HDFC plans to raise yen loan

HDFC, the country’s largest housing finance company (HFCs), has said that it is keen to raise funds overseas and is awaiting further details of the Reserve Bank
of India’s (RBI) guidelines.On Saturday, RBI had said that it would allow HFCs to raise short-term borrowings overseas as a temporary measure.

Although RBI has reduced the CRR and brought down the repo rate, thereby bringing down the cost of funds for banks, none of these measures have brought down the cost of funds for HDFC. The corporation continues to pay double-digit interest rates to banks. With interest rates ruling high, fixed deposits, which offer returns up to 10.9%, have once again become the mainstay of HDFC’s borrowings, accounting for over 20% of funds.

In the past, HDFC had raised overseas funds in various currencies, including yen. According to bankers, since the funds are anyway converted into rupees and hedged, the currency does not matter. What is crucial for HDFC will be RBI guidelines on the tenure and cost. Since all its liabilities are long-term with an average loan tenure of seven years, HDFC will require long-term funds.

Even from the cost perspective, a foreign currency borrowing has to have a tenure of at least three years to justify the fixed cost of fund raising, including fees paid to bankers. The guidelines on foreign borrowings are expected to be out within the next couple of days.

Along with guidelines on foreign currency borrowings, HFCs are awaiting an easing of capital requirements in line with the relaxations allowed for banks. National Housing Bank — NHB usually follows the prudential norms on home loans prescribed by RBI.

Lloyds shareholders approve HBOS takeover

Shareholders of British bank Lloyds TSB on Wednesday backed the takeover of troubled rival HBOS and a recapitalisation that will hand the British government a key stake. Lloyds TSB investors, holding an extraordinary general meeting in Glasgow, Scotland, voted almost 96 percent in favour of the HBOS takeover.

They also voted by a similar majority to approve plans to raise 5.5 bn pounds (6.5 bn euros, 8.3 bn dollars) of new capital. Under the recapitalisation plan, Lloyds will issue 1.0 bn pounds of preference shares to the British government and 4.5 bn pounds in new ordinary shares.

At the same time, HBOS also plans to raise 11.5 bn pounds of fresh capital with support from the state.Lloyds TSB Chairman Sir Victor Blank said the vote was an "important milestone" in the history of the group.

Lloyds TSB agreed in September to buy HBOS in a deal worth 9.8 billion pounds after its target was left facing collapse due to massive exposure to the US subprime mortgage crisis. Competition rules have been waived to allow the takeover to go ahead. HBOS shareholders will vote on the deal in December.

Kingfisher plans 25% stake sale

Vijay Mallya's Kingfisher Airlines is believed to be discussing stake sale with three foreign airlines — British Airways, Singapore Airlines and Virgin — as a strategic investment is expected to fetch better valuation compared to the numbers indicated by PE investors.

The airline is holding exploratory talks with international carriers for diluting up to 25% stake. The move comes as the Centre is reportedly planning a policy change to allow foreign airlines to invest in domestic carriers with a cap of just below 26%.

The civil aviation ministry had met the airlines on October 30 to discuss key policy changes including allowing foreign airlines to pick up stake in domestic carriers. This meeting has triggered expectation that the government may allow the foreign carriers to buy equity in Indian companies. It must be mentioned that while foreign airlines are not allowed to pick up equity in aviation companies, other institutions and foreign investors are free to hold up to 49% stake.

Read more in The Economic Times article.

PE's pick up 80% stake in GEAR

Two private equity firms — US-based Berggruen Holdings and UK-based Cycladic Capital — have picked up close to 80% stake in construction equipment service provider Gemini Equipment and Rentals (GEAR) for around $15 million (nearly Rs 74 crore).

“This is part of the first round capital-raising programme. The proceeds will be utilised for expansion,” said GEAR managing director Rajiv Sethi. The construction equipment industry is growing at the rate of 35% and is likely to expand fivefold by 2015. The critical role of the industry in the infrastructure development has opened huge opportunity for entrepreneurs to enter the construction equipment rental business.

Currently, GEAR has an asset fleet of 200. The company has presence in Ahmedabad, Bhopal, Bhubaneshwar, Lucknow, New Delhi, Bangalore, Kolkata and Secunderabad. It aims to have 500 equipment assets by the end of this fiscal and additional 250 in the year 2009-10.

Religare ties-up with Karur Vysya for equity trading services

Financial services provider, Religare, and Karur Vysya Bank,announced their tie-up offering Religare's equity trading services to the bank's customers.The new alliance is in line with Religare's strategy of increasing its reach and penetration across the country.The arrangement with Religare will provide the three in one facility of demat account, bank account and trading account to Karur Vysya's customers.

