Monday, August 31, 2009


South African mobile operator MTN wants to conclude a proposed tie-up with Indian partner Bharti Airtel quickly to end any doubt about the deal, chief executive Phuthuma Nhleko said.

“We want to do the deal sooner rather than later because we are really uncomfortable with the uncertainty,” Nhleko told Reuters on Thursday.

Last week, Bharti and MTN extended talks aimed at creating the world’s third-biggest mobile company for a second time, frustrating investors who wanted the deal finalized, and raising concerns its structure was too complex to succeed. Both firms agreed to extend talks to 30 September, after previously extending discussions by a month to 31 August, as they negotiate a $23 billion cash and share-swap deal aimed at an eventual full merger.


World’s biggest oil company ExxonMobil is in talks with India’s top technology firms and multinational vendors for outsourcing of several IT contracts worth up to $1 billion.

A day after British Petroleum (BP) formally awarded over $1.5-billion outsourcing contracts to TCS, Infosys and Wipro along with IBM and Accenture, top Indian offshore vendors including L&T Infotech and HCL Technologies - along with other MNC vendors - have locked horns with each other for almost $1-billion outsourcing deal being fleshed out by ExxonMobil.

The Economic Times

Spurred by a worldwide consolidation wave, Indian carmakers are rushing to global automotive designers in a bid to give a cutting edge to their products line-up. Auto majors such as Bajaj Auto, Maruti Suzuki, Mahindra & Mahindra and Tata Motors are understood to be meeting several top auto designers in a bid to scale up their in-house design functions.

Senior officials of these companies have conducted several rounds of interviews at a recent Society of Automotive Engineers event with designers from Chrysler, BMW and others based out of Europe and the US.

The Economic Times

Indian stocks rose more in the first 100 days of Prime Minister Manmohan Singh’s leadership than under any new government since 1991. Investors predict more gains as he opens up the world’s second-fastest growing economy.

The Bombay Stock Exchange’s Sensitive Index climbed 16 percent since Singh started a second term on May 22 as international investors bought $4.9 billion more shares than they sold, data compiled by the bourse show. The advance is the biggest since the 40 percent rally after Prime Minister P.V. Narasimha Rao came to power, and compares with the 8.4 percent increase for the Standard & Poor’s 500 in the first 100 days of U.S. President Barack Obama’s administration.


Thursday, August 13, 2009


The acquisition is expected to strengthen its domain-based solutions in key BFSI vertical

IT and BPO services company MphasiS today said it will acquire AIG Systems Solutions (AIGSS), the IT arm of the US-based insurance giant AIG (American International Group), for an undisclosed sum.

The acquisition, which comes with guaranteed business from AIG, is expected to strengthen MphasiS’ domain-based solutions in its key banking, financial services and insurance (BFSI) industry vertical, MphasiS CEO Ganesh Ayyar said. The BFSI segment brings in 40 per cent of the company’s revenues.

MphasiS, a majority of which is owned by Hewlett-Packard subsidiary EDS, did not disclose the financial details of the deal. With cash and bank balances of $74 million in its second quarter ended April 30 this year, the company is likely to fund the acquisition through internal accruals, according to analysts.

The MphasiS buy of AIGSS signals renewed activity in the tech merger and acquisitions space, which has been sluggish since January this year. TCS had bought the back-office unit of Citigroup Inc for $505 million in October last year, while Wipro acquired in December another captive unit of Citigroup for $127 million.

“Indian IT companies are positive on cash flows and are looking at rebounding from the recession through inorganic growth. We expect action to pick up on the M&A scene,” said Neeraj Atri of IndusView Advisors, a strategic consulting firm.

AIG, once the world’s largest insurance company, was part of an $800-billion fiscal stimulus package from the US government and has been looking at hiving off assets which fall outside its core insurance business.

AIGSS has around 800-850 people on its rolls, with offices in Chennai and Kolkata, and provides IT services to AIG companies worldwide, according to an MphasiS filing with the Bombay Stock Exchange. MphasiS currently employs 33,810 people, of which the applications services business has a total of around 15,000 employees. The acquisition is expected to help MphasiS gain market share in the insurance domain and enhance its portfolio of domain-specific solutions.

“This acquisition gives MphasiS the depth and breadth for us to be the preferred partner of choice in their (AIG’s) IT transformation,” MphasiS President (Applications Services Business Unit) Gopinathan Padmanabhan said in a statement.

Post-acquisition, AIGSS is expected to become part of the key application services business unit of MphasiS. This unit showed a quarter-on-quarter growth of 5.2 per cent for the period ended April 30 this year, and brought in 63.8 per cent of MphasiS’ total revenues. While the company has seen pressures in terms of pricing and solutioning, it has been winning new deals in the marketplace, CEO Ganesh Ayyar had said in a internal mail to employees in May this year.

For the second quarter ended April 30, MphasiS showed 219.1 per cent growth in PAT to Rs 224.5 crore from Rs 70.3 crore earlier. Total revenues for the quarter crossed Rs 1,000 crore, with consolidated topline at Rs 1,048.5 crore increasing 52.3 per cent from Rs 688.4 crore in the same period of 2008. The company hired 3,822 people to support growth during the quarter, of which 117 were freshers.

