ICICI Venture plans to float public issue

 ICICI Venture’s Vishakha Mulyespent the first year in charge 

steadying operations after the sudden exit of her predecessor.

Mumbai: The private equity arm of ICICI Bank Ltd is considering a public issue though it will move ahead only after it launches a greater variety of funds to create an “alternative asset platform”, its new managing director and chief executive said in an interview.


Listing unusual even by global standards; firm in no hurry as the move has to be driven by a purpose, says CEO


Such a listing would be unusual even by global standards. Private equity has come to the public markets only fitfully, with the most famous instance being the public issue of the Blackstone Group in June 2007 on Wall Street. In India, only IL&FS Investment Managers Ltd is listed on the local exchanges.

The future listing goal and more immediate plans to float new funds is part of a renewed expansion drive that comes in the wake of a difficult year when ICICI Venture Funds Management Co. Ltd had to manage investor worries and build a new team.

Vishakha Mulye, the 44-year-old head of the private equity firm, has spent her first year in charge trying to stabilize operations after the sudden exit of her predecessor Renuka Ramnath in April. “We chose to stabilize our team and resolve with our investors first,” she said.

The problems with investors that she alluded to concern what is called the “key man clause” that allows investors in a private equity fund to refuse to honour investment commitments in case important members of a fund’s management team leave. The exit of Ramnath led to a minor investor revolt when it was raising money for its $810 million (Rs3,839 crore today) second fund in 2009.

Mulye tackled investor worries about the exit of Ramnath by capping investor commitments in the second fund and inviting new investors into a third private equity fund that is now raising money. “We decided we would continue with existing commitments we had with companies. But all new commitments will henceforth be done from the new fund,” she said.

This $350 million new fund was raised from domestic investors, and was the third one managed by ICICI Venture Management and the first floated under Mulye’s watch. She now plans to raise another $150 million from international investors, who will take the total corpus of the third fund to $500 million. There is no key man clause in the domestic part of the fund while Mulye will be the “key man” for the international portion of the fund.

Other funds on the anvil are a $500 million infrastructure fund and a Rs500 crore real estate fund.

ICICI Venture Management currently manages around $2 billion of assets in three private equity funds, one real estate fund and a mezzanine fund that invests in senior debt and equity of growth companies.

The public offer is much further down the road.

“We will do that (a public offer) at an appropriate time...we are slightly away from that right now,” said Mulye. “We are not in a hurry to do that as it has to be driven by an objective. Once we bring the company to the right level, at the appropriate time and if there is investor interest, then we will go to our parent ICICI Bank Ltd,” she added.





































“The Indian PE (private equity) industry is not so mature yet, as it’s just a 10-15-year-old industry and globally funds such as Carlyle, Blackstone and Morgan Stanley all have diversified plays,” says Pankaj Dhandharia, national director at consulting firm Ernst and Young India Pvt. Ltd. The launch of an alternative asset management platform, according to him, is a natural step of progression for one of the oldest funds such as ICICI Venture Management.

Source :baiju.k@livemint.com:Baiju Kalesh & Shraddha Nairlivemintay26,2010

Ambani truce reopens key sectors for Mukesh

 
 Source :Tony Munroe and Devidutta Tripathy / Reuters :livemint:may26,2010
Mukesh Ambani seen to covet infrastructure, financial services; Anil Ambani’s businesses free to join with outside partners; Shares in Ambani firms retreat after Monday surge; brothers unlikely to invest jointly anytime soon


Mumbai / New Delhi: For India’s warring billionaire Ambani brothers, peace means competition.
Freed from a pact that prevented him from going head-to-head with younger brother Anil, Mukesh Ambani’s Reliance Industries can now invest wherever he sees opportunity, with financial services, power and infrastructure on his target list.

After five years of a bitter feud that split India’s richest family, held government energy policy hostage and discouraged foreign investment in oil and gas, Mukesh and Anil unexpectedly called a truce on Sunday by ending a non-competition agreement that was a source of acrimony between them.

