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.

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.

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.

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.

Governmet re-starts attempts to see IFCI stake

Goverment has revived its effort to sell 26% stake in IFCI, plans of which were shelved in December last year.The stake sale process is expected to begin next quarter.Differences, however, persist over whether the new partner should be given management control. This was what had caused the IFCI board to cancel the process last year after the lone bidder, the Sterlite Industries-Morgan Stanley-led consortium, demanded management control.

The bidding process last year was fraught with problems after the board set a minimum reserve price of Rs 107, which was considered too steep. As a result, most prospective bidders withdrew. Of the three bids, two were for less than Rs 107 per share and were disqualified.

Read more in The Business Standard article.

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SBI rejects rumours of JV with SG

State Bank of India (India) today rejectd rumours of its proposed joint venture with French financial services major Societe Generale. The bank said it has not received any official communication from the regulators.

SBI had entered into an agreement with Societe Generale Securities Services (SGSS), a division of Societe Generale Group in June this year to provide a range of security services like reporting, corporate actions, dividends collection and distribution, tax reclaim services amongst others.Following the signing of the pact, SBI is presently waiting for the Reserve Bank of India approval while Societe Generale's proposal is pending with the Foreign Investment promotion Board (FIPB).

Management issue may upset IFCI sale again

On May 29, the board of IFCI announced that it would be making a second attempt to sell 26% in the term-lending institution. However lack of clarity on management control may once again dampen interest among investors who are seeking to bid for the strategic stake in IFCI.

Less than six months ago, IFCI was forced to call off its plans to sell stake after talks with Sterlite and Morgan Stanley — the consortium selected among bidders — failed. The bone of contention then was that of management control.

Sources said investors were unhappy with the uncertainty over management control. After having acquired 26% stake, the successful buyer would have had to make an open offer for 20%, which would raise their stake to 46% — making them majority shareholder. But even at this position, they were not guaranteed full management control.

Yet another bone of contention was the bonds worth Rs 923 crore held by the government. There is uncertainty on whether or not they would be converted into shares. A conversion of government stake would widen the equity base and bring down the stake held by the strategic investor.

Read more in The Economic Times article.

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Finmin awaits law ministry advice on SBI-SBS merger

The board of SBI and State Bank of Saurashtra had already given their nod for the proposed merger in August last year despite opposition from a section of bank employees.The proposed merger would be the first of its kind among public sector banks.The finance ministry has sought the law ministry’s advice on the merger which is yet to come. Once the advice comes, the proposal would go to the Cabinet for approval

Speaking on the merger, SBI chairman OP Bhat had earlier said “other formalities regarding the merger have been completed and only the government approval remains.” Since State Bank of Saurashtra was a 100% subsidiary of SBI, the merger was only a technical process, he had said.

SBI also convened a meeting to consider merger proposal with other associate banks in January but was postponed later following opposition from the unions.

ICICI seeks non-banking finance company licence, drops FoF plan

ICICI Bank has applied for a licence to set up a non-banking finance company (NBFC), even as it has decided to stick to its knitting in other areas. The country’s second-largest bank has shelved plans to get into the fund of funds (FoF) business. It has also dropped the idea of setting up an infrastructure fund by itself.

Last year, the bank had made plans to foray into the FoF business. It was looking to start with around $500-million fund and then expand it to around $2.5 billion with multiple closing. However, with international markets going into a tizzy on the back of the subprime crisis, the bank has decided to shelve its FoF business plans. The bank was also looking at setting up a $2-billion infrastructure fund.

On the investor appetite for funds, ICICI Bank joint MD Chanda Kochhar said, “The demand for such funds continues to be strong, because infrastructure in India is still attracting a lot of interest and investors are long-term players who are not affected by short-term movements in the market.”