* A Spurt In Overseas Fund-Raising By Indian Companies

* Indian Companies Preferring GDR More In Comparison To ADS Route

* Institutional Fund Raising Through Qualified Institutional Placement Also On Rise

* Foreign Institutional Investors Turned Net Buyers In The Indian Markets

The appetite of global investors for Indian equity is increasing again, as reflected by a spurt in overseas fund raising by Indian companies in recent times. The fact that India still continues to grow at 6% - 7% while the global economy is facing one of its most severe economic crises, has made the global investors less risk-averse to India. They are realising and appreciating that as soon as the global economic conditions improve, India’s growth rate would move closer to double digit.

As a result, overseas public offerings of Indian blue-chip companies, which provide the global investors an attractive option to participate in the India growth story, are on the rise. Also, the Qualified Institutional Placements (QIPs) in which mostly the Foreign Institutional Investors (FIIs) participate, have become a preferred route for fund raising by Indian companies. Apart from that, the recent outperformance of the Indian stock markets when compared with other prominent markets is largely due to the renewed buying interest among the FIIs, who want to ride the next wave of India’s growth.

In the first four months of fiscal year 2009-10, Indian firms raised about $3 billion (Rs.14,686 crore) through QIP route and about $2.5 billion (Rs.11,990 crore) through GDR (Global Depository Receipt) and ADR (American Depository Receipts) issues, according to an estimate of Delhi-based research firm PRIME Database. The trend of tapping GDR/ADR route actually revived in July 2009 only, during which the Indian firms moped up more than $2 billion through these instruments. After touching the peak levels of $5.32 billion QIP offerings and $6.39 billion GDRs/ADRs during 2007-08, the global meltdown of equity markets had turned the year 2008-09 in to a drought year.



No. of Issues


($ mln)













(Till Jul,09)






No. of Issues


($ mln)





















(Till Jul,09)




Source: PRIME Database

Indian Companies Become One Of The Biggest Fund Raisers In Overseas Markets

The $1.5 billion (Rs.7,305 crore) ADS issue of Sterlite Industries, a subsidiary of London-listed Vedanta Resources Plc. and India’s largest copper producer, closed in just six hours on 16th July 2009. It was the largest U.S. share sale by an Indian company in the last two years. Earlier, India’s largest private sector bank ICICI Bank had raised $2.46 billion through ADS offering in June 2007.

The other big fund raisers through ADR/GDR route in the recent weeks are, by the world’s sixth largest steel maker Tata Steel Ltd($500 million), India's largest private power producing company Tata Power ($335 million) and the world's fifth-largest wind-turbine maker Suzlon Energy Ltd($110 million).

Tata Steel’s $500 million GDR issue is not only the largest ever Indian Global Depository Receipt (GDR) offering in London, but also one of the biggest new equity issues to be conducted by a company outside its home market on any global exchange in the last 12 months.

"As a globally ambitious Indian company, with significant operations in Europe, Tata Steel is a high profile addition to our markets. Tata Steel's listing demonstrates that London remains the market of choice for companies from across the globe seeking to access a truly global pool of international investment capital and benefit from trading on the International Order Book, the world's most liquid trading platform for GDRs." London Stock Exchange Group’s Xavier Rolet, Chief Executive appreciating Tata Steel’s offering said.

Prithvi Haldea, CMD of PRIME Database, however warns that it should not be viewed as hype. “Investors are still very selective in what they are buying. They are willing to look at investment opportunities from credible companies with a substantial track record and where the pricing is attractive,” he says.

Indian Markets Outperform The U.S. And Asia On The Back Of FII Buying

The outperformance of the Indian equity markets in the recent months can directly be attributed to the renewed buying interest of the foreign institutional investors (FIIs). July 2009 is set to become the fifth consecutive month in which the FIIs have made net purchases on the Indian bourses. March 2009 proved to be the turning point when FIIs turned buyers again after almost a year. From May 2008 to February 2009, they had been on a selling spree (barring December 2008) in India due to global worries. The selling in India during this period was also due to the fact that India was one of the few markets where they could have sold their old stock investments in profit even after a significant decline from the peak.

Since March 2009, the net FII purchases in this year have now reached almost $8 billion including $4.15 billion in May 2009 – the month in which the United Progressive Alliance (UPA), India’s ruling coalition gained a clear majority in the elections for the lower house of the Indian parliament setting aside the political uncertainties. In line with the FII buying, India’s benchmark index Sensex has moved up from 8,110 on March 09, 2009 (the lowest of the year 2009 so far) to 15,379 on July 24, 2009 scoring a 90% gain in just about four and half months. Earlier, in contrast, FIIs had made net selling on the Indian bourses to the tune of $11.97 billion during the year 2008. Accordingly, Sensex had fallen from 20,287 on December 31, 2007 to 9,647 on December 31, 2008 registering a decline of 52.4%.

