September 2007
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Reliance Ind To Buy Hualon Corp

Reliance Industries Limited, a leading energy and chemical group in India, will acquire Hualon Corporation (M) Sdn Bhd, the polyester producer in Malaysia which is under receivership. Ernst & Young Malaysia (E&Y) was appointed the receivers and managers of Hualon effective Nov 30, 2006 with the appointment of Lim Tian Huat, Adam Primus Abdullah and Stephen Duar, all of E&Y. The acquisition, when consummated, would be Reliance's second international acquisition in the polyester sector of Reliance after the successful takeover of Trevira in Germany in 2004, E&Y said in a statement here today. Reliance said it reached an agreement with E&Y to acquire the assets of Hualon, which is a leading polyester (fibre, yarn and resin) manufacturer with a capacity of half a million tons per annum. This includes its downstream textile manufacturing capabilities spread over two locations in Malaysia namely, in Nilai and Melaka. Reliance Industries is India's largest private sector company on all major financial parameters with a turnover of US$25.51 billion (US1=RM3.51). Reliance said the acquisition of Hualon, one of the largest exporters in Malaysia, would consolidate its position further as the world's largest polyester manufacturer with 2.5 million-tonne capacity, 25 percent increase from the current capacity and increase in revenue by around US$1 billion. [...]

Kshitij may launch hospitality fund

Kishore Biyani’s real-estate investment arm is all set to launch a hospitality fund that will invest in hotel projects. The details of the hospitality fund, including the entire corpus, are not being made public. But the market buzz is that it should be somewhere around $350 million. Promoted by Future Group, Kshitij Investment Advisory Co Ltd (KIAC) is developing/managing 56 properties across the country. It currently manages two retail-focused real estate funds: Kshitij Venture Capital (KVC) Fund ($80 million) and Horizon International Fund with a corpus of $350 million. While the KVC corpus is fully committed its capital to develop 13 retail projects across metros, mini-metros and tier-2 towns, the Horizon International Fund has already committed over 70% of the $350 million for various real estate projects.Shishir Baijal, CEO, Kshitij Investment Advisory Co Ltd, refrained from making any comment. Another reason being cited was them being in the silent phase as Biyani’s financial arm Future Capital is all set to hit the market in the near future. A reliable industry source said: “The fund should be in a position to hit the market anytime. In fact, if everything goes as per the plans the announcement can be expected within the next 30-45 days,” said the source. The source also said the hospitality fund will not only invest in the hotel projects being partnered by group companies but also consider those being developed by others. [...]

Big ticket deals elude private equity

Private equity's (PE) big fish are finding it hard to crack deals in India that are respectable by their standards. Last month saw Blackstone striking it big with investments in Gokaldas Exports ($170 million) and Nagarjuna Constructions ($150 million). But that was an exception. Such big-ticket transactions have not been easy to come by, especially for those with a mandate to invest only giant sums. Data compiled by Venture Intelligence, a research service focused on PE and venture capital activity in India, shows that 77 per cent, or 232 of the 302 PE deals in India in 2006, were in the sub-$25 million range. Of these, 104 were in the $10-25 million range, 55 in the $5-10 million band, and 73 were of the sub-$5 million variety. The biggest PE deal in India so far has been one by Carlyle – a $650 million investment for a 5.6 per cent stake in Housing Development Finance Corporation. General Atlantic's $18 million investment in Daksh eServices in 2002 was among the lowest. As a result, some PE firms are viewing India as a different market and are willing to scale down their minimum threshold levels here. [...]

Hero buys Telecom Service Centres in £40m deal

SCOTLAND's largest call centre operator has been bought by Hero Group in a deal worth £40 million. Telecom Service Centres, the Isle of Bute-based operator with more than 3,000 staff, mainly in Scotland, has been sold to the New Delhi-based Hero Group, and will now form part of the Hero ITES company and be renamed TSC Hero. TSC chief executive Ken Hills yesterday insisted the move would not lead to any jobs being shifted offshore, and that the company's UK operations were targeting more growth. There would be very little change in the day-to-day activities of the company, he said. “The change I'm looking for and the reason we wanted to do the deal was to get access to more capital from a longer-term strategic investor to help us on to the next level of growth, but day to day I don't think the guys will see a huge amount of change,” Hills said. While UK companies have outsourced thousands of call centre jobs to countries such as India, recent years have seen many return the jobs to the UK, with research showing customer retention rates are much lower for companies that use foreign call centres. Some companies now promote the fact they use “UK only” call centres. [...]

Private equity funds need level playing field in India to grow

Although 2007 is likely to be another landmark year for private equity (PE) in India, the level of PE activity, currently estimated at around $10 billion, could increase and needs to increase multifold given India’s current GDP growth. To achieve this, regulations and taxes need to improve and the PE community needs to project itself in the market that it is a source of finance that contributes to the growth plans of entrepreneurs, helps generate employment and improves corporate governance. Having said this, PE financing is steadily gaining more acceptability amongst Indian promoters. This indicates a ‘leap of faith’ for closely-held traditional Indian family-owned and managed businesses, which until a few years ago, had viewed private equity financing as a possible interference in their business. The recent investment by Blackstone in Bangalore-based garments company Gokaldas Exports demonstrates this leap of faith. Blackstone has acquired a controlling stake from the owners. This transaction symbolises a traditional promoter-family run business partnering with a large private equity fund to accelerate its growth plans. This transaction demonstrates that Indian promoters are recognising the value that a PE brings to the partnership and PE investors are being viewed as ‘partners’ to the business. [...]