Some other players like Citi, Blackstone, 3i and Axis Bank have set up infrastructure funds to invest in India. On the FoF, she pointed, “We haven’t really finalised all plans there. In the current market scenario, it doesn’t make sense.” The FoFs are essentially investor groups that invest in private equity funds in order to provide investors with a low-risk product through exposure to a large number of vehicles across sectors and even geographies.

The bank has applied for a NBFC licence to RBI. If RBI approval comes through, it will be the second private sector bank after HDFC Bank to set up a NBFC. However, the plans have not been finalised. The group is also looking at using its housing finance company to book more home loans from this year.

IFCI board may discuss stake sale on Apr 29

After failing in its effort to rope in a strategic partner last year, IFCI Board may take up the stake sale process again at its board meeting scheduled for April 29.
It is not the part of the board's agenda but may come up for discussion during the meeting.

IFCI board had aborted the process for equity sale to a strategic partner, rejecting the demand for management control by the successful bidder in December last year.
NRI billionaire Anil Aggarwal-led Sterlite Industries, jointly with global investment banking giant Morgan Stanley, had emerged as the front-runner by quoting the highest price.

Speaking about the stake sale two months back, IFCI CEO and Managing Director Atul Rai had said it has no immediate proposal to go for another bidding, but in the medium term may require an "angel investor".

Finance Minister P Chidambaram had also backed IFCI's decision to reject the bid offer in December, but said the company could get more offers when a rebidding is initiated. He did not give a timeframe for the rebidding.

Read more in The Economic Times article.

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Yes Bank eyes two private sector banks for acquisition

Private sector lender Yes Bank has zeroed in on two banks as possible acquisition targets and could execute the buy-out in 2009-10.With bank valuations still at reasonable levels and not expected to increase in the medium-term, an acquisition would certainly be attractive, said Rana Kapoor without giving the names of the two banks in its radar.

Recently, HSBC Bank hiked its stake in the bank to 4.88 per cent, which Kapoor termed as "a purely financial investment".While Kapoor remained tight-lipped, the banking industry grapevine feels Karnataka Bank, Karur Vysya Bank and Kerala-based Catholic Syrian Bank, Federal Bank and South Indian Bank could be potential acquisition targets.

Indian Overseas Bank to take over Pune bank

Indian Overseas Bank Ltd said on Monday its board has approved in principle the proposed takeover of Pune-based Shree Suvarna Sahakari Bank Ltd.

HSBC investment arm buys 4.99% in Yes Bank

HSBC Financial Services Middle East has picked up a 4.99 per cent stake in Yes Bank in the secondary market.The global investment arm of HSBC has been investing in the bank since January.Rabo Bank holds around 18 per cent in Yes Bank.

While HSBC refused comment on Tuesday, the strategic investment in Yes Bank has set the market abuzz with rumours. This is the second strategic investment made by the HSBC group in a bank after its investment in Axis Bank (earlier called UTI Bank). The group now holds a 4.96 per cent stake in Axis Bank.

In the recent past, Citigroup had picked up around 12 per cent in HDFC. Analyst saw Citi’s acquisition, and its indirect stake in HDFC Bank, as a strategic move to get ready to buy an Indian bank once the RBI eases the rules for foreign banks to enter India.

According to the RBI norms, foreign banks are allowed to buy up to 5 per cent stake in a bank. Annually, all foreign banks operating in India receive permission to open around 12 to 14 branches.

Read more in The Business Standard article.

Govt considering proposal to merge SBI, SBS

Government is considering a proposal for merger of State Bank of India and State Bank of Saurashtra as the boards and unions of the two have approved the move.This was stated by Minister of State for Finance Pawan Kumar Bansal in Rajya Sabha today.The boards of directors of SBI and State Bank of Saurashtra have approved merger to "allow economies of scale in terms of network, manpower and other resources besides entailing better management of risks," he said.

He said the Government would not put pressure on banks to merge although the Narasimham committee on banking sector had recommended consolidation in the banking sector so that Indian banks are equipped to compete at the global level.

Read more in


The Economic Times article.