India Inc to have easier M&A ride

The government has decided to simplify the norms for mergers and acquisitions by removing the bottlenecks that slow down India Inc’s inorganic growth. The idea is to offer a fast-track system which will spare companies from the lengthy process of securing high court sanctions for M&As, if they meet certain criteria.

The ministry of corporate affairs is working on two types of fast-track clearances for M&As. The first one is a new concept called ‘contractual mergers’. Under this, companies needn’t wait for the high court approval, which will take at least six months to materialise.

This proposal, originally mooted by a panel headed by eminent lawyer Shardul Shroff and later endorsed by the JJ Irani panel on company law, will get legal recognition soon, officials said. The second proposal is a simplified procedure for M&As between group companies and unrelated private companies.

Under the contractual merger plan, companies can decide to merge through a contract which should be approved by the shareholders later. Such a window is available in many other countries. Currently, all private sector companies need to get the approval of high courts for M&A activities, while state-run companies have to obtain the government approval.

Read more in The Economic Times article.

PE deals hit record $10.8 bn in 8 months

For the first time, private equity (PE) investments in India have crossed the $10-billion mark in a calendar year. And that too, with over three months still to go in 2007. The magnitude of the growth can be gauged by the fact that in 2006, the total value of PE deals announced stood at $7.86 billion.

With the PE industry on fire and with strategic mergers & acquisitions (M&A) building on the big-budget deals struck early this year, the total value of equity deals involving Indian companies is now nudging the $60-billion mark.

For the January-August period, the total value of PE deals announced stood at $10.8 billion spread over 267 deals, according to the latest dealtracker of advisory firm Grant Thornton. PE funds have been flexing their muscles in equity transactions in the country, and even surpassed strategic M&As in the value of deals struck during June and July.

In June and July, PEs totalled $4.6 billion while M&As were valued at $2.66 billion. But in August, M&As clawed back with the cumulative value of deals pegged at $3.37 billion over 62 deals compared to $1.22 billion worth of PE deals through 30 deals.

Cross-border deals continue to outpace domestic M&As as in the re-cent past. There were a total of 30 domestic deals with an announced value of $660 million as against 32 cross-border deals worth $2.71 bil-lion.

Read more in The Economic Times article.

Private equity firms invest record $3.8 bn in India

Global private equity firms, including Blackstone and Carlyle Group, have made an investment of $3.8 billion in 2007 so far in the country, up 50 per cent from the year-ago period.

The record volume has been reached through 81 M&A deals. Last year, foreign private equity players had invested $2.6 billion, data complied by global consulting firm Dealogic showed.

Carlyle Group is the leading "financial sponsor" in India with investment of $777 million via two deals, including acquisition of over six per cent stake in HDFC.

It is followed by Dubai International Capital, which acquired a 2.87 per cent stake in ICICI Bank for $741 million, and Blackstone Group with $619 million inflow via eight deals.

Blackstone Group, the world's leading private equity firm, has acquired stake in companies such as Intelenet Global Services, Punj Lloyd and Gokaldas Exports.

The US-based Group has also decided to pump in $150 million to acquire a stake in Nagarjuna Construction Company. A move that comes close on the heels of its decision to acquire up to 70.1 per cent stake in Gokaldas Exports, the country's biggest apparel exporter, for about Rs 675 crore.

Blackstone Group manages around $90 billion of assets worldwide. In January, it invested about $275 million in Ushodaya Enterprises Ltd (UEL), a media and film production company owned by Ramoji Rao.

L&T Infotech eyes $1-b post through M&As

L&T Infotech, the unlisted technology arm of engineering and construction major Larsen & Toubro, plans to become a $1 billion company through expansion and acquisitions, a senior executive said on Monday. “In terms of size, we are not competing with top tier companies, but we want to be in tier I when it comes to quality, reputation and service,” L&T chairman AM Naik told reporters at a conference.

L&T Infotech is a mid-sized company, with annual revenues of $287 million, in FY07. While there has been speculation about L&T’s plans to list the company, Mr Naik and senior company officials have maintained that a public float could only be next year.

L&T Infotech plans to invest around Rs 1,000 crore in the next 3-4 years. “We have planned an investment of around Rs 500-600 crore for L&T Infotech and nearly Rs 200-300 crore for our engineering services businesses,” said Mr Naik.

