HSBC buys 73% in IL&FS Investmart

The Hongkong and Shanghai Banking Corporation (HSBC) has acquired a 73.21 per cent stake in IL&FS Investsmart, a leading retail brokerage house in India, for a consideration of Rs 1,110 crore ($261 million).HSBC has acquired the stake from E*Trade Mauritius ( 43.85 per cent) and an additional 29.36 per cent stake from IL&FS. In addition, HSBC has paid a non- compete fee of Rs 82.45 crore ($19.4 million) for a three-year period to IL&FS.

HSBC will also make an open offer to acquire up to 20 per cent of the remaining shares in Investsmart.Softbank Asia Infrastructure Fund (SAIF) continues to hold about 10 per cent equity in the Indian broking outfit.

If HSBC fails to get a good response to the open offer, it might look at delisting Investsmart, which has a market capitalisation of close to Rs 1,275 crore ($300 million).

Earlier this year, E*Trade Financial Corporation had said that it had been hit by the sub-prime crisis in the United States. In order to concentrate on its core business, it was looking to monetise its holding in the Indian venture.Sources said IL&FS is involved in several businesses and was keen on exiting this venture.

A few months ago, IL&FS had put its broking arm on the block and several domestic and foreign brokerage houses had evinced interest in acquiring it, including the Aditya Birla group, Indiabulls and Religare Securities.

RIL, Essar Oil eye ONGC`s `unviable` Kakinada refinery

After the UK-based Hinduja group, Oil and Natural Gas Corporation's (ONGC) proposed Rs 26,500-crore refinery at Kakinada, Andhra Pradesh, has found new suitors in Reliance Industries (RIL) and Essar Oil.This is despite ONGC maintaining its stand that the refinery is not financially feasible unless the Andhra Pradesh government gives it more incentives.

The 15-million-tonne-per-annum refinery will be implemented by Kakinada Refinery and Petrochemicals (KRPL). While ONGC's subsidiary Mangalore Refinery and Petrochemicals (MRPL) holds 26 per cent stake in KRPL, IL&FS holds 51 per cent and the remaining stake is held by the Andhra Pradesh government.

Read more in The Business Standard article.

PE, hedge funds take 10% in Argentum

Argentum Motors a company floated by B V R Subbu, former president of Hyundai Motors India, Ajay Singh, promoter of budget airline Spicejet, and Ashish Deora, who runs a broadband company has offloaded 10% of its stake to three leading private equity and hedge funds D E Shaw, Rand Corporation of South Africa-promoted proprietary fund Satwa based in Hong Kong and Infrastructure Leasing and Financial Services Ltd (IL&FS).

Argentum took over the Daewoo Motors India factory near Delhi, which shut shop four years ago, for Rs 800 crore and is planning to set up one of the country’s largest auto ancillary units and function as a third-party manufacturer for auto companies.

The three funds have collectively forked out Rs 200 crore for the 10 per cent stake and have also provided the company a loan worth Rs 100 crore.The company is also looking for a fresh investment of Rs 500 crore to upgrade the facility and might look at more equity investors to finance the project.

Read more in The Business Standard article.

Rural Electrification Corp file papers for 156 mn share IPO

State-run lender Rural Electrification Corp Ltd (REC) has filed initial papers with the market regulator for a 156-million-share initial public offering, a senior official said on 23 August.

The book-built issue will equally comprise a fresh issue of shares and disinvestment by the federal government. Post-issue, the government’s stake in the firm will come down to 81.82% from 100%.The company is aiming to raise about Rs12 billion from the issue, another source close to the issue said. The funds raised from the fresh issue will be used for funding ongoing and future projects.

REC is the nodal agency for promoting rural electrification projects and also finances state electricity boards for investment in such projects. For the year to March 2007, it reported net profit of Rs6.6 billion on total income of Rs28.5 billion. The company is one of the three state-run power firms cleared earlier this year to sell equity, marking a limited revival of asset sales by the Indian government.

ICICI Securities Ltd, IL&FS Investsmart and SBI Capital Markets are the book-running lead managers to the issue

UB raises debt for Deccan buy

UB Group has raised Rs 550 crore as debt financing from IDFC, HDFC and IL&FS for its stake buy in Air Deccan.These institutions could pour in more debt as the group company UB Holdings is set to make an open offer for additional 20% stake in Deccan Aviation, the parent of the low-cost airline, shortly.

