slash costs by $3 billion annually in
commercial lending, investment banking and wealth management,
becoming the latest big bank to take aim at expenses in a sluggish
economy.The No. 2 US bank posted second-quarter earnings of $2.5
billion on Wednesday, reversing a year-earlier loss, helped by a cost-
cutting program launched last year.Expenses declined 35 per cent to
$17 billion, while its work force was reduced by more than 12,000 from
a year earlier to 275,460.The first phase of the cost-cutting initiative
begun in 2011 was intended to save $5 billion a year and eliminate
30,000 jobs by the end of 2014 in consumer banking and information
technology.
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