After their father, Dhirubhai, died in 2002 without leaving a clear will, the brothers split the inherited business in a 2005 deal brokered by their mother, Kokilaben, and some of India’s top bankers.

Shares in conglomerate Reliance Industries and the listed firms in Anil’s Reliance ADA Group surged on Monday on expectations the brothers, who have a combined worth estimated at $43 billion, will move beyond the dispute that has been a costly distraction since they carved up their father’s business empire.
The shares retreated on Tuesday in a weak broader market.

While the two groups spoke hopefully of harmony and cooperation, they are unlikely to invest together anytime soon given the recent bad blood, said a person familiar with the matter who declined to be identified.
Still, Mukesh’s Reliance Industries, which has been seeking global acquisitions for growth, can now invest freely in a country where it is well-connected, its brand is ubiquitous, and where an economy poised to grow at 9% offers better long-term prospects than can be found overseas.

Besides power and financial services, Mukesh, the world’s fourth-richest man is eyeing infrastructure such as roads, the source said. A return to telecom may be a more distant prospect.

“I’m not saying entry is imminent, but I would be surprised given the man’s reach, his connections and business acumen if over the next two or three years he doesn’t do something meaningful either in banking or in telecom,” said Saurabh Mukherjea, head of Indian equities at brokerage Execution Noble.

“Power generation -- that’s almost a given, that every large industrial house in India is having a crack at it,” he said.

Anil lost this month’s Supreme Court ruling in a gas pricing dispute with Mukesh that embroiled New Delhi and ultimately brought the brothers to the negotiating table.

He is believed by some analysts to have agreed to cancel the pact that stopped them from competing in exchange for better terms for gas supplied by Mukesh.

Also, Mukesh, 53, can no longer block Anil from tying up with rivals, the way he did in 2008 when he thwarted a bid by Anil’s Reliance Communications to merge with South Africa’s MTN by asserting a right of first refusal.

Having just splashed out $1.8 billion on third-generation mobile spectrum in India and facing the need to spend billions more on network construction, Anil may find that freedom handy if he chooses to bring in outside investors.

If Anil, ranked 36th on the Forbes rich list, had prevailed in court, it would have cost Reliance Industries $700 million a year in lost cash flow by selling him gas at the lower price agreed earlier by the two brothers, according to Ambit Capital.

Mother Brokers Peace

In the 2005 split of the business empire, the low-profile Mukesh walked away with the shiny if stodgy jewel -- Reliance Industries, which has interests in oil and gas, petrochemicals and textiles.

Anil, 50, got the telecom, power and financial services businesses and has branched into media and entertainment, sectors that appear to suit his flashier public persona.

Neither was allowed to compete on the other’s turf.
In a saga that reads like a Bollywood script, complete with a long-suffering and heroic mother, Kokilaben has since then sought to broker peace between her squabbling sons, who though not on speaking terms live with her in the same Mumbai building.

Mukesh is building a $1 billion, 27-story home of his own.
Under their new agreement, the only area where Reliance Industries cannot compete with Anil is in gas fired power generation. Mukesh is free to invest in the high-growth, newer economy industries that will benefit from rapid expansion of Asia’s third-largest economy, as well as coal-based power.

What Next?
Reliance Industries, India’s biggest listed company, is forecast by Goldman Sachs to generate free cash flow of $18 billion between this year and the financial year that ends in March 2014, giving it plenty of firepower for investment.

Mukesh has a soft spot for telecom -- he founded the firm that became Reliance Communications and was ceded to Anil in the split -- although he is unlikely to dive into a cellular market locked in 15-player fight to the death. With his cash, he could eventually swoop in for a capital-starved operator.

Financial services are also on Mukesh’s radar screen. Anil’s Reliance Capital is engaged in insurance and fund management. Both sectors are attractive to Reliance Industries, according to the source, and may see consolidation as undercapitalised players look to exit.

Mukesh Ambani is among several Indian tycoons also seen coveting a banking licence if rules eventually allow.

“For a company that has big project execution and scale as one of the core strengths, we feel thermal power; telecom, media and entertainment and financial services could be areas that could attract the company,” brokerage IDFC said in a note.