On May 31, UB Holdings bought 26% stake in Deccan Aviation for Rs 550 crore, and announced plans for a mandatory open offer. At the time of the acquisition, UB indicated that it could rope in financial investors for de-leveraging the acquisition partially, as it had received several expressions of interest from PE funds. But with debt financing clinched, UB is not likely to divest stake for de-leveraging.

UB has tied up debt financing from IDFC and HDFC for over Rs 400 crore. “The debt financing has been arranged for funding most of the 26% purchase,” a top UB official said, without divulging the name of the institutions. IL&FS is believed to have pumped in the remaining Rs 150 crore.

Read more in The Economic Times article

IL&FS to wrap up $400 mn PE fund

IL&FS Investment Managers Limited (IIML), the publicly listed private equity arm of IL&FS, is set to close its $400 million fund by October 2007. It will have its first closure of $150 million by July-end and the remaining would be wrapped up by October.

This is IIML’s sixth fund and will be its largest fund after the $525 million real estate fund launched in 2006. With this $400 million fund, IIML is more than doubling its fund size from the earlier $153 million Leverage India Fund.

IIML had started the roadshows for this $400 million fund in September 2006. According to company sources, the investors in the Leverage India Fund such as Taib Bank of Bahrain and Punjab National Bank are investing in the fresh fund.

The new fund is expected to focus on late-stage funding for profitable, cash-generating companies. “IL&FS PE Fund has been lately focussing on the pre-IPO and private investments of listed companies (PIPE), which enable the fund to achieve early exit,” an industry analyst explained.

Global PE funds set to hit the road with $1.5 b kitty

Global private equity funds are set to drive on Indian roads. At least half a dozen PE firms, including Goldman Sachs, Lehman Brothers, Citigroup and few Gulf-based funds are keen on making a foray into the domestic road sector. Experts say funds worth $1-1.5 billion may be invested in the next 6-8 months. This would be the first time PE investments of such magnitude would flow into the sector.

Goldman Sachs recently picked up 5% stake in IL&FS Transportation Networks Limited (ITNL) for a consideration of $20 million. ITNL is a vehicle promoted by IL&FS to spearhead its initiative in the roads sector.Industry experts say PE firms are in talks for investing in public-private partnerships (PPP) projects in which revenue stream has been fixed and identified.

Construction companies are in discussion with PE funds for jointly investing in road projects through the SPV route. Investment bankers say deals in southern and western parts of India are being discussed and some of these are in the range of $50-80 million. Several Gulf-based funds which have global expertise in managing road projects are also learnt to be interested in picking equity in Indian road projects.

Read more in The Economic Times article.

Hershey is all set to enter Indian market

Chocolate and confectionery maker, The Hershey Company is finally set to enter the Indian market by acquiring the stakes in Mumbai-based Godrej Beverages and Foods (GBFL).

Godrej executives declined to comment on the matter, sources in the know said the deal between Hersheys and GBFL had been signed a while ago. Hersheys has acquired 51 per cent stakes in GBFL, acquiring 40 per cent stakes by IL&FS. The remaining stakes is expected to be acquired from Godrej Industries and A Mahendran, managing director, GBFL who also holds stake in the company. Post acquisition, Mahendran and Godrej Industries’ stake in GBFL will together come down to 49 per cent.

Read more in The Business Standard article.

Citigroup Venture to buy 19.9% stake in Anand Rathi

Leading private equity investor Citigroup Venture Capital International is picking a 19.9% stake in Anand Rathi Securities (ARS), a Mumbai-based stock brokerage promoted by former BSE president Anand Rathi.

While announcing the deal on Friday, ARS said the funds will be utilised for the expansion purpose and also for meeting working capital requirements. The company, however, did not disclose the size of the deal and the price at which the stake is being acquired by the US-based fund.

In the past few years, many Indian brokerages have raised funds through the PE route, which has mainly gone into expansion of their businesses. Motilal Oswal Securities, India Infoline, Edelweiss Securities, IL&FS Investsmart and Indiabulls Financial Services are among the brokers which roped in foreign investors when the market was bullish.

Read more in The Economic Times article.

List of Sharekhan's suitors gets longer

Sharekhan has got a queue of suitors, first it was JM Financial and then IDFC was believed to be in talks to buy out the brokerage firm. Now the buzz is that American online trading giant E*trade, and Goldman Sachs too have joined the list, with many in the broking industry claiming that E*trade is the frontrunner for the deal.

Interestingly, last year Sharekhan had seen a mass exodus when many of its employees joined IL&FS Investsmart where E*trade is a key investor.Sharekhan is only one of the many deals that the broking industry is looking to clinch.

Read more in The Moneycontrol article