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Newsletter weekly

  1. 1. Top Headlines Indiabulls Merging NBFC Arm With Housing Finance Unit Forum Synergies In Debut Deal; Puts $3M In Captronic Systems Nagpur Automotive Buys Adhunik Metaliks Forging Arm For $44M Anand Rathi & Knight Frank Eye $100M In Second Realty Fund Greenko Group Promoters Hiking Stake To 14.4% Jacob Ballas Capital Invests $39M In Marg Karaikal Port Pune Developer KUL Raises $39M For Township Project FC May Invest $12M In Ahmedabad NBFC MAS Financial Sunil Sharma Quits BDO India After 25 Yr Stint; Manoj Daga Takes Over Phoenix Mills Looking To Raise Up To $187M BCCL Raising Stake In Pantaloon Retail To 7.7% For $37.5M Weekly Economic Review A major consolidation is underway in India’s fragmented retail industry. On Monday the Aditya Birla conglomerate announced it would acquire a controlling stake in Pantaloon Retail’s chain of clothing stores. As part of the deal, Pantaloons Retail will hive off its apparel chain into a separate unit. Then Aditya Birla Nuvo will infuse Rs1,600 crore into the new entity through a subscription of debentures. Once the separation process is complete, those debentures will become equity. Aditya Birla Nuvo will also make an open offer for at least 25% of the resulting unit. That will give it at a stake of at least 50.01% in the retail chain, and make it a subsidiary. Switching to other news, the troubles of India’s telecom industry may have just become sharper. On Monday Norwegian firm Telenor announced it was writing down $681 million in what remains of its 1
  2. 2. Indian assets. Telenor said the decision came because the newproposals for re-auctioning 2G spectrum make it nearly impossible for itto participate. Telenor’s Indian joint venture, Uninor, was among thecompanies that lost key spectrum licenses in a February Supreme Courtdecision. SigveBrekke, the managing director of Uninor, has said theproposal for a re-auction for spectrum was effectively a price settingballoon.India’s biggest consumer goods company, Hindustan Unilever, hasbeaten estimates with robust quarterly numbers. Resurgent demandand stable price tags have helped the company ride through the stormof rising input costs across the sector. Net profit for the fourth quarterrose 21% to Rs. 687 crore. That came on the back of a rise in net sales of16% to Rs. 5,660 crore. Also, the company’s operating margin rose by170 basis pointsIn other news, fresh figures indicate a grave economic challenge forIndia. On Tuesday, the commerce ministry announced the trade figuresfor March, and those for exports aren’t very promising. They fell 5.7%during the month to $28.7 billion. This is the first time exports havefallen since 2009. Meanwhile imports continued to expand, going up24.3% to $42.6 billion in March. That meant a trade deficit of $13.9billion.The services sector index fell from 56 in March to 53.5 in April.According to Market Watch it’s the worst reading since December. S&P500 lost 0.77% to 1,391 on selling in stocks of commodities andtechnology companies.Back home, high capital requirements prescribed under Basel IIIguidelines are estimated to hit growth and return ratios of public sectorbanks. The norms are expected to force banks to plough back a largechunk of their profit into their balance sheets.Finally, beer consumption in Australia has fallen to a 65 year low asconsumers shift to wine and other forms of alcohol. According toBloomberg, beer consumption fell to 4.23 liters per person in the year to30 June 2011, the weakest reading since 1946. 2
  3. 3. Inside The StoryIndiabulls Merging NBFC Arm with Housing Finance UnitIndiabulls Financial Services Pvt Ltd (IFS) on Friday announced plans tomerge itself with its fully owned subsidiary Indiabulls Housing FinanceLtd (IHF) in order to consolidate capital with the fast-growing housingfinance business in its portfolio The commercial vehicle financebusiness, the loan against property and corporate loans businesses ofthe non-banking financial arm will be transferred to a separate entity. Inthis reverse merger, shareholders of IFS will get one share of thesubsidiary company for each held in the listed non-banking financecompany. The listed entity will be renamed as IHF and will continue tobe traded on the bourses.“There were regulatory restrictions on theamount of capital infusion into the housing finance company and henceto make an efficient use of capital and to consolidate balance sheets, theMerger will take place,” Gagan Banga, chief executive officer ofIndiabulls Financial Services said over phone.Forum Synergies in Debut Deal; Puts $3M In CaptronicSystemsForum Synergies (India) PE Fund Managers, a private equity firm set upby former CEOs, has made its debut deal by investing Rs 15 crore oraround $3 million in Captronic Systems Pvt Ltd. The Bangalore-basedNiche technology firm specializes in the design and development ofcustom automated test, control and acquisition systems for R&D, designvalidation and production testing.Captronic’s products were also usedFor testing certain aspects of Chandrayaan-1, Indias first unmannedlunar probe.The investment has been made through India Knowledge-Manufacturing Company and Axon Capitals India Opportunities Fund,both of which are advised by Forum Synergies. The Bangalore-basedprivate equity firm has a parallel investment relationship with AxonCapital, a Madrid-based private equity firm. 3