Raid at NHAI

Federal investigators on Tuesday raided the offices of the National Highway Authority of India (NHAI) and the homes of some of its officials, recovering around Rs1.5 crore.

The raids followed cases of corruption and abuse of authority registered three days earlier against two senior NHAI officials over the award of a project, said their colleagues and officers of the Central Bureau of Investigation (CBI).

NHAI is the nodal agency that administers the 35,000km National Highway Development Programme. It has awarded a total of 118 projects worth an estimated Rs60,585 crore.

The CBI raids began in New Delhi at around 9.30am and continued until late evening. Raids were also carried out in Jaipur.

The two senior NHAI officials were charged on 22 May with “wrongly awarding” a contract to develop a highway stretch between Maharashtra and Madhya Pradesh, a senior CBI officer said.

Work on the 176km stretch, estimated to cost in excess of Rs2,500 crore, was awarded as an annuity contract earlier this month, said an NHAI official.

NHAI had received more than a dozen bids for the project. “Four (bids) were rejected on frivolous grounds at the qualification stage. The NHAI officials then eliminated another four at the bidding stage. They asked them to submit original documents, which was against the conditions of the tender,“ the CBI officer said.
K.S. Bakshi, managing director of Oriental Structural Engineers Pvt. Ltd, which won the contract, did not respond to questions sent to the company’s corporate email address.

V.C. Verma, a director of the firm, also could not be reached.
 
Sleuths recovered Rs1 crore from the house of one NHAI official and Rs46 lakh from the house of the second. They also found details of several properties owned by the two, the CBI officer said.

Source :‘rahul.c@livemint.com’Livemint,May26,2010

FIIs shun Standard Chartered IDR issue

 Source :Ravi Samalad : ML :May 25,2010

The retail investor category was subscribed 0.01 times while the FII category received zero bids

Standard Chartered Plc’s Indian depository receipts (IDR) issue, which hit the market today, has received a lacklustre response from foreign institutional investors (FIIs) and retail investors.

Retail investors bid for 7.22 lakh shares out of the total quota of 7.20 crore shares. The retail category was subscribed 0.01 times. Retail investors have been given a 5% discount in this issue. The Foreign Institutional Investor (FII) category received zero bids.

The Qualified Institutional Buyers (QIBs) category was subscribed 0.12 times from 8.40 crore shares reserved under the category. Domestic Institutional Investors (DIIs) bid for 86.95 lakh shares while mutual funds (MFs) bid for 17.10 lakh shares.

Similarly, the Non-Institutional Investor (NII) quota saw a lukewarm response. It was subscribed 0.0009 times, and received bids for just 40,800 shares from individuals. Even corporates have shied away from investing on the first day, which saw zero bids.

Employees subscribed for just 1,600 shares from the reserved quota of 48 lakh shares. The company has 20.40 crore shares on offer, including 3.60 crore shares for anchor investors at a price of Rs104 per share. The company has 16 anchor investors on board. Overall, the issue was subscribed 0.05 times on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

The company is planning to raise Rs2,400 crore-Rs2,760 crore through the IDR issue with a price band of Rs100-Rs115. The issue opened today and closes on 28 May 2010.

Bank of Rajasthan's promoter’s name vanishes from BSE, NSE shareholders’ list

 Source :Yogesh Sapkale :ML : May21,    2010

The names of PK Tayal and his group companies are not there anymore as promoters of Bank of Rajasthan. In fact, there is no promoter mentioned for the Bank on either the BSE or NSE site

Bank of Rajasthan (BoR), which is in the news for its proposed merger with ICICI Bank Ltd, has been embroiled in various controversies in the past. While market regulator Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) had cracked the whip on the erring lender, the exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), seem to be unaware of the filings from BoR.

According to both BSE and NSE sites, PK Tayal and his associated group entities are no longer the promoters of BoR. In fact, as per BoR's filing to the exchanges, there is not a single promoter mentioned for the period to end-March 2010. Surprisingly, names of PK Tayal and eight of his group companies are there under the promoter and promoter group for the quarter ending December 2009.