It’s important to note that although the rally in Indian market during March to July has been a part of global rally, but it has outperformed the indices of other emerging markets and the U.S. Dow Jones Industrial Averages Index, which also touched its low of 6,440 on March 09, 2009 has since moved up 41.2% to 9,093 on July 24, 2009. In Asia, Nikkei of Japan has moved up 41.5%, while Hang Seng index of Hong Kong and Straits Times of Singapore have scored 76.1% and 73.8% gains respectively in the same period.


India continues to attract venture capital firms seeking extra-ordinary returns. The country’s attractiveness is highlighted by the fact that about 60 foreign investment firms have expressed eagerness to invest in India, as per data as on May 31, according to the country’s stock market regulator Securities and Exchange Board of India (SEBI).

Currently, there are 129 foreign venture funds and 132 domestic funds operating in India. These funds collectively invested about $8 billion in FY 2008-09, with almost equal amount of investments.

Real Estate sector emerged favourite, attracting $1.4 billion of investments followed by telecommunication and services sectors sharing the second slot at about $630 million each and information technology $550 million, respectively.

India Inc.’s appetite for overseas investments at about $37 billion in the financial year 2008-09 is underscored by its corresponding increase in capital expenditure and inorganic expansion strategy to accelerate growth.

The surge in capital expenditure of $47.5 billion at more than 21% in the financial year 2008-09 has a very visible contribution of the infrastructure sector that accounted for a large chunk of the increase at $18 billion, with a share of more than a third.

As a clear signal of revival, the increased capital expenditure in the sector coupled with the Indian government’s well timed stimulus packages, amounting to 3.5% of the country’s GDP, resulted in a healthy growth of 6.5% in the six core infrastructure sectors in June 2009. The sector had grown by 5.1% in corresponding month the previous year, while the figure for May 2009 stood at 2.8%. Cement topped the chart with a growth of 12.8%, while steel rose 5.3%, both crucial inputs for construction activity.

Of significance is the fact that a part of the expense finds its way in to mergers and acquisitions (M&As), as in the case of the largest acquisition of the sector by state-run Oil and Natural Gas Corporation Ltd’s (ONGC) of then London Stock Exchange listed-Imperial Energy Corporation for $2.8 billion in August 2008. The other large overseas acquisition by an Indian company was that of the U.K.-based automobile marquee brands Jaguar and Land Rover by Tata Motors Ltd for $2.3 billion.

The potential merger of India’s largest GSM mobile telecom service provider Bharti Airtel Ltd and South Africa's largest telecom company MTN Group Ltd for about $23 billion will substantially add to the share of the telecom sector in the capital expenditure this year. The deal will result in about $4 billion of net cash outflow from Bharti. (See Vol4 | Issue 7; Bharti-MTN: A Billion Subscribers in Sight).

Steven Spielberg, Hollywood’s iconic film director’s cash strapped DreamWorks Studios will receive a lifeline of $825 million in financing for film production as part of a 50:50 joint-venture with India’s Anil Ambani founded Reliance Big Entertainment (RBE).

Of the $825 million, RBE’s parent company Reliance-Anil Dhirubhai Ambani Group (R-ADAG) will provide $325 million as equity infusion while The Walt Disney Company will table $175 million in distribution advance. Rest of the funding will come from the global financial services firm JP Morgan Chase & Co as debt.

The Indian Film industry popularly called ‘Bollywood’ that churns out the largest number of movies in the world, has welcomed global film production companies in to its fold including the U.S.-based Twentieth Century Fox Film Corporation, Warner Brother Entertainment, Inc., Viacom Inc., Sony Pictures Entertainment, Inc., among others in partnership deals with Indian counterparts for film production and distribution.

Renowned Indian actor Shahrukh Khan's Red Chilies Entertainment and director Karan Johar's Dharma Production's have recently entered in to a marketing and distribution deal worth more than $20 million with Oscar winning film Slumdog Millionaire’s fame Fox Star Studios, a joint venture between Twentieth Century Fox and the U.S.-based News Corporation’s Indian subsidiary Star India.

DreamWorks has required funds since it parted ways with the U.S.-based media conglomerate Viacom Inc’s Paramount Motion Pictures Group in September 2008. The financing deal will enable Spielberg to resume movie production, with the target to make five to six films per year. The first production is scheduled to start this year for release in 2010.

The Ambani-Spielberg joint-venture potentially elevates the fledgling $2 billion Indian movie entertainment sector growing at 9% compound annual growth rate (CAGR) to global scale with projects in the pipeline involving Hollywood stars George Clooney, Julia Roberts and Brad Pitt, among others.

RBE’s Holywood ambitions are not limited to DreamWorks only. BIG Pictures, owned by RBE, has plans to produce films with Nicolas Cage’s Saturn Productions, Jim Carrey’s JC 23 Entertainment, George Clooney’s Smokehouse Productions, Chris Columbus’ 1492 Pictures, Tom Hank’s Playtone Productions, Brad Pitt’s Plan B Entertainment, Jay Roach’s Everyman Pictures, Brett Ratner’s Rat Entertainment and Julia Roberts’ Red Om Films.