Read more in The Economic Times article.

100 mn euro fund to push Indian, Italian M&As, JVs

A Milan-based business advisory firm aims to create a 100 million euro (Rs.5.4 billion) equity fund to push mergers and acquisitions (M&As) and joint ventures (JVs) between Italy and India.

"I am talking to Italian banks and Luxembourg-based funds. I have also received positive feedback from Indian banks," Carlos Paris of Paris&Partners said of the equity fund to promote "arranged and love marriages that last" between Indian and Italian businesses in the areas of lifestyle products, food processing, cinema and infrastructure.

"Ninety per cent of Italian businesses are family-owned and form the core of our economy. There are similar traditions in India. So, I am now looking for good DNA with Indian groups," Paris, a former banker, told media.

Toward this end, the equity fund will function as a third party professional with the capability to lead investment to provide Italian-quality goods at Indian prices," Paris explained.

The timing could not be better, with 2007 being celebrated as the Year of Italy in India.

Read more in The Economic Times article.

India breaks into top 10 M&A league

India became the world’s eighth largest market in the first quarter of 2007 — an improvement over the 11th rank in calendar year 2006. According to Alan S Alpert, managing partner (M&A transaction services), Deloitte Tax LLP, there has been a substantial increase in M&A in India. Inbound M&A (into India) and local M&A have been growing.

The Vodafone Hutch accounted for the majority of the gains in the first quarter. Also the number of M&A transactions by Indian companies overseas has gone up substantially. The US and the UK continues to be the number one and two M&A market. According to Thomson Financial, in the first quarter India saw inbound and local deals of $25.581 billion.

In the first quarter India pipped markets like France (2006: $76.8 billion, 2007: $24.79 billion), Italy (2006: $17.40 billion, 2007: $14.79 billion), Luxembourg (2006: $34.65 billion, 2007: $2.5 billion). According to Mr Alpert, India has now surpassed China and South Korea in the Asian M&A league table and is behind only behind Japan.

He added that the global M&A saw record levels of deals worth $3.7 trillion in 2006. However, there has been a shift in the participants in the M&A market. Around three to four years ago private equity players contributed to around 10% of the deals. In 2006 however, this has now changed to 25%. PEs have been gaining force on the back of liquidity and a stable economy.

That could be the reason why players like Deloitte have launched a dedicated private equity practice here — Deloitte Corporate Finance Services India. The team in India is led by managing director Sandeep Gill and director Bomal Modi. Both were earlier part of the corporate finance practice of Deloitte & Touche LLP In London.

M&A deals in co-operative banking sector on the rise

Merger and Acquisition deals, common among corporates today, are also making inroads in the urban cooperative banking sector.As per figures available with the National Federation of Urban Cooperative Banks, 19 co-op banks have already merged with stronger banks while nine more are in the pipeline.

Banks like Saraswat Bank, Shamrao Vithal Co-op Bank and Cosmos Bank have been the major acquirers so far.The co-operative banking sector with over 1,850 banks and total business of about Rs 2,00,000 crore is infested with weakness.
According to Krishna, earlier, there was no organised attempt to revive the weak banks. They would be subjected to many restrictions and eventually go into liquiditation.

Read more in Live Mint article.

Traffic on M&A St to swell further

Riding on the boom in the Indian economy, corporate India is expected to be an active player in the global mergers & acquisitions (M&A) market in 2007, with significant deal activity expected in IT/ITeS, telecom, pharmaceuticals, energy, banking and financial services sector, according to a CII whitepaper on M&As. Corporate India is likely to see many billion-dollar deals in energy and pharmaceuticals sectors, the whitepaper said.

One of key enablers for future M&A would be availability of structured financing options. While high economic growth has left Indian companies flush with surplus funds, India Inc is already exploring exchanges like the Alternative Investment Market (AIM) of LSE, Kosdaq of South Korea, TSX of Toronto, Sesdaq of Singapore and the Euronext to take advantage of liberal listing norms, a quicker listing process and better valuations from wider range of international investors.

Indian companies are expected to raise at least £2-3 billion from AIM alone. With almost 60% of the investors in the market being long-term investors willing to invest in long-gestation projects, AIM is likely to emerge as the preferred market for Indian companies to raise capital.