The Tayal group entities such as 21st Century Entertainment Ltd, Ahmednagar Investments Pvt Ltd, Cumballa Hill Property Developers Pvt Ltd, Cyber Infosystems & Technologies Ltd, Cyberinfo Zeeboomba.Com Ltd, EDC Securities Ltd, Giriganga Investments Pvt Ltd and Sumander Property Developers Pvt Ltd, together still hold 28.61% stake in BoR. However, their names are mentioned in the “public and holding more than 1% of the total shares" category, instead of the "promoter and promoter group" category. In its ex-parte order, SEBI has labelled all these companies as ‘promoter entities of BoR’.

A note posted by BoR on the BSE site said: "Hitherto, Tayal Group holding was shown in the Promoter Category. Based on the legal opinion obtained, they are no longer being treated as Promoter of the Bank. In the absence of any other category for the dominant shareholders group (DSHG), their holding has been shown in the Public Category."

"The declared shareholding of Tayal Group is 28.60%, however, as per SEBI ex-parte interim order dated 8 March 2010, holding of Tayal Group and related entities are to the order of 55.01%," the note says.
The question is how can any group or entity be removed suddenly from one category and placed into another category? That too when the market regulator has clearly said that all these companies are "a promoter entity of BoR". More importantly, is there anyone in the exchanges who keeps a tab on the regulatory filing done by companies? When asked, after more than 24 hours, the BSE asked us to check the lender’s filing on its site.

Following the SEBI ban on about 100 entities related with the Tayal Group, BoR's managing director and chief executive officer, G Padmanabhan, had said that 'technically' the Tayals were not the Bank’s promoters.
"Legal opinion has been obtained that they are not the promoters. The Bank does not consider them as its promoters. They are just dominant shareholders in the bank," Mr Padmanabhan had said.

SEBI was peeved that the Tayals had increased their shareholding in the private sector lender to 55.01% in the October-December quarter of 2009 from 44.71% in the quarter ended June 2007, although they had claimed that they were actually divesting stake. The market regulator also said that while the promoters apparently conveyed the impression that they were reducing their shareholding, they did not, in fact, dilute their controlling stake in BoR.

The SEBI action against the Tayal Group itself came after the RBI appointed Deloitte Haskins & Sells to conduct a special audit of BoR's accounts, suspecting violation of operational norms by the lender, including transparency in lending. The RBI had also imposed a Rs25-lakh fine on the Bank alleging violation of a host of norms.

Savings bonds don’t carry nomination option for joint holders

 Source: Aaron Rodrigues :ML:May21,2010

Entitled legal heirs to these financial instruments will have to face a lot of time-consuming paperwork and legal hassles if these bonds are transmitted to them

According to the government of India’s 2003 notification, savings bonds do not carry a nomination option for joint holders. With no nomination facility available, any entitled legal heir will have to face a lot of paperwork and legal hassles for inheriting the funds accrued in such bonds.

“I thought nomination is mandatory for all financial assets as well as physical assets. Didn't all co-operative societies make it compulsory for members to have a nomination some years ago? I just discovered this when I received a bond certificate (for the Govt of India 8% savings bonds) with the section 'Nomination Registered at Sr No' struck off,” said Dr Nita Mukherjee, a well-known researcher.

According to the 2003 notification, the sole holder or a sole surviving joint holder of bonds can nominate one or more persons who shall be entitled to the bonds and the payment in the event of his or her death. This means that only the surviving member of a joint bond account can nominate someone. ”The government presumes that both holders of a joint bond account won’t expire at the same time,” said Bhavesh Gagiwala, a certified financial planner (CFP) at Falguni Investment.

Mr Gagiwala added that joint holding allows three applicants—and the government didn’t think that nominees were a necessary option. “Some of our rules are so weird and you can’t complain or take it up to someone, as this is a government scheme,” said Yogin Sabnis, a CFP from VSK Financial Consultancy Services.
But nomination is the simplest way for transfer of funds to legal heirs during the time of death. Without such nominations, heirs have to do a lot of paperwork and spend a lot of money and time to get the assets. “If there are no slots for nomination, which is your inherent right, then that is a tremendous issue,” said Vivek Rege, MD, VR Wealth Advisors Pvt Ltd.

