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Weekly Indian Economic Review

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Weekly newsletter

  1. 1. Top Headlines Largest Indian IPO In 18 Months Fails To Sail Through LinkedIn Buying Slide Share for $118.7M OrangeScape Raises $1M Angel Funding From IAN Anchor investors step up selling in MCX shares LIC HFL Asset Management Co Raises $47M For Maiden PE Fund Cleantech Firm ProKlean Raises Rs 2.5Cr From Chennai Angels, Others Parag Milk looking to raise $28M; To close deal in a month Warburg Pincus sells bulk of 33% stake in Moser Baer at huge loss. Panasonic acquires 76.2% stake in Bangalore-based Firepro UK’s OCS acquires Radiant Hospitality for $5.63M Weekly Economic Review One of the most controversial tax proposals in recent times has finally been postponed. On Monday, finance minister Pranab Mukherjee told Parliament his government would delay the rollout of the general anti- avoidance rules or GAAR. Mukherjee said the delay would help both taxpayers and authorities address issues arising out of the proposal. Crucially, he added that the burden of proving tax evasion would now lie with tax authorities rather than investors. Meanwhile some companies that have invested directly in India have good reason to be scared. On Tuesday, Pranab Mukherjee said the government could still tax overseas deals that make capital gains by selling Indian assets. On cue, tax authorities announced the next day that it would make a fresh claim on Vodafone. That will include Rs7,900 crore in basic tax, and also a penalty and interest of Rs4,300 crore. The government plans to send Vodafone a notice once the Finance Bill 2012 gets passed. 1
  2. 2. And switching to other developments, the Reserve Bank is pulling allstops in its efforts to defend India’s battered currency. On Thursday itlaid out new measures that could help shore up the rupee. Mostsignificantly, it told exporters they would have to sell half of theirforeign currency holdings. The move is expected to infuse at least $2.5billion into the market. RBI also allowed banks to take intradaycurrency trading positions up to five times their overnight limit. UntilThursday’s announcement, banks were not allowed to take intra-daypositions greater than their overnight limit. RBI is hoping the move willdampen rupee volatility. But the currency continues to get battered. Therupee ended Friday at 53.64 to the dollar.And while the rupee may be falling, it may not be enough to boostexports. Indeed, on Thursday, commerce secretary Rahul Khullarwarned that export growth may plunge to 10 to 15% this fiscal, from theprevious 21% growth. He also released trade figures for April.According to them, India’s exports for the month went up just 3.2% to$24.5 billion. Imports meanwhile fell 3.8% to $37.9 billion. That meant atrade deficit of $13.4 billion for the monthThe disappointments for India’s economy don’t end there. The country’sindustrial output has also plunged. The Index of Industrial Productionfor March actually contracted 3.5% In February it grew 4.1%. The latestdecline in the volatile IIP index came largely because of capital goods.They dropped 21.3% in March.And moving to corporate news, India’s biggest company has effectivelydowngraded the value of one of its most important businesses. OnMonday, Reliance Industries slashed the value of its proven gasreserves. It cut its estimate by 6.63% of proven reserves at thebeginning of the last fiscal. That amounts to a reduction of 0.43 trillioncubic feet.While RIL hasn’t mentioned any particular fields that have beenaffected, its management has indicated that this is largely because offalling production at the once-lucrative KG D6 gas block. RIL’s estimatecomes even as it repeatedly clashed with the government over the costsof developing fields and the selling price for gas. 2
  3. 3. Inside The StoryLargest Indian IPO In 18 Months Fails To Sail ThroughThe initial public offering (IPO) of Samvardhana Motherson Finance Ltd,the holding company of the automotive component manufacturinggroup Samvardhana Motherson, has failed to sail through and has beensubscribed just 23 per cent or less than a quarter, according to stockexchange data. This may come as a major downer for the primarymarket in the country and put a question mark over the prospects oflarge-sized IPOs.The company has now withdrawn its IPO due to thepoor response, according to a statement issued.LinkedIn Buying Slide Share for $118.7MWorld’s largest professional networking site LinkedIn is acquiring thepresentation sharing platform SlideShare, co-founded by persons ofIndian origin, for $118.75 million in a stock-cum-cash deal. Thisincludes 45 per cent or around $53.4 million to be paid in cash and therest through LinkedIn shares.At the current market price, it wouldtranslate into holding around 0.5 per cent for SlideShare equityowners.The acquisition is expected to close during Q2, 2012 or withinthe next eight weeks.Rashmi Sinha, CEO of SlideShare, said, “We builtSlideShare to help professionals share presentations and connect peoplethrough the content. What we can build with LinkedIn is the mostnatural extension of this vision.”OrangeScape Raises $1M Angel Funding From IANChennai-headquartered OrangeScape, a cross-Cloud PaaS (Platform-as-a-service) provider, has raised $1 million from the Indian AngelNetwork. The capital raised will be largely used for business andproduct development. As part of the deal, Sharad Sharma of IAN hasjoined OrangeScape’s board of directors.The company builds businessapplications using a visual-style modelling interface in a 5GLenvironment. This is done through the OrangeScape Studio on browser.Applications developed using the OrangeScape platform can be 3