  4. 4. Nagpur Automotive Buys Adhunik Metaliks Forging Armfor $44MClearwater Capital Partners-backed Adhunik Metaliks Ltd, has sold itsforging subsidiary Neepaz V Forge to Nagpur Automotive Industries PvtLtd for Rs 230 crore ($44 million). The transaction is part of strategy todivest the non-core assets.Neepaz V Forge, manufactures forgedproducts for automobile players such as Tata Motors, Ashok Leyland,Renault and Mahindra & Mahindra besides railways, oil & gas, defenceand agriculture sectors. Its product profile includes front axle beams,crank shafts, cam shafts, connecting rods, stub axles, steering knuckles,axle arms, differential case, differential covers, differential housings,pistons, yokes, gears, track links etc.Anand Rathi & Knight Frank Eye $100M In Second RealtyFundAnand Rathi Financial Services and property consultancy Knight FrankIndia are planning to launch their second real estate fund by end of thismonths and looking to raise around Rs 500 crore ($100 million).Unlikeits peers who are hitting foreign shores to raise new funds, the jointfund rental yield and appreciation portfolio (RYAP) fundwill be raisedfrom the domestic market. Like its predecessor, it will invest incommercial assets in tier I cities which include Mumbai, Pune,Bangalore, National Capital Region (NCR) and Chennai.The fund wouldbe targeting returns of 10-12 per cent from its investments and expectsto stay invested in an asset for four-five years.Greenko Group Promoters Hiking Stake To 14.4%The promoters of Greenko Group PLC, one of Indias largestindependent power producers in renewable energy space, haveincreased their shareholding in the AIM-listed firm by 4.5 per cent andhave the option to raise it by an additional 1.3 per cent in two months.The combined holding of the two executive directors -Anil Chalamalasetty and Mahesh Kohli – through their holding entityACMK Enterprise Limited has increased to 13.1 per cent stake as a partof fresh share issue under a long term management incentive 4
  5. 5. plan announced in 2008.The shares have been issued after the firm hitmilestones in terms of power capacity.Jacob Ballas Capital Invests $39M In Marg Karaikal PortPrivate equity firm Jacob Ballas Capital has invested Rs 200 crore (~$39million) to pick an undisclosed minority stake in Marg Karaikal Port PvtLtd, which is developing a port in Indias south east coast in Puducherry.The investment has been made by NYLIM Jacob Ballas India Fund III,LLC through a mix of subscription to fresh shares and secondarypurchase of shares. It could not be immediately ascertained if thepromoters (BSE-listed Marg Ltd) sold more shares or one of thefinancial investors part exited in the latest transaction. The company didnot share how much of the investment is through primary issue whichand how much went to the selling shareholder.Pune Developer KUL Raises $39M For Township ProjectKumar Urban Development ltd (KUL), the Pune based realty companypromoted by Lalit Kumar Jain, has raised Rs 200 crore for its firstresidential township project, called KUL Ecoloch, said a source close tothe development.The source said the transaction was concluded lastmonth: “It has raised equity of Rs 50 crore from LIC Housing FinanceLtdFC May Invest $12M In Ahmedabad NBFC MAS FinancialInternational Finance Corporation (IFC) is planning to invest up to $12million or a little over Rs 60 crore in Ahmedabad-based MAS FinancialServices Ltd. The investment in the non banking financing company(NBFC) could be through compulsorily convertible preference shares(CCPS).IFC has an existing exposure in a few other NBFCs includingRajasthan-based Au Financiers, which recently attracted a $50 millionround led by private equity major Warburg Pincus. Last year, it alsoinvested in Kolkata-based NBFC Magma Fincorp along with KKR. 5
  6. 6. Sunil Sharma Quits BDO India After 25 Yr Stint; ManojDaga Takes OverSunil Sharma, CEO of public accounting firm BDO India, formerly knownas BDO Haribhakti Consulting Pvt Ltd, has stepped down after a 25-yearcareer in the company. Manoj Daga, another senior partner in thecompany, has replaced Sharma as CEO. Daga joined BDO in 2006 andwill assume his responsibilities for the management and developmentof BDO’s business in India. “I intend to follow the benchmarks thatSharma has set and pledge to contribute to the further growth andsuccess of BDO,” said Daga on his appointment."BDO is grateful forSunil’s unrelenting service over the years and we wish him and hisfamily the very best in their future endeavours," said ShaileshHaribhakti, Chairman, BDO.Phoenix Mills Looking To Raise Up To $187MMumbai-based realty company The Phoenix Mills Ltd is planning toraise as much as Rs 1,000 crore ($187 million) through various equityor equity convertible route including a QIP or an overseas bond orequity issue in one or more tranches.The company is raising the moneyto augment working capital requirements, to fast track the completionof the existing projects, financing acquisitions of new projects and forfunding requirements for investments in subsidiaries or consolidationof holdings in project special purpose vehicle, it disclosed onThursday.Two analysts actively tracking the public listed company, whodid not wish to be identified, said the company’s city assets arematuring and it makes sense to increase its stake in those projects.“Inmost cases they hold anywhere between 35 to 70 per cent which theymay want to increase,” said one of the analysts.BCCL Raising Stake In Pantaloon Retail To 7.7% For$37.5MAd-for-equity media investor Bennett Coleman & Co Ltd (BCCL) isincreasing its bet on the country’s largest retail company Pantaloon 6
  7. 7. Retail (India) by subscribing to fresh shares worth Rs 200 crore ($37.5million).BCCL which picks minority equity stakes in private as well aspublic companies in lieu of ad space on its various media properties, isalready an investor in Pantaloon Retail. It held a little over 4 per centstake in the public firm through two entities.With the fresh sharepurchase, BCCL’s holding will move up to 7.7 per cent on a dilutedequity base. This will make it the single largest non promotershareholder of the company. At the current market price its stake wouldbe valued at Rs 300 crore, making Pantaloon one of the biggest portfoliocompany for the media group. 7