A legal heir entitled to these assets would have to do a lot of paperwork, which include signatures from various relatives and the filling up of a nomination or succession form. These signatures would be proof for the issuing authority of these financial instruments in order to release the assets.

Added to that, heirs who have not been expressly nominated would also have to issue advertisements informing the public that they are the legal heirs and should receive no objection from their relatives. The entire scenario becomes very time-consuming and the heirs have to shell out a lot of money for legal fees.
On 20th April, the Bombay High Court had ruled that in case of transmission of shares, all ownership rights will vest with the nominee rather than the legal heirs.

Mr Sabnis said that the rule may have been implemented in order to reduce conflict. This is a major lacuna in whole process and leaves a lot of unanswered questions for customers.

However, certain banks provide you with a separate nomination form when you want to open a savings account. However, it is not compulsory for banks to have a separate nomination column

SEBI plays double standards on Standard Chartered IDR issue

Source :Moneylife: May24,2010

While the big multinational Standard Chartered Bank was allowed to blank out disclosure of litigation, then why were Indian banks such as Lakshmi Vilas Bank and United Bank of India not allowed this favour?

Even as the first-ever Indian Depository Receipt (IDR) issue of Standard Chartered Plc is set to open in the Indian capital markets on 25 May 2010, questions about its non-disclosure of numerous litigations still remain open. The bank’s name was involved in the 1992 Harshad Mehta securities scam, which rocked the Indian capital market. However, the Securities and Exchange Board of India (SEBI) has turned a blind eye over all its pending litigations and has quietly passed the red herring prospectus (RHP), while Lakshmi Vilas Bank Ltd and United Bank of India have had to disclose all their pending litigations.

Standard Chartered has been taking the stand that the litigation is not ‘material’. The question then remains, why did SEBI seek a disclosure from these two Indian banks?

Lakshmi Vilas Bank Ltd, in which the Harshad Mehta Group held 2,700 shares in connection with the 1992 securities scam, disclosed the case in its draft red herring prospectus which reads: “The Bank has 14 cases as on date involving title suits relating to shares between various parties wherein the Bank is a proforma party and awaiting decision of the said courts. Noteworthy to mention is a case filed in the Sub Court under Special Court (TORTS) Act, 1992 by the Custodian in 1996 for shares held by (the) Harshad Mehta Group totalling 2,700 shares held by various parties and the matter is still pending.”

Similarly, United Bank of India, which hit the market earlier this year, disclosed all its cases against its chairman and directors, civil proceedings, labour and employment cases and other cases related to the bank. There was no mention of the bank’s involvement in the scam. The RHP had one case filed by SEBI against the bank, 18 civil cases, approximately 162 cases pertaining to labour and employment issues (as on 1 March 2010) and three other cases.

“As of the date of this Draft Red Herring Prospectus, neither the Company, any member of the Group, any Director, or any material associate of the Company (emphasis ours) are involved in any material governmental, legal or arbitration proceedings or litigation and the Company is not aware of any pending or threatened material governmental, legal or arbitration proceedings or litigation relating to the Company, any member of the Group, any Director or any material associate which, in either case, may have a significant effect on the performance of the Group, and there are no liabilities or defaults (including arrears and potential liabilities) in relation to such material proceedings or litigation which would be required to be disclosed under the SEBI Regulations,” states page 419 of Standard Chartered’s red herring prospectus.

However there are at least half-a-dozen cases filed against the bank by the Enforcement Directorate in 2002.

Earlier, Arijit De, head of external communications of Standard Chartered India replied to an email query by Moneylife: “The IDRs represent the shares of Standard Chartered (SC) plc, UK, the ultimate parent company of Standard Chartered Bank, India. In accordance with the disclosure requirements under SEBI Regulations, IDR Rules, other applicable laws and international practice, SC plc has made appropriate disclosures of all material issues in the draft offer document filed with SEBI. We have nothing further to add beyond what is disclosed in the DRHP.”

