February 2008
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Rs 1,200-crore VC fund for defence SMEs put on hold

A RS 1,200-crore venture capital fund being set up for investments in small & medium enterprises (SMEs) in the defence sector has run into red tape. The fund has been put on hold by the Foreign Investment Promotion Board (FIPB). Former RBI deputy governor Vepa Kamesam, Lt Gen VJ Sundaram, who is leader of the flight vehicle design team for Prithvi, and Tata Strategic Electronics CEO Rahul Chowdhry are on the advisory board of the fund. A lack of clearance from the defence ministry and “a potential conflict of interest” with the advisors of the company are cited to be the reasons behind the hold-up. This is the first time that a venture fund of such size is being set up for investments in defence SMEs. The move comes at a time when multinationals are vying for multi-billion dollar defence deals from the Indian government, which also include mega orders for fighter aircraft. The fund is promoted by Rajesh Narayan, who was earlier a director and India head (specialist finance) at ANZ Investment Bank. The segments of investment identified by the fund include military aircraft, helicopters, radars, submarines, missiles, rocket launchers, simulators, tanks and torpedoes. Investment would be made in SMEs that are vendors for these products. Many SMEs supply components, technology and designs for such products. […]

Biyani pulls out of Dish TV deal, Zee may move court

The recent market slump has claimed yet another casualty. Kishore Biyani promoted private equity fund Indivision India Partners, which had picked up a 4.9% stake in Zee's DTH arm Dish TV for Rs 250 crore, has now cancelled the deal. The reason: the Dish TV shares have crashed from a high of about Rs 175 in mid-December 2007 to end at Rs 62.95 on Friday. Dish TV is India’s largest DTH operator and commands about 67% market share in this space. ET has learnt that Zee had sent a legal notice to Indivision India Partners for backing out of a binding deal, following which both groups have now smoked the peace pipe. The deal was announced in December last year under which Indivision India Partners was supposed to be allotted 1.25 crore equity shares of Dish TV of Re 1 each at a price of Rs 100 each, aggregating Rs 125 crore. Further, the private equity fund was to subscribe 9,615,385 warrants — each convertible into an equity share — at Rs 130 per equity share, aggregating to Rs 125 crore. The deal, when signed also raised Dish TV’s valuation to over Rs 5,000 crore. This was about Rs 1,000 crore more than its valuation if the same was calculated based on the closing price of the company’s shares on December 6, 2007. […]

BSE to take 26% stake in National Multi-Commodity Exchange

Taking a big stride towards its foray into commodities trading, the Bombay Stock Exchange (BSE) has decided to play an active role in the management of National Multi-Commodity Exchange (NMCE), India’s first demutualised online commodity exchange. BSE has agreed to buy a 26% stake in the Ahmedabad-based commodity exchange, which is lagging behind its rivals MCX and NCDEX. BSE is in the process of finalising the transaction and will soon make a formal announcement to this effect, said BSE MD and CEO Rajnikant Patel. He, however, declined to comment on value of the deal because of the confidentiality clause. Market sources estimate the enterprise value of NMCE well below its peers, given its low trading volumes.BSE will be issued fresh shares, which will bring down the promoters’ stake substantially in NMCE. At present, Central Warehousing corporation holds a 26% stake while the National Agricultural Co-Operative Marketing Federation of India (Nafed) and the Punjab National Bank hold around 10% each. Gujarat Agro Industries has a 5% stake. […]

HDFC Bank, Centurion strike merger

It’s official: HDFC Bank will merge Centurion Bank of Punjab, a bank one-fifth its size in terms of assets, with itself in the biggest consolidation seen in private-sector banking in India in recent times. What such a merger does is help HDFC instantly augment its branch network by 50% or 400 branches. Centurion also has Reserve Bank of India’s permission to open another 30 branches. Suresh Ganapathy, analyst with Deutsche Bank, said Centurion’s branch-network was the main draw for HDFC Bank. “That’s because in India, getting a branch licence is becoming more and more difficult. HDFC Bank will certainly benefit from the move,” he said. Fee-based income has become crucial for banks as margins in their core business of lending are on a decline due to competition and interest rate pressures. Having a larger branch network helps distribute more products that bring in fee-based income, such as mutual fund schemes and insurance plans. The latter afford as much as 30% commission on premiums. […]

IDG Ventures invests $3 m in Aujas Networks

IDG Ventures India, a $150-million early-stage technology venture capital fund, has announced an investment of $3 million in Aujas Networks Pvt Ltd, a pure-play digital security services start up. The Bangalore-based Aujas will address a global security services market currently over $17 billion and growing annually at over 17 per cent. Aujas plans to utilise the investment to build its sales presence in India, West Asia, Europe, Asia Pacific and North America and to significantly enhance its service offering development initiatives, said an IDG release. Srinivas Rao, Sameer Shelke and Ms Manjula Sridhar, a team of experienced security professionals from the industry, co-founded Aujas. Earlier, as the Director of Network Solutions, Rao scaled the company from its early days to becoming a leading IT Infrastructure solution integrator, which resulted in acquisition by IBM Global Services in 2005. […]

9 shortlisted for UTI AMC pre-IPO sale

India’s third largest asset management company, UTI Asset Management Co. Pvt. Ltd (UTI AMC), has shortlisted nine investors including Blackstone Group Lp., Goldman Sachs Group Inc., Shinsei Bank Ltd, National Australian Bank Ltd, the Bank of New York Mellon Corp. and Sequoia Capital Llp. for selling more than 11% of its equity ahead of an initial public offering (IPO) of its shares. Two sovereign funds from West Asia and a Belgian Bank are also in the race. The AMC (asset management company) will finalize a few investors from this list and will place 16 million shares or 11.35% of its equity; none of the investors will be offered more than 5%, people familiar with the development who did not wish to be identified said. Investment bankers have advised UTI AMC to price its shares for the private placement in the range of Rs450-550 per share of a face value of Rs10. At the higher end of the price band, the AMC will earn around Rs880 crore from the share sale. At this price, it will be valued at Rs7,755 crore. With Rs52,656 crore of assets under management as on 31 January, the asset management firm has a 10% market share in the Indian mutual fund industry, which has a total asset base of Rs5.48 trillion. […]

PEs, strategic investors strike $5 bn deals on D-Street in January

January was an unusual month. Despite the market crash and battered valuations thereafter, deal makers had a hectic schedule. January recorded the maximum number of mergers & acquisitions (M&A) and private equity (PE) deals — the highest-ever in a single month in India. Strategic investors and PE funds were striking a deal every six hours, totalling 116 deals worth $5 billion. The previous high was in January 2007 when there were 101 deals announced in a single month. In January 2008, according to the latest dealtracker from advisory firm Grant Thornton, there were 56 M&A deals worth $3.01 billion and 60 PE deals worth $2.05 billion. In volume terms, this was the biggest month for PE funds in India. For PE deals too, the previous best was in January last year when 56 deals were announced. This had come down later during the year with an annual average of 33 PE deals per month during 2007. Grant Thornton corporate advisory services partner CG Srividya says: “A lot of the deals announced in January would have actually been closed by December itself. Moreover, if we look at the stock market correction, it has not led to total collapse of all sectors, some have been affected less than others. Many PE funds were waiting for a correction to enter the market and the fall would lead at least some promoters to have realistic expectations. In fact, there could be a positive spin-off for PE deals because of the correction.” […]