The equity trading service would be part of value -added offering for the bank's savings account customers. Religare would map its own branch network with the network of the bank to service the bank's clients.Pre-trading account opening activity would be done at the bank branch and post-trading account opening of the clients would be served by Religare-designated branches.The partnership is a step forward to further strengthen the bancinvest channel created by Religare, which already includes tie-ups with IndusInd Bank, Tamilnad Mercantile Bank, Corporation Bank and Bank of Rajasthan, among others.

HM mulling components business.

Hindustan Motors is moving ahead to become more of an automobile component manufacturer than developer of new models."The key to our revival will be our components business comprising forgings, castings and stampings produced at our Uttarpara factory near Kolkata," company Chairman C.K. Birla said.

As long as the Ambassador remained the car of choice for all Indian government purchases, whether at the federal or the state level, the company managed to stay in the green even as other manufacturers aggressively attacked the rapidly growing Indian automobiles market.

Hindustan Motors refused to move away from the Ambassador. But when government orders began drying up in 2004, the company, once India's largest carmaker, was hit hard; it has been ailing ever since.

Read more in The Economic Times article.

CII for removal of interest rate cap on NRE deposits

Pressing for removal of interest rate cap on non-resident (NR) deposits to deal with the problem of forex liquidity in the system,industry chamber CII said RBI decision to relax external sector norm will give right signals to the industry.

"The problem is of sentiments overtaking events and therefore the RBI's response to the emerging market needs of industry sends out the right signals," CII President K V Kamath said in a statement.He added, "CII had suggested that the interest rate cap on FCNR (B) and NRE deposits be removed and the banks be allowed to decide these rates...we feel that the removal of the cap is what is called at this juncture."

CII said the central bank's move to allow housing finance companies to avail of foreign currency borrowings and buy-back and pre-payment of foreign currency convertible bonds would be very useful for the real estate sector.The Reserve Bank yesterday announced a slew of measures, including permission to housing finance firms to raise funds from overseas markets and raising the interest rate ceiling on foreign currency deposits.

Cement companies keen on JV with NTPC

The country’s largest power generation company, National Thermal Power Corporation’s (NTPC), move to foray into cement making in a joint venture has aroused interest among the domestic cement players.NTPC last week said that it has invited expressions of interest (EoI) from companies to partner the state-owned company in setting up four plants to manufacture cement using fly ash generated from its power stations.North-based Shree Cements, which has plans to set up a grinding unit in a joint venture with NTPC, has already submitted an EoI.

“The location of our grinding unit, which will have a capacity of around 1 million tonnes per annum, could be in Haryana, Uttar Pradesh or Rajasthan, close to Delhi’s Badarpur unit of NTPC,” said Bangur, who is also the president of Cement Manufacturers’ Association. “We will supply clinker and NTPC will provide fly ash,” he added.

Read more in The Business Standard article.

Zydus Cadila buys Dutch firm Etna Biotech

Ahmedabad-based pharma major Zydus Cadila on Tuesday said it has acquired Etna Biotech, a subsidiary of the Dutch biopharma company,Crucell. This is the sixth foreign acquisition by Zydus in the last five years. The company has not divulged the details of the deal.

In an official statement issued by the Zydus Cadila CMD Pankaj Patel said: “This acquisition will help us to be in the forefront in the innovation for vaccine research and development. The deal marks company’s first acquisition in the research space and offers the group a highly evolved research platform for developing new vaccines and technology.”

Zydus, the Rs 2,300-crore company is striving for a strong foot-hold in the lucrative vaccines market. The global vaccine industry is expected to grow by 18% by 2010, which is roughly three times the growth of the global pharmaceutical industry. The company would look at scaling up its vaccine products, as the newly-acquired research oriented company will provide cost advantage, sources said.

Last month, the group received WHO accreditation for rabies vaccine. So far Zydus had only a few products in vaccines segment through collaborations which were more for marketing other vaccines. The only vaccine that the company owned is the rabies vaccine - Lyssavac N.

OVL may make ‘firm’ offer to Imperial soon

ONGC Videsh (OVL) — the foreign arm of government-owned Oil & Natural Gas Corporation (ONGC) — is set to make a ‘firm’ offer to shareholders of the UK-based Imperial Energy within 28 days.On Monday, the Russian Federal Anti-Monopoly Service (FAS) gave OVL a clean chit on anti-monopoly regulations, the other mandatory pre-condition for making a formal offer paving way for the $2.5 bn acquisition.

Imperial, incorporated in 2004, has oil and gas assets principally in the Tomsk region of western Siberia and the Kostanai region in north central Kazakhstan.It has about 920 mn barrels of oil equivalent (boe) independently estimated proven and probable hydrocarbon reserves (2P) and around 3.4 bn boe of independently estimated proven plus probable plus possible hydrocarbon reserves (3P). The company plans to produce 25,000 barrels of oil per day (bopd) by December this year and 35,000 bopd by the end of 2009.

