Indian Weekly Economic review

1. Top Headlines
 Piramal Buys Additional 5.5% In Vodafone; Essar Exits
Completely
 VC-backed India Homes Raises $4M; Eyes another $6M
Funding.
 SBI waives service fee on SME loans.
 Halcyon Buys Delhi Hospital Management Rights for $77M
 Saban Capital Opens Asia Office.
 AMR Infrastructure to invest Rs 1,200 crore on township
at Greater Noida.
 Song Investment Appoints Kartik Srivatsa As New Advisor
For India
 Temasek Sells 1.4% Of ICICI Bank For $300M
 Batelco Sells Entire 42.7% In STel For $174.5M To Local
Partner
 Thomas Cook Puts Indian Arm On Block, Stake Currently
Valued At $178M
 Flipkart Acquires Letsbuy; Common Investors Get
Consolidated Play
 Deutsche Bank Exits Lodha Project For $508M
 Kotak Private Equity Backs Minda Corporation.
 Future Group partners Disney to launch cookies
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2. Weekly Economic Review
The government has thrown a lifeline to India’s struggling aviation
industry. And two carriers, Kingfisher and Air India, are expected to be
the biggest beneficiaries. On Tuesday a group of ministers has decided
to allow airlines to import jet fuel directly. The move could help them
cut fuel costs by up to 20%. Fuel usually accounts for about half of a
carrier’s operating costs. Kingfisher Airlines, which is both loss-making
and ridden with debt, has long been pleading for direct imports.
And in another key decision the same day, the group of ministers
approved Air India’s debt recast plan. That will entail converting Rs11,
000 crore worth of short-term debt into long-term loans. And another
Rs7, 500 crore worth of debt will be converted into government-
guaranteed bonds. Of course, the Union cabinet still has to approve the
decisions of fuel imports and Air India, but both are expected to pass
through with little trouble.
Moving to the economy, government figures released on Tuesday
confirm growth is expected to slow down to its lowest levels in three
years. The latest advance estimate says India’s economy will grow at
just 6.9% this fiscal. That would mean India will have grown at just six-
and-a-half percent between October and March. Government officials
had been predicting growth of 7-7.5%.
And the gloom surrounding the economy only continued. Numbers
released on Thursday showed India’s industrial output had drastically
slowed down in December. The index of industrial production increased
just 1.8% during the month. Of course, the new figure completely
contradicts the HSBC Purchasing Managers’ Index, which showed a
strong gain in production in December. But Finance Minister Pranab
Mukherjee admitted the numbers were disappointing and said he hoped
for a pick-up in a couple of months
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3. Moving to earnings, the country’s biggest telecom firm, Bharti Airtel, has
disappointed investors by reporting a fall in profits for an eighth
straight quarter. Consolidated net profit tumbled 22% to Rs1, 011 crore.
That was on a 17% rise in revenues to Rs18, 477 crore. In India, Bharti
Airtel reported a 6% drop to Rs187. And in Africa it fell 3% to $7.1.
Meanwhile, another giant firm has done even worse. India’s largest
steelmaker, Tata Steel, posted losses for the first time in more than two
years. The company reported a loss of Rs687 crore in the third quarter,
compared to a profit of Rs949 crore in the same period the previous
year. That was despite a 15% rise in net sales to Rs32, 964 crore. Steel
and other metal companies are already suffering from a high input costs
and low demand from Europe. Steel firms have also had to write down
their inventories because market prices have fallen.
And finally, there’s a shake-up in India’s young e-commerce industry,
with Flipkart Online Services acquiring online electronics retailer
Letsbuy.com. The deal is estimated to be worth $25-30 million.
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4. Inside The Story
Piramal Buys Additional 5.5% in Vodafone; Essar Exits
Completely
Piramal Healthcare Ltd said on Saturday it would buy a 5.5 percent
stake in Vodafone's India unit from Essar for 30 billion rupees, taking its
total stake in the mobile company to about 11 percent. The sale will
Mark the exit of Essar as Vodafone's joint venture partner in India after
the London-listed company last year sealed a long awaited deal to buy
out Essar in July. Vodafone last year bought 22 percent of Essar and
Piramal bought 5.5 percent. The world's biggest cellular carrier by
Revenue, Vodafone is the largest overseas corporate investor in India.
The transaction contemplates various exit options for Piramal, including
both participation in a potential IPO of the unit and a sale of its stake
back to Vodafone, the Indian firm said in a statement.
