Indian Economy Weely Newsletter

1. Top Headlines
Vinod Khosla-backed Praj Picks 50.2% In Neela Systems
For Rs 64Cr
TVS Capital Nears First Close After Raising Rs 200Cr For
Top-up Fund
General Atlantic To Invest Up To $125M In Fourcee Infra
Pearson In Talks To Buy Educomp's 50% Stake In Indiacan
Ghari moves out Wheel, to be No 1 in laundry market
Healthkart Raises Rs 27Cr From Sequoia Capital, Omidyar
Clearwater Capital Makes Open Offer For Kamat Hotels’
Stake
Thomas Cook decides to sell its India arm to raise funds;
shares rise
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2. Weekly Economic Review
There’s good news for India’s economy. New data shows industrial output has
rebounded in November after dropping into negative territory the previous
month. The index of industrial production stood at 5.9% in November. The
revised figure for October shows a fall of 4.7%. November’s IIP is highest since
June. And it’s also better than most street estimates. Still, the index is known
for its volatility and may not be seen as a sure indicator of broader economic
revival.Food inflation remained in negative territory in the last week of
December. India’s food price index fell 2.9% in the period to 31 December.
The previous week it was even lower at minus 3.36%.
IT giant Infosys announced its quarter result this week, setting the tone for
the earnings season. Trouble was, the news wasn’t all good. While the
company’s numbers are in line with street estimates, global uncertainty has
forced it to cut its guidance. Infosys has slashed its revenue growth forecast
for a second time this financial year. It now stands at just 16%. That’s in
contrast to the previous range of 17-19%.
Net profit rose 24.4% quarter-on-quarter to 2,372 crores. And margins went
up to 31.2% from 28.16% in the quarter before. Infosys’ numbers were helped
along by a 7.36% depreciation of the rupee during the quarter, a factor that
caused the firm’s rupee revenue to shoot up. Meanwhile Infosys CFO V.
Balakrishnan said that even if clients slashed their I-T budgets in the coming
months, outsourcing budgets were more likely to stay intact.
Also in earnings, India’s biggest mortgage lender has reported profits, but has
still fallen short of expectations. HDFC posted a 10% rise in net profit to
Rs981 crores on a year-on-year basis. Meanwhile its loan book expanded 21%
to Rs1.32 trillion. And net interest income went up 18% to Rs1,235 crores,
while net interest margin was at a stable 4.3%.
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3. Inside The Story
Vinod Khosla-backed Praj Picks 50.2% In Neela Systems
For Rs 64Cr
Engineering firm Praj Industries that makes ethanol equipments, has
acquired a majority stake in Neela Systems Limited (Neela) for
approximately Rs 64 crore($ 12 million), valuing the privately held
water treatment firm at Rs 127.5 crore. Mumbai based MX Capital was
the exclusive financial advisor for the seller.The public listed firm that is
backed by a number of marquee investors including ace stock
market.investor Rakesh Jhunjhunwala, Tata Capital and Norwegian
sovereign wealth fund, will buy 50.20 per cent of Neela.
TVS Capital Nears First Close After Raising Rs 200Cr For
Top-up Fund
Chennai-based private equity firm TVS Capital Funds Ltd, which
manages TVS Shriram Growth Fund-IA, has raised firm commitments of
Rs 200 crore and is soon expected to make a first close of its top-up
fund. The funds have been primarily raised from ultra high networth
individuals (UHNWIs) and family offices, signalling the increased
ophistication of investors entering this asset class.TVS Capital launched
TVS Shriram Growth Fund-IB in August 2011, targeting Rs 400 crore
with a green shoe option to raise another Rs 100 crore. The PE firm is
now close to making its debut exit and exploring new deal structures
like mezzanine and private investment in public equity (PIPE).
General Atlantic To Invest Up To $125M In Fourcee Infra
Kicking off a big-ticket transaction in India in the New Year, global
private equity major General Atlantic is investing up to $125 million to
buy a minority stake in Fourcee Infrastructure Equipments Pvt
Ltd,TheMumbai-based freight and logistics company.The investment
will be through a mix of fresh capital infusion into the company and a
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4. secondary transaction to buy out some stake of the existing investors,
the sources add. This will be the third round of funding for the company.
Pearson In Talks To Buy Educomp's 50% Stake In Indiacan
Pearson Plc., