Union Budget 2007-08 Presented: Proposals for Capital Markets and Private Equity

The Finance Minister of India Mr. P Chidambaram has presented the Union Budget for the year 2007-08 today in the Parliament. Some of the proposals suggested for the capital markets are:PAN to be made sole identification number for all participants in securities market with an alpha-numeric prefix or suffix to distinguish a particular kind of accountIdea of Self Regulating Organizations (SRO) to be taken forward for different market participants under regulations to be made by SEBIMutual funds to be permitted to launch and operate dedicated infrastructure fundsIndividuals to be permitted to invest in overseas securities through Indian mutual fundsShort-selling settled by delivery, and securities lending and borrowing to facilitate delivery, by institutions to be allowedEnabling mechanism to be put in place to permit Indian companies to unlock a part of their holdings in group companies for meeting their financing requirements by issue of exchangeable bondsRate of dividend distribution tax to be raised from 12.5% to 15% on dividends distributed by companies and to 25% on dividends paid by money market mutual funds and liquid mutual funds to all investorsIn case of venture capital funds, pass-through status will be granted to those VCFs only in respect of investments in venture capital undertakings in biotechnology; information technology relating to hardware and software development; nanotechnology; seed research and development; research and development of new chemical entities in the pharmaceutical sector; dairy industry; poultry industry; and production of bio-fuels. In order to promote business tourism, this benefit also will be granted to those VCFs that invest in hotel-cum-convention centres of a certain description and size

Holcim to up control in ACC, Guj Ambuja

In a move aimed at consolidating its Indian operations, Swiss cement major Holcim will increase its control in ACC and Gujarat Ambuja Cements for close to Rs 2,700 crore.

Holcim is in talks to buy Gujarat Ambuja Cements’ 33 per cent stake in Ambuja Cement India Ltd (ACIL) that, in turn, holds 35 per cent in ACC and 9.93 per cent in Gujarat Ambuja Cements. At present, Holcim owns 67 per cent in ACIL.

This will make ACIL a wholly-owned Holcim subsidiary.

Read more in The Business Standard Article.

Bennet & Coleman picks up 5% in YOU Telecom

Media house Bennet & Coleman has picked up 5 per cent stake in broadband company YOU Telecom India Pvt Ltd.
YOU Telecom is an investee company of Citigroup Venture Capital International Growth Partnership Mauritius Ltd.
Citigroup Venture Capital International Director PR Srinivasan said: "YOU Telecom is in the process of building the 'YOU' brand. Bennet & Coleman can add tremendous value to the YOU's branding efforts."
YOU Telecom, previously known as Iqara Telecoms, was promoted by British Gas. Citigroup Venture purchased Iqara Telecom in June 2006 in colloboration with Mike Kazma of Amzak International, a Latin American network operator.

Pune firm in largest-ever BPO buyout

In the largest acquisition by an Indian business process outsourcing (BPO) company till date, Pune-based HOV Services has acquired US-based BPO Lason for $148 million (about Rs 660 crore).

The leveraged buyout –- effective Wednesday — is valued 3.5 times the acquirer’s current turnover if its March 31, 2006, figures of Rs 164 crore are taken into account.

HOV will acquire Lason through HOV Services LLC, its wholly owned subsidiary in the US. The company has raised $188 million (around Rs 837 crore) through a combination of equity and debt instruments.The company will thus have cash worth $40 million (around Rs 180 crore) post-acquisition to finance its future activities.

Read more in The Business Standard article

Bajaj Electricals in parleys to buy lighting co

Bajaj Electricals plans to acquire a majority stake in a lighting company in the western India, as part of its corporate strategy to double turnover to Rs 2,000 crore by 2009-2010.

Speaking to newspersons at a meeting held in Kolkata on Friday, Bajaj Electricals CMD Shekhar Bajaj said: “The company is in advanced stage of negotiations with the lighting company. Instead of buying the company and its assets, we may pick up a majority 51% stake or more since the present management is very strong.”

Bajaj Electricals offers a range of consumer electrical products and industrial luminaires ranging from lamps, tube lights, small household appliances, ceiling fans, table fans and air coolers.

Read more in The Economic Times article

ABN Amro may launch realty fund

ABN-Amro Mutual Fund has filed with the capital markets regulator, Securities & Exchange Board of India (Sebi), for a scheme that will invest in real estate companies and leading property companies worldwide.

The ABN-Amro Global Property (India) Equity Fund, which awaits the regulator’s nod, will invest in foreign equity and equity-related securities through ABN–Amro’s Luxembourg-based ABN-Amro Global Property Equity Fund. The latter is a diversified, actively managed fund mainly investing in realty companies and top property companies across the globe.

In its filings, ABN-Amro said, the portfolio would invest in stocks of different countries, but the investment manager of the proposed scheme would ensure that the exposure to each country was limited so that the portfolio was not exposed to one country.

Read more in The Business Standard article

Sebi mulls pricing cap on listing day

The Securities and Exchange Board of India (Sebi) is considering imposing a price ceiling on the day a company's scrip is first listed.

This is aimed at preventing prices of newly-listed shares from rising beyond a certain limit on a day when circuit filters are not in place.
The market regulator has requested the stock exchanges to be vigilant against such huge price increases on the first day of listing when no circuit filter is operational.

Read more in The Business Standard article

RIL to raise $2 billion debt from abraod

Mukesh Ambani-led Reliance Industries plans to raise $ 2 billion debt from abroad to fund its oil & gas business expansion.The company's Board approves 12 crore preferential warrants to promoters and appoints R A Mashelkar as director on the Board.It also plans to set up three billion dollar cracker project in Jamnagar.