VC-backed India Homes Raises $4M; Eyes another $6M
Funding
Delhi-based India Homes (formerly Agni Property Services Pvt Ltd), a
property services company, has raised $4 million from existing backers
Helion Venture Capital and Foundation Capital. The firm is seeking to
Raise another $6 million in the coming fiscal.IndiaHomes will utilize the
capital to make foray into the e-commerce space and fund its Goldmine
Project – an online pricing system which features real estate products
on the basis of comfort, luxury, market demand and availability. The
company also aims to achieve a growth rate of 300-400 per cent and
envisages a gross transaction value of Rs 1000 crore in 2012 and Rs
3500 crore in 2013.
SBI waives service fee on SME loans
Country's largest lender State Bank of India has decided to waive
guarantees and annual service fees on loans given to small and medium
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5. Businesses, guaranteed under the Credit Guarantee Fund Trust scheme.
To improve credit flow to the SME sector, the government- appointed
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
acts as a guarantor for loans up to Rs 1 crore. CGTMSE charges the
above-mentioned twin fees to borrowers. The Trust, which came into
being four years ago, charges a guarantee fee ranging from 1 to 1.5 per
cent of the loan amount, while the annual service fee ranges from 0.50-
0.75 per cent.
Halcyon Buys Delhi Hospital Management Rights for $77M
Abhay Soi-led alternative asset management firm Halcyon Finance &
Capital Advisors Pvt Ltd has acquired the management and
development rights of a South Delhi-based super specialty hospital from
the Sikh Gurdwara Management Committee for Rs 375 crore ($77
million). The deal has been carried out through its healthcare arm
Radiant Life Care Pvt Ltd, which has purchased the rights to manage
Guru Harkishan hospital for a period of 30 years, according to a
company statement. Spread over 11.43 acres of land, the hospital will be
developed in phases. Halcyon plans one million sq. ft. of development,
including a 700-bed super-specialty healthcare facility and suitable.
Infrastructure like research centers and a medical college for allied
healthcare activities, the statement adds. With this acquisition, we plan
to have the largest inventory of beds in the national capital region
(NCR). The whole point of having this hospital in the NCR region is to
target patients from states like Haryana, Punjab, Madhya Pradesh,
Rajasthan and the North East, up to Nepal.
Saban Capital Opens Asia Office
Saban Capital Group, a private investment firm founded by media mogul
Haim Saban, has opened an Asia office in Hong Kong. Set up by its
wholly owned subsidiary Saban Capital Group (Asia), the office is led by
Sumeet Jaisinghani, who has re-located to Hong Kong from Saban
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6. Capital Group’s Los Angeles office and serves to expand the firm’s
investment activities in Asia, including India.Saban formed Saban
Entertainment, an international television, production, distribution and
merchandising company that produced The X-Men and other shows
around Marvel Comics characters. In 1995, he merged his company with
Rupert Murdoch’s Fox Kids Network, which was acquired by The Walt
Disney Company for $5.3 billion in 2001. He has an estimated current
net worth of $3.5 billion and is ranked by Forbes as the 104th richest
person in the USA.
AMR Infrastructure to invest Rs 1,200 crore on township
at Greater Noida.
Realty firm AMR Infrastructure today said it is developing an integrated
township at Greater Noida with an investment of Rs 1,200 crore. "The
25-acre project includes IT office space, residential units and a shopping
mall. The shopping area will be a kind of adventure sports mall, where
Over 45 kinds of activities will be offered," AMR Infrastructure
Managing Director Kapil Aggarwal told reporters here. Asked about
investment, he said, "The total cost of the project is Rs 1,200 crore. We
have already put in Rs 600 crore". The company would fund these
investments through internal accruals and sales to customers, he added.
Song Investment Appoints Kartik Srivatsa as New Advisor
for India
Hyderabad-based Song Investment Advisors has announced a
leadership change with departure of founder and managing director
Vishal Vasishth. Aspada Capital Advisors LLP, led by Song's
current investment manager Kartik Srivatsa, will manage Song’s
existing portfolio of investments. Song Investment manages a $17
million fund whose investors include search giant Google Inc., Soros
Economic Development Fund and Omidyar Network. The firm recently
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7. Invested in two companies - secondary care hospital chain Be Well
Hospitals and potato supply chain management company SV Agro
Processing.