Read more in The Economic Times article.

IDBI in talks to buy 25% stake in GE arm

Industrial Development Bank of India (IDBI) is learnt to be in talks with GE Commercial Finance (GE), the financial arm of GE, to pick up around 25% stake in the latter’s construction equipment finance business in India. Infrastructure Development Finance Company (IDFC) will also hold around 35% stake in it.

Sources close to the development confirmed the move and said GE is all set to hive off its construction equipment finance business into a separate Rs 650-800 crore joint venture company and is in talks with IDFC and IDBI for the same.“Talks were initiated in the beginning of this year but global market slowdown and the current turmoil in the financial services sector led to the delay in the agreement. It may take some time for the final deal to come through,” said a source.

Globally, GE Commercial Finance has assets of over $335 bn. It caters to industries including healthcare, manufacturing, construction, infrastructure and equipment, among others.The company’s real estate portfolio spans across all market segments — from industrial, commercial and office space to residential and recreational developments.

DoCoMo to buy 26% of Tata Tele for $2.7 bn

Japanese business daily the Nikkei Wi-fi wireless networks today reported that DoCoMo will buy a stake of about 26 per cent in Tata Teleservices Ltd for 260 billion yen ($2.7 billion). This would be the latest of a series of overseas acquisitions by DoCoMo and follows $350 million investment in Bangladesh's No.3 cellphone carrier.In September DoCoMo was in talks to buy a stake in Tata, part of the Tata Group conglomerate and parent of Tata Teleservices (Maharashtra) Ltd.

The deal would add to a record value of overseas acquisitions by Japanese firms this year as companies increasingly snap up competitors abroad, taking advantage of tumbling global stock markets and the yen's recent surge.

DoCoMo spent nearly 1.9 trillion yen in the late 1990s and early 2000s to buy small stakes in operators around the world to promote use of its i-mode mobile Internet technology and ensure the adoption of 3G networks on the same W-CDMA standard that it uses.But it saw its investments sour, and pulled out of AT&T Wireless Services Inc, Dutch operator KPN Mobile N.V. and Hutchison 3G UK Holdings after incurring heavy losses.

SKS Microfinance mops up Rs 366 cr

SKS Microfinance on Monday announced that it has raised $75 million (Rs 366 crore) from a host of investors including Sandstone Capital, SKS investors, Kismet Capital and SVB India Capital Partners (an affiliate of Silicon Valley Bank).This was the fourth round of fund raising by the Hyderabad-based micro-finance firm. Edelweiss Capital was the advisor to SKS.

SKS has provided micro-loans of Rs 4,729 crore to 3.3 million poor households across 18 states in 50,000 villages and urban slums of India. Its members have maintained a 99% repayment rate. The new equity investment will help SKS expand its reach to 8 million members over the next two years.

Vikram Akula, founder and CEO of SKS Microfinance, said: “The fact that this investment has come during the global economic meltdown is proof of the confidence that investors have in SKS.” In February, it had raised Rs 124 crore from UNITUS, Vinod Khosla, Infocom Ventures, SKS Capital, Sidbi, Tejas Ventures, Sequoia Capital, Yatish Trading, SVB India and Columbia Pacific.Prior to that, it had collected Rs 53 crore in March 2007 and Rs 14 crore in March 2006. Last month, Swadhaar, a Mumbai-based micro-finance institution has raised $3 million from Michael and Susan Dell Foundation, Accion and Unit Equity Fund.

Circuit City files for bankruptcy

Circuit city Stores, the No 2 US consumer electronics retailer, filed for bankruptcy protection on Monday, falling victim to tighter credit terms from vendors and a loss of market share to Best Buy, Wal-Mart Stores and other rivals.The retailer and 17 affiliates filed for Chapter 11 protection from creditors with the US bankruptcy court in Richmond, Virginia.

Circuit City filed a week after saying it would close 155 stores, or more than one-fifth of its retail base, and eliminate 17% of its US workforce. It also said it was considering all options to restructure. The company had lost money in five of the last six quarters.

In recent weeks, suppliers pinched by the global credit crunch have tightened terms, sometimes requiring up-front payments before shipping goods. Best Buy has said it might take over stores that distressed rivals close. According to the filing, Circuit City had $3.4 bn of assets and $2.32 bn of debts as of August 31, and more than 100,000 creditors.Among the company’s largest unsecured creditors are HP, Samsung and Sony, the filing shows. The largest shareholders include HBK Master Fund and First Pacific Advisors.

Wells Fargo set to buy Wachovia

US bank Wells Fargo said Monday it had raised 12.6 billion dollars in a stock offering in preparation for its acquisition of rival bank Wachovia.

