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Indian Economy newsletter

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  1. 1. Top Headlines Shareaholic raises $3M Series A funding led by Kepha Partners. EILSF invests $12.5M in eye care chain Dr. Agarwals Healthcare. CIL to pick 50% in IOCs 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. 1
  2. 2. The IMF has cut down its projections for India’s economy. Its latestupdate to its April World Economic Outlook says weak global marketsand falling demand at home will mean slower growth. IMF’s projectionfor the calendar year 2012 is 6.1%. Its forecast in April was 6.8% ofGDP. India grew at 5.3% in the January-to-March quarter, and therehave been few signs of a revival since then. IMF’s new report calledIndia a rising concern, citing a large fiscal deficit and the weakeningrupee.Indian power engineering companies are going to get a breather. Thecabinet has approved a proposal to impose duties on foreign powergeneration equipment. A 5% import duty will come into effect shortly. Itwill be accompanied by a 12% countervailing duty to make up for exciseon Indian products- and a special additional duty of 4%.Adding them up,the effective tax rate on foreign power equipment will 21%. The newduties will help Indian power companies like BHEL and L&T. But theywill hurt Chinese power engineering firms and their Indian clients likeLanco and Reliance Power.India will continue to maintain its commercial presence in the muchcoveted South China Sea. A senior executive from state-run OVL has toldMint the company will continue exploring for oil in Block 128 off thecoast of Vietnam. The area is at the heart of a territorial disputebetween China and several south-east Asian countries. Earlier, Chinahad protested the presence of an Indian surveying ship in the region. Inside The StoryShareaholic raises $3M Series A funding led by KephaPartners.Boston and New Delhi-based Shareaholic, Inc., which runs the contentsharing site Shareaholic Inc., has risen $3 million in Series A funding ledby Kepha Partners. All existing investors including General CatalystPartners, NextView Ventures, 500Startups, Boston Seed Capital, and 2
  3. 3. angels also participated in the round.The company had earlier raised $2million from General Catalyst Partners, NextView Ventures, DaveMcClure of 500 Startups, Nicole Stata of Boston Seed, Edward Roberts ofMIT, Dharmesh Shah of HubSpot and others. Prior to this, the companyhas raised $355,000 as angel funding in 2009, when it crossed the 100-million user mark. The new investment takes Shareaholic’s total fundingto $5.35 million.EILSF invests $12.5M in eye care chain Dr. AgarwalsHealthcareLife Sciences-focused private equity fund EILSF (Evolvence India LifeSciences Fund) has acquired a minority stake in Chennai-based Dr.Agarwals Healthcare, its second investment in the healthcare servicessegment. EILSF will pick up the stake for Rs 60 Cror.CIL to pick 50% in IOCs explosives division to form equalJVCoal India (CIL) will sign a memorandum of understanding with IndianOil Corporation (IOC) to take over 50% in its explosives division, whichwill be spun off into a different company where CIL and IOC will have50% stake each. CILs move comes just after Competition Commission ofIndia (CCI) imposed a penalty of 60 crore on 10 private explosivesmanufacturers following its complaint that they had formed a cartel.The competition regulator found that Gulf Oil Corporation Ltd, IdealIndustrial Explosives Ltd, Solar Industries India Ltd, Blastec India PvtLtd and Indian Explosives Ltd, among others, had formed a cartel tosupply explosives to Coal India. 3
  4. 4. Ybrant Digital debuts on stock market with $822M marketcapHyderabad-based digital marketing solutions company Ybrant DigitalLtd has completed its reverse merger with IT outsourcing servicesprovider LGS Global, to become yet another digital media firm to belisted on the stock market.On debut, the company’s share price rocketed7.6 per cent to close at Rs 94.95 a unit. At this price, the companycommands a market cap of Rs 4,522 crore or $822 million.Thecombined consolidated provisional revenues for the financial yearended March 31, 2012, are pegged at Rs 1,320 crore and the profit aftertax (PAT) at Rs 190 crore. This means the firm is trading at 23.8x itsFY12 net profit. Although not strictly comparable, among other largeand listed digital media firms, Info Edge (India) is currently trading at35x its FY12 net profit.Nexus Ventures-backed Cloud startup Aryaka raises $25Min Series CCloud WAN Optimisation as a Service provider Aryaka, which has officesin the US and India, has received $25 million in Series C funding fromventure capital investors. The funding led by InterWest Partners andPresidio Ventures also saw existing investorsNexus Venture Partners,Trinity Ventures and Mohr Davidow Ventures investing afresh.Thefunds will be used to support the California-headquartered company’smarket penetration and global reach.“Market traction has beentremendous as small, mid-sized and large enterprises realise thatnetworks 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 fundReliance MediaWorks Ltd. said that one of its units has signed a termsheet to raise Rs 605 crore ($110 million) from a leading internationalprivate equity fund, in what would be the single largest PE transaction 4
  5. 5. in Indian media sector in over five years. The potential investor hassigned "an indicative non-binding proposal to acquire a substantialminority stake" in the film and media services division of the AnilDhirubhai Ambani Group (ADAG) firm.Reliance MediaWorks and thepotential investor have agreed to exclusivity for the next 90 days. Theproposed investment is subject to completion of customary detaileddue-diligence, definitive documentation, completion of subsidarisationof the film and media services business, and approvals as may benecessary," said a company statement. Reliance MediaWorks shareprice shot up in early trade and was at Rs 64, up by 8.57 per cent at10:24 am on Wednesday.BofA plans $3B of new cost cutsBank of America Corpsaid it plans to slash costs by $3 billion annually incommercial lending, investment banking and wealth management,becoming the latest big bank to take aim at expenses in a sluggisheconomy.The No. 2 US bank posted second-quarter earnings of $2.5billion 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 froma year earlier to 275,460.The first phase of the cost-cutting initiativebegun in 2011 was intended to save $5 billion a year and eliminate30,000 jobs by the end of 2014 in consumer banking and informationtechnology. 5
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