Rel Retail, Citi tie up for consumer finance

Mukesh Ambani Group company Reliance Retail and Citibank are understood to have agreed to float a joint venture for consumer finance.The two partners are believed to have decided on giving Sandeep Soni, who heads Citibank's new strategic initiatives for alliance and partnerships, the charge of the new venture.

RBI may block Citi`s plan to buy 3% in NSE

The Reserve Bank of India (RBI) may block Citibank India’s proposal to pick up 3 per cent stake in the National Stock Exchange (NSE).Citigroup already holds 2 per cent in the exchange.

A source close to development said the bank proposed to buy shares from the State Bank of India group, which holds 12 per cent (9 per cent by the State Bank of India and 3 per cent by subsidiary, SBI Caps).The bank has submitted a proposal to the RBI.

The banking regulator is of the view that Citibank India is a member of the Citigroup, which already owns 2 per cent stake in the NSE. Therefore, granting permission to Citibank India may lead to conflict of interest among related entities holding stake in the same entity.

As per the demutualisation norms, an individual entity cannot hold more than 5 per cent stake in an exchange. SBI and SBI Capital Markets have already pared their stake by 3 per cent and 2 per cent, respectively ,thus bringing down the combined stake to 12 per cent from 17 per cent earlier.

NSE has institutional holding from SBI, Industrial Development Bank of India, Corporation Bank, Oriental Bank of Commerce, Union Bank, Bank of Baroda and Canara Bank.Thus, NSE has already offloaded 26 per cent stake in favour of foreign investors as permissible under the foreign direct investment norms for stock exchanges.

Punj Lloyd plans $200 mn QIP

Infrastructure major Punj Lloyd is raising $200 million (over Rs 800 crore) through a qualified institutional placement (QIP).

The money will be used to part-fund its recent acquisition of 25% stake in Pipavav Shipyard (PSL) as well as for its planned capacity expansion. Citibank and Kotak have been appointed advisors for the placement.

The company will raise this amount by August 10, by issuing up to 1.75 crore shares at a floor price of Rs 270 per share. Following the equity placement, Punj Lloyd chairman Atul Punj’s personal holding in the company will come down to 35.5% from 38%. As a whole, the Punj family holds 53.4% in the company.

Proceeds from the QIP will also be used to part-finance capex plans. Punj Lloyd had recently announced acquisition of a 25.1% in PSL for about Rs 400 crore.

Punj Lloyd has aggressive expansion plans in high-margin businesses like upstream engineering (offshore platforms), petrochem (hydrocracker, LDPE plant), process engineering (bio-ethanol, sulphuric acid plant), power plants (coal, gas and nuclear) and civil infrastructure (SEZ/township development, metro-transportation, highway).

SBI to raise $225m in bonds abroad

State Bank of India is set to raise $225 million from the overseas market this year by issuing perpetual bonds. The overseas issue opened on Monday and the bank is expected to price the bonds this week. The bank has appointed Citibank and JP Morgan Chase as merchant bankers to the issue.

The bank plans to raise a total of Rs 15,000 crore this year in the form of equity (tier-I) and debt (tier-II). The proposed issue, perpetual note, will be the first tranche of its tier-I borrowing this year. If the SBI Act is amended, the bank plans to raise close to Rs 6,000 crore by way of public issue. The balance would be raised from the debt market.

In February this year, SBI had raised $400 million by way of perpetual bonds at 6.43% and it had a call option in 2017. The proposed perpetual note, too, would have a call option at the end of 10 years. The proposed borrowing is a part of SBI’s $5 billion MTN issuance and is likely to be raised at 1.3-1.4% over Libor, which is now ruling at 6.6-6.7%.

Read more in The Economic Times article.

International rating agency Standard & Poor’s has assigned a ‘BB’ rating to the bank’s $225 hybrid issue. The rating of BB is sub-investment grade. However, the senior secured borrowing has been rated at BBB-, which is an investment grade.

Mutual fund Lotus India sees assets grow to $2 bn

Lotus India Asset Management, a Mumbai-based mutual fund group, expects funds under management to nearly treble to $2 billion (Rs8,112 crore) in the next 10 months as it targets Indian retail investors, an executive said on Thursday.

Lotus is a joint venture between Fullerton Fund Management, a unit of Singapore’s state investor Temasek Holdings, and London-based Sabre Capital Worldwide, which was founded by former Standard Chartered chief executive Rana Talwar.The group has launched seven mutual funds, raising $700 million, since November 2006 and plans to launch 10 to 12 more funds.

Indian mutual funds had total assets of Rs3.5 trillion ($86 billion) in April, up 36% from a year earlier, according to data from the Association of Mutual Funds in India.
Bagga, who previously worked at Citibank and GE Capital in India, said growth was likely to come from retail investors, thanks to higher savings, and from the pension industry as the government opens up the sector to fund managers.

Read more in The Live Mint article.

MRTPC issues notices to ICICI, Citibank, HSBC

Monopolies and Restrictive Trade Practice Commission on Tuesday issued enquiry notices to leading private lenders ICICI Bank, Citibank and HSBC on complaints regarding violation of norms in their credit cards business.

An MRTPC Bench comprising Justice O P Dwivedi and M M K Sardana issued the Notice of Enquiry (NOE) and directed the banks to file their replies in four weeks.

The notices followed the report of the Director General of Investigations and Registrations (DGIR), the investigative arm of the Commission, which had recommended action against these banks for making false promised to customers and violating RBI guidelines.

However, when contacted, an HSBC spokesperson said: "We have not yet received any notice from MRTPC. If we do, we will certainly examine it and respond to their query."

The spokesperson said the bank was conscious of the need to maintain transparency in business dealings and endeavours to offer the highest levels of customer service possible.

Read more in DNA Money article.

Vijay Mallya downs Whyte & Mackay

Liquor baron Vijay Mallya today put the cork on months of speculation by announcing the purchase of Glasgow-based Scotch whisky distiller Whyte & Mackay for £595 million (Rs 4,784 crore).

Mallya’s United Spirits, India’s largest liquor firm and the flagship of his UB Group, will now own all the shares held by W&M Chairman Vivian Immerman and other investors.

That will give the Indian company an annual output of 75 million cases, and it will remain the third largest in the world in terms of number of cases produced, behind Diageo and Pernod-Ricard SA.

Mallya, chairman, UB Group, said at a video conference from Glasgow that the 140 brands owned by the company, including Whyte & Mackay, Isle of Jura, The Dalmore and Vladivar vodka, had been independently valued at £170-190 million.

The distiller’s brands will be sold in India, China and Russia. Besides, the firm’s Scotch will be used to blend whisky in India.

The deal is estimated at 21 times historical EBITDA (earnings before interest, tax and depreciation) for the year ended September 2006, a premium to those of peers Diageo and Pernod-Ricard.

Analysts, however, believe the premium is justified and inevitable, given the growing demand for Scotch whisky worldwide and the fact that not too many distillers are up for sale.

The combined turnover of United Spirits and Whyte & Mackay in the current year may touch Rs 4,700 crore and the combined operating profit, Rs 750 crore.

The deal will be financed through a combination of borrowings from Citibank (£310 million) and ICICI Bank (£ 325 million). A part of this debt, £325 million, is to be raised in Whyte & Mackay without recourse to United Spirits.

Read more in The Business Standard article.