The bank offered 407.5 million shares and sold an additional 61 million shares due to demand.Wells Fargo, which needs financing to buy Wachovia, fixed the share offering at 27 dollars in early November, a modest discount to its share price at the time of 28.77 dollars.

"The enthusiastic response to this offering in a very difficult market demonstrates broad investor confidence in Wells Fargo's long-term growth potential and our time-tested vision and diversified business model," said Wells Fargo's chief financial officer Howard Atkins.

Wells Fargo also has received 25 billion dollars from the US Treasury as part of the Treasury's 700 billion dollar bailout of the troubled financial sector.

After hefty payout, BSE shareholders to get 12:1 bonus

After pocketing a hefty 3000% dividend in 2007-08, shareholders of the Bombay Stock Exchange (BSE) are being treated to some more largesse — this time in the form of a bonus issue. According to reliable sources, the BSE board at its meeting on Saturday has decided to offer 12 bonus shares for very share held by shareholders.

Though the bonus issue is in line with brokers’ expectations, the move is seen as the first step towards eventual listing of the exchange’s shares. BSE is required to enhance its capital base significantly from the current level for listing purpose.
Post-bonus, the exchange’s equity capital would increase from the current Rs 78 lakh to Rs 10 crore, which is the limit applicable to companies seeking listing on the National Stock Exchange (NSE). The minimum paid-up capital requirement for BSE listing is Rs 3 crore.

Fannie Mae posts $29 bn in losses

US mortgage finance giant Fannie Mae posted a record $29 billion in losses in the third quarter. The company's net worth fell to $9.4 billion at the end of September from $44.1 billion at the end of last year.Fannie Mae said it might have to tap the government's $100-billion funding as early as next year.

Fannie Mae and Freddie Mac, which own or guarantee around half of US home loans, were seized by federal regulators in early September.The US government was to inject up to $100 billion in each company in exchange for ownership stakes of almost 80 percent.

Reliance Retail’s JV with UK logistics co Wincanton falls through

The high profile joint venture between Reliance Retail and the UK-based supply chain powerhouse Wincanton which was to manage RRL’s transportation, warehouses and inventory have been called off. According to The Economic Times report, the reason cited for the fall off was that RRL was unlikely to meet its initial growth projections and generate expected volumes.

RRL and Wincanton had signed an MoU and negotiations had reached advanced stages. The talks, however, were derailed after Wincanton saw a gap emerging between its expectation and what was being rolled out on the ground in terms of RRL’s expansion. In November 2006, India’s largest conglomerate Reliance Industries announced its foray into consumer retail with Rs 26,000-crore investment.

The company has also initiated a slew of measures to tide over the current crisis, perpetuated by a slowdown in Indian retail consumption and global financial turmoil. The company has recently reduced the size of its Ahmedabad hypermarket by two-thirds and initiated several cost-cutting measures. A senior source pointed out that some tough measures are on the anvil yet again.

Emami gets board's approval to hive off realty biz

FMCG major Emami Group has got its Board's approval to hive off its real estate arm into an independent entity.The Kolkata-based company, which recently acquired a controlling stake in Zandu Pharmaceuticals, is planning to focus more on its core FMCG business while letting Emami Realty chart its course as a completely separate firm.

Asked if Emami was planning to exit from the realty business after spinning off the arms, Emami Director Aditya Agarwal replied in the negative and said Emami Realty would continue working on the various projects that it has started. '

On the source of funding of the projects, he said: "It is too early to talk (about it) at the moment." Emami Realty's 10 projects comprise four IT parks, three shopping malls and three residential complexes in Kolkata, Coimbatore and Hyderabad, involving a construction area of over 50,00,000 sq ft. The projects are likely to be completed by 2010-11.

Global investors pull out $480 mn from India funds in October

Global investors have pulled out a whopping over $480 million from India-focused funds last month, with as much as $120 million flowing out in the last week, amid the meltdown in the equity markets.

India-focused funds have witnessed the highest outflows among all the Asian funds in the last four weeks, followed by China funds, which saw redemptions of over $286 million, as per data compiled by global fund tracking firm EPFR.

India-focused country funds saw an outflow of $119.7 million in the last week of October, while for the past four weeks the toll has been as much as $482.2 million.
However, so far this year, the total redemptions from India-dedicated funds have been the second highest, of over two billion dollars, while China-focused funds have witnessed the highest outflows of $2.8 billion in 2008 so far.

The Indian benchmark index Sensex dropped over 3,000 points from over 13,000 to below 10,000 in October, while China's Shanghai SE Composite Index had fallen from over 2,100 to below 1,700 in the last month.

Asian equity funds excluding Japan extended their losing streak to the eighth week in a row and recorded net outflows of USD one billion in October. In the last week of October they suffered an outflow of over 386 million dollars.