  4. 4. Deployed on various Cloud platforms (such as Google App Engine,Microsoft Azure, IBM Smart Cloud and Amazon EC2) and claim toprovide scalability, administration and monitoring capabilities for a costthat suits you the most.Anchor investors step up selling in MCX sharesBarely two months after Multi Commodity Exchange (MCX) turned thedarling of the stock markets post-listing on the Bombay Stock Exchange(BSE) in March, have anchor investors hit the sell button, ask stockbrokers.As a consequence, the share price of the Rs 660-crore initialpublic offering (IPO) is now trading below its issue price of Rs 1,032.The MCX scrip is down over 20 per cent in over a month and was tradedat Rs 1,009 last Friday. MCX was an offer for sale by promoters,including Financial Technologies, State Bank of India, GLG FinancialsFund, Alexandra Mauritius Limited, Corporation Bank, ICICI LombardGeneral Insurance Company and Bank of Baroda.LIC HFL Asset Management Co Raises $47M For Maiden PEFundLIC HFL Asset Management Company, the asset management arm of LICHousing Finance Ltd, has raised Rs 250 crore (approx. $47 million) forits first private equity fund – a dedicated urban development fund –according to a senior executive of the company.VK Sharma, director andchief executive of LIC Housing Finance Ltd, said, “The fund has managedto raise Rs 250 crore as of now and we are looking at deals. We will goout and invest at one go once we have blocked four-five deals.”LICHousing Finance Ltd is the 50 per cent partner in this private equityfund, along with its parent company Life Insurance Corporation of India.The fund was looking to invest Rs 200 crore by the end of the fourthquarter of FY2012. 4
  5. 5. Cleantech Firm ProKlean Raises Rs 2.5Cr From ChennaiAngels, OthersChennai-based ProKlean Technologies Pvt Ltd, which develops cleantechnology products for various industries, has raised Rs 2.5 crore inangel funding. The money has been raised from Chennai Angels, an IIMalumni group and a strategic American investor for a minoritystake.ProKlean develops chemical-free, bio-degradable formulations,used across tanneries, textile firms and hospitality industry. The fundingwill be used to expand manufacturing facilities, increase sales &marketing reach and also for product R&D.Investors from ChennaiAngels included Lakshmi Narayanan (Cognizant), Prabhakar Ram(NextGen), Rajeev Mecheri (Mecheri Capital), Gopal Srinivasan (TVSCapital) and Sameer Mehta (Atlas). Besides Mehta from Chennai Angels,Sunil Nikhar (founder of Pyxis Systems) also joined the board ofProKlean as a representative of the IIM alumni group.Parag Milk looking to raise $28M; To close deal in a monthPune-based Parag Milk Foods Pvt Ltd (formerly Parag Milk & MilkProducts) is in talks with mid-market private equity investors to raiseRs 150 crore ($28.3 million), after its initial round of discussions withtop global PE firms fell apart due to valuation disconnect, sources closeto the negotiations have said.In its second round of fundraising, thecompany is looking to raise capital to fund its expansion and set up newfacilities.A deal with top tier PE investors failed to materialise as thecompany was seeking a valuation benchmarked to FMCG firms, said oneof the sources privy to the developments. “Unlike other consumerbusinesses, the dairy business runs on thin margins and investors werenot comfortable with the valuations,” he added.Panasonic acquires 76.2% stake in Bangalore-basedFireproPanasonic Corporation is acquiring 76.2 per cent stake in AIG andStandard Chartered PE-backed Firepro Systems Pvt Ltd, the companyhas said in a release on Friday. Although Panasonic did not disclose the 5
  6. 6. financials of the transaction, sources with knowledge of the deal saidthat it could be upwards of $200 million or Rs 1,066 crore.Panasonicwill acquire a portion of Firepros ordinary shares, previously owned byinvestment companies. Following the acquisition, it will hold 76.2 percent in Firepro while Firepro’s management will continue to own 10.8per cent stake and the investment companies will have 13 per centstake.UK’s OCS acquires Radiant Hospitality for $5.63MUK’s OCS Systems has acquired Mumbai-based Radiant HospitalityServices Pvt Ltd, a facility management services company, for Rs 30-35crore. This is the second such transaction by the company in one monthafter it acquired a controlling stake in Absotherm Facility ManagementServices Pvt Ltd. The company would follow a string-of-pearl strategy toexpand its offerings in India by acquiring another 3-5 companies, peoplewith direct knowledge of the company’s plans said.“The company hasbeen acquired for around Rs 30-35 crore,” said one of the persons withdirect knowledge of the deal. 6