Temasek Sells 1.4% of ICICI Bank for $300M
Singapore’s sovereign wealth fund Temasek sold close to half of its
stake in India’s second largest lender by the size of balance sheet (and
second largest private bank by market value) for Rs 1,472 crore($300
million) through open market transactions on the stock exchange on
Wednesday. A large chunk of the shares were acquired by an
investment arm of Goldman Sachs.
Batelco Sells Entire 42.7% in STel for $174.5M to Local
Partner
Bahrain Telecommunications Co (Batelco) has struck a deal to sell its
entire 42.7 per cent holding in STel Private Limited (STel), an Indian
mobile operator, to its local joint venture partner Sky City Foundation
Limited for $174.5 million, the company said on Wednesday. This makes
it the first foreign investor to announce an exit from India after the
country’s apex judiciary in a landmark judgment last week scrapped
122 telecoms licenses as part of a corruption problem.
Thomas Cook Puts Indian Arm on Block, Stake Currently
Valued At $178M
Travel services firm Thomas Cook Group plc said on Wednesday it has
formally launched a sale process for its 77.1 per cent stake in the public
listed India unit, Thomas Cook (India) Limited. At current market price
the sale could fetch the British firm Rs 880 crore or $178 million,
helping reduce debt on the balance sheet of the parent firm. Thomas
Cook India says it is the largest integrated foreign exchange and travel
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8. Services Company in the country. Its services include foreign exchange,
outbound and inbound leisure travel, corporate travel and insurance.
Flipkart Acquires Letsbuy; Common Investors Get
Consolidated Play
Flipkart.com, the largest online retailer in India, is buying out
Letsbuy.com, a specialised e-commerce site run by the two-and-a-half-
year-old start-up eTree Marketing Pvt Ltd. The deal marks yet another
consolidation move in a bustling e-commerce industry in India that has
seen a string of sites folding up recently, even as many others are
attracting hyper interest from venture capital and private equity
investors. The acquisition is a combination of cash and equity, and the
founders of Letsbuy, along with their 350-plus team, will continue to
function independently with the added advantage of being able to
access Flipkart’s superior technology platform and supply chain
capabilities,” the company said.Speaking about the acquisition, Flipkart
co-founder and CEO Sachin Bansal said, “This acquisition fits into our
strategy of building dominant shares in all categories where we operate
Deutsche Bank Exits Lodha Project for $508M
Deutsche Bank has exited its investment into one of the projects of
Mumbai-based property firm Lodha Developers for Rs 2,542 crore
($508 million), pocketing returns of 55 per cent or Rs 902 crore ($180
million) for its over four-year-old investment.This comes as yet another
exit in the Indian realty space, which has been abuzz with private equity
funds selling their investments made during the heyday of Indian realty
in 2007.In September 2007, Deutsche Bank invested Rs 1,640 crore by
subscribing to optionally convertible debentures (OCDs) of Lodha’s
subsidiary Cowtown Land Development Ltd. It has now fully exited the
investment it had made in the company by selling the stake to the
property developer.The Lodha Group funded the buyback through
internal accruals worth Rs 1,720 crore and fresh fundraising of Rs 825
crore.
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9. Kotak Private Equity Backs Minda Corporation
Kotak Private Equity Group has invested in automotive component firm
Minda Corporation Ltd, the flagship of the $555 million Spark Minda or
the Ashok Minda Group. The deal has seen the arm of the private sector
lender Kotak Mahindra Bank acquire a minority stake in the company
for around Rs 125 crore,“From our perspective, auto components
happen to be a growing opportunity, especially as the two-wheeler
segment continues to do well. We continue see good number in auto
sales, especially in rural areas, and in terms of aspirations of moving to
luxury cars,” said Nitin Deshmukh, CEO of Kotak Private
Equity.Although Deshmukh did not disclose the size of the investment,
We learnt that the transaction was done in two tranches where Kotak
Private Equity had initially picked up stake in 2011 for Rs 80 crore,
followed by a second tranche of Rs 45 crore ago.
Future Group partners Disney to launch cookies
India’s largest retailer Future group has partnered Disney to launch the
country's first cookies for kids under its own brand - Brand Tasty Treat.
The retailer feels that while the cookie sub-segment is growing three
times faster than the overall biscuits market, the kids segment is
virtually untapped. With the launch, Future group is targeting 20% of
the cookie category in over 200 Big Bazaar stores. The launch also
strengthens the fact that children are fast becoming decision makers for
many categories such as instant noodles and shampoos that marketers
are now tapping to launch products specially designed for the younger
target audience.
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