Moneylife had previously reported about this issue and had raised the matter with SEBI but we have still not received any response.

The Euro Zone Won’t Fail...but the crisis will only make it stronger.

Source : Stefan Theil | NEWSWEEK


Speculators have begun betting on an early euro-zone exit by Greece, a politically corrupt, basket-case country that has long cooked its government-debt figures and now faces years of stagnation—if not deflation and depression—as it slashes public deficits and shrinks wages in an attempt to regain competitiveness. In a confidential paper leaked last month, the European Commission warned that "imbalances" between stronger and weaker euro states risk the very existence of the euro itself.

They are wrong. Currency unions don't collapse because weaker members leave them. Were Greece to start printing new drachmas, they would immediately plummet in value against the euro. A super-weak drachma would make Greek wines and vacations very cheap for foreigners, but that gain for Greek competitiveness would be more than offset by bank runs, rampant inflation, and the burden of having to pay back old euro-denominated debts and mortgages with a newly worthless currency. Even if Greece's inept political class decides to take the risk—not unthinkable, since it might be a way to shift blame to outsiders—it would not break the euro zone. The euro would hardly be less stable without Greece, or even without Spain and Portugal. (Together, the three make up only 18 percent of euro-zone GDP.) On the contrary, a euro centered on Germany, France, and a few of the more advanced Central European economies like Poland would make the union stronger, not weaker. The risk of this is not so much the result but the financial and political upheavals in getting there.

The euro zone would break up not when weaker members leave, but when stronger ones no longer see gains from the arrangement. Today, that cornerstone is Germany. Europe's largest economy has emerged from the crisis bruised but with comparatively healthy public finances and an economic model unquestioned by its people. With the German political class so thoroughly invested in the common currency—and German companies dominating Europe more than ever—that scenario seems highly unrealistic.

On the contrary, Germany is working hard to impose its monetary and fiscal discipline on the rest of Europe. At home, it already has a new constitutional amendment prohibiting deficits starting in 2016. Chancellor Angela Merkel vetoed EU bailouts of weaker economies, forcing countries like Latvia and Hungary to seek the tough love of the IMF. The Frankfurt-based European Central Bank, unlike America's Federal Reserve, has a strict inflation-fighting mandate and is prohibited from using monetary policy to jump-start the economy. It has pumped far less money into the EU economy than the Fed has done in the U.S., even at the cost of allowing the euro to rise against the dollar by 20 percent since the start of the crisis. ECB chief Jean-Claude Trichet has told Greece that it must reform on its own, and denied there would be a bailout. Now Merkel is pushing to install German Bundesbank chief Axel Weber to succeed Trichet when his term ends next year to make sure the ECB doesn't soften its course.

As the focus of the economic crisis shifts from the financial to the public sector, there will be more risk and pain. In Latvia, whose currency is pegged to the euro, slashed public spending has accelerated the country's path to depression; GDP is down 24 percent in the last two years. Ireland, which is paring back its deficit with across-the-board cuts in civil-servant salaries, has seen GDP slide by more than 8 percent in the same period. Back in Greece last week, farmers rioted against a planned freeze in their subsidies.

It's no accident that the countries with bubble and deficit problems have also lost labor competitiveness, especially within the euro zone. Ireland, Spain, and Greece have let their wages rise about 20 percent faster than Germany's since the euro's introduction. With Germany now so much more competitive, it has accumulated China-style trade surpluses with weaker euro-zone members. Without the currency safety valve, those countries will have to make deep wage cuts, along with tough product- and labor-market reforms that help raise productivity.

Working out these problems could leave Europe stronger as a political institution. Just as the Great Depression forced the U.S. to impose a tighter federalism, today's economic crisis will likely force Europe into a closer union. Already last week, the EU Commission began pushing reforms on Greece. Through the back door of an economic crisis, the euro zone might then get the kind of political governance that skeptics always warned was necessary for a currency union to work. At the end of the tunnel could be a more integrated Europe, reformed problem economies, and ultimately a more competitive Europe.