Read more in The Economic Times article.

Dabur to buy 60% stake in Singapore-based FMCG company Unza for Rs. 675 crores

Dabur is about to acquire over 60% stake in Singapore-based consumer goods company Unza Holdings for Rs. 600-675 crores. Dabur is expected to buy out the holdings of private equity funds Actis and Standard Chartered who hold 30% each in the $150 mn-Singapore company. The deal is touted to be one of the largest overseas acquisition deals in the FMCG space, and make it the third-largest FMCG company in India behind HLL and ITC with manufacturing facilities in China, Vietnam, Indonesia and Malaysia.

Unza is a leading personal care manufacturer and marketer in South-east Asia with 48 brands in its portfolio, and is equally owned by the company management and the two private equity funds.

Read more in The Economic Times article.

HCL Technologies may bid for Cambridge Solutions

One of India’s premier IT companies, the $1.1 bn-HCL Technologies may bid for Cambridge Solutions, one of the top BPO outfits of the country, valued at around $350 mn. If the deal sails through, it may be the biggest M&A ever in the Indian IT space.

HCL has signaled early interest to acquire around 42% promoter holding put up for sale. The promoters of Cambridge have mandated Lehman Brothers to scout for potential suitors. The promoters of Cambridge, which includes names like ex-McKinsey chief Rajat Gupta, the US-Canadian Bronfman family of Seagram fame, serial investor Ramesh Vangal and former PepsiCo chairman Chris Sinclair, together hold 59.15% stake. It is learnt that Mr. Vangal, who is the single largest individual investor with around 18% stake, is unlikely to offer his shares.

Almost two-thirds of Cambridge’s revenues comes from high-end BPO operations spread across the US, India and Europe. It has a strong presence in the lucrative insurance processing domain, with around 2000 of its total 4500 employees located in the US. HCL has BPO operations at nine centres in India, two in the UK and one in Malaysia, which provide both voice and non-voice services. The BPO operations constitute around 17% of revenues and employ around 10,000 people.

Read the article in The Economic Times article

Merrill Lynch eyes stake in India Infoline distribution arm

US-based brokerage and investment bank Merrill Lynch has initiated talks with India Infoline for acquiring a significant stake in its distribution subsidiary, India Infoline Distribution Company Limited (IILD). Merrill had recently hiked its stake in India Infoline to 14.10%. It may pick up to 26% in IILD for over Rs. 150 crores. In December 2006, India Infoline sold its stake in the subsidiary Khambhat Investment & Trading Company Private Limited, a non-banking finance company, to Merrill Lynch.

Merrill Lynch plans to enter into the Indian mortgage business, and is accordingly planning a tie-up with India Infoline for the same. The company expects to create synergies with India Infoline as it has a wide retail network of over 200 branches. IILD, apart from the distribution of financial products such as mutual funds, IPOs and fixed deposits, also distributes mortgages and loan products.

Read more in the article in Business Standard.

IPCL set to merge with Reliance Industries

Ending months of speculation, Reliance Industries (RIL) said today that it is considering merging its group firm, Indian Petrochemicals Corporation (IPCL) with itself.

The boards of both the companies will meet on March 10 to consider the plan, RIL said in a statement to the Bombay Stock Exchange after the markets closed for the day

Analysts say Reliance was supplying raw materials to IPCL, which was then making the final products for the end-user industries like rubber. "Post-merger, RIL would offer end-to-end product solutions which would give it a pan-Indian and perhaps Asian dominance," said an analyst.

Analysts also said the merger may help RIL to increase its revenue from chemicals by as much as 4% to 48% of the total. IPCL uses naphtha made at the parent's refinery as feedstock to make chemicals.
Read more inThe Business Standard article.

IBM targets Indian firms for acquisition

After spending close to $5 billion for 13 acquisitions in 2006, IBM plans to keep up its accelerated pace of acquisitions this year and has earmarked Indian IT space as a key target region.The company’s acquisitions in 2006 were in the software space, an area where IBM is bullish about growth prospects in future as well.

The US-based IT giant is believed to have sounded its investment bankers to scout for potential targets in the country, which could include mostly small-to-mid sized software firms, although it is not averse to acquiring large companies at the right price.

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

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.