JM Financial and Morgan Stanley to go separate ways

In one of the biggest developments to have happened in the Indian investment banking space, the JM Financial Group and Morgan Stanley have called it quits on their Indian joint venture JM Morgan Stanley, one of the biggest names in investment banking and securities broking entities in India. The joint venture, inked in 1997 and formalized in 1999, established a pre-eminent investment bank, equity broking, research, wealth management and advisory and securities distribution operations in India during the decade long relationship.

JM Financial will acquire the 49% holding of Morgan Stanley in JM Morgan Stanley, which along with the investment banking business will also include its subsidiaries engaged in fixed income, equity broking, wealth management, advisory and distribution businesses of the joint venture at around book value for $20 mn (approximately Rs. 88.5 crores). JM Financial will simultaneously sell to Morgan Stanley, their 49% holding in JM Morgan Stanley Securities, the institutional equity broking business for $445 mn (around Rs. 1970 crores).

The transaction is expected to close by the first quarter of FY2007-08.

Shell buys out BPCL stake in Bharat Shell

Bharat Shell, a 51:49 joint venture between BPCL and Shell, was incorporated in 1993 for marketing Shell’s lubricants in the country.The joint venture has an authorized capital of Rs 250 crore and a paid up capital of Rs 200 crore. Bharat Shell also markets LPG to both domestic and industrial consumers

Shell Overseas Investments has bought out Bharat Petroleum Corporation’s (BPCL) 49% stake in Bharat Shell.According to a release issued by Shell, the two companies want to focus on their own specific lubricants brands in the important Indian lubricants growth market.

Read more at The Business Standard article.

Indian Government to announce an incubation fund for entrepreneurs

The Indian government is proposing to set up an incubation fund which could be announced in the forthcoming Budget. The fund will help graduates from leading technical and management institutes with the seed money to float their ventures. The initiative will be on the lines of private venture capital funds. The fund will provide capital support and interest subsidy for a project. The proposal is being worked out on the basis of recommendations made by a committee under the Planning Commission.

While the government may provide seed money for the fund by way of token provision for the next fiscal, the industry may also be asked to take it forward. The industry may be involved in the identification and implementation of viable projects. Incubatee entrepreneurs may be allowed certain concessions. Besides, contributions to the fund by business houses could earn them deductions from income tax.

A Planning Commission committee on technology innovation and venture capital has suggested that all technical institutions should set up profit-sharing Enterprise Incubation Units to provide advisory services, help in filing patents and protecting commercially valuable intellectual property. The committee also has suggested that these incubation units should get grants of up to 50% of their expenditure and exemption from tax as long as returns are used for further innovation. The committee has also suggested that enterprises being developed at incubation centres should also be categorized a priority sector for extending concessional bank credit.

Read The Economic Times article.

Apollo Hospitals to buy UK-based healthcare unit

Apollo Hospitals is looking at acquiring a UK-based hospital chain estimated to be valued upwards of £1.2 bn, in partnership with private equity players. Apollo will provide its management expertise in such deals.Apollo Hospitals has already expressed an interest in the British unit of Swedish healthcare company Capio that is owned by private equity groups Apax and Nordic Capital. The private equity owners of Capio were considering the sale of Capio's British unit in response to antitrust concerns.Apollo has also been looking at other hospitals including The Priory Group, owner of the famous rehabilitation centre for pop stars and fashion models. Priory Healthcare's major shareholder ABN-AMRO has appointed Morgan Stanley to conduct a strategic review.

Read the Moneycontrol.com and Reuters.co.uk articles.

Tata Group forms Tata Realty & Infrastructure with Rs. 4500 crore-fund

The Tata Group has promoted a real estate arm, Tata Realty & Infrastructure, which will invest in infrastructure and real estate projects. The company has a corpus of Rs. 4500 crores. Dinesh Chandiok, the former CEO of Ansal Properties to head Tata Realty, will lead the initiative.Apart from the Tatas, foreign investors too would be sponsors of the fund. There would be different fund schemes for different projects in phases. International Consultancy firm KPMG has been involved in strategizing the Tatas' real estate business. Tata Realty would look at investing in housing complexes, special economic zones and construction of bridges, ports and airports.

Read more in The Times of India article.

IDEB Projects gets PE funding of $32 mn from Samsara Capital and Fortune Partners

Bangalore-based engineering construction and property development company IDEB Projects has received a private equity funding of $32 mn (Rs. 150 crores) from Samsara Capital of USA and Fortune Partners of Singapore. IDEB has been involved in the construction of infrastructure projects like roads, bridges, build-operate-transfer (BOT) projects, high-rise buildings, mass housings, elevated and intricate RCC structures and treatment plants since 1998. PricewaterhouseCoopers were the financial advisors to the transaction.The funding will be used by IDEB for building land banks in 6-8 cities. At present, the company has a construction business order book of Rs. 1100 crores and is developing over 8 mn square feet of real estate projects in Bangalore, Chandigarh, Goa, Jaipur, Mysore, Pune and Uttaranchal. The company is building a 4 acre-IT Park in Dehradun in a joint venture (JV) with the state government through the State Industrial Development Corporation, a Rs. 165 crore-design-and-build contract for Delhi Metro for an elevated viaduct of 4.55 km, and five elevated stations for Phase II of the Delhi Mass Rapid Transport System in a JV with the Shanghai Urban Construction Group.After the fund infusion, the company is targeting consolidated revenues of over Rs. 1500 crores in 2007-08. The company is expected to achieve consolidated revenues of about Rs. 550 crores in 2006-07 from its engineering construction and real estate businesses. It is looking at an IPO sometime in 2008-09.

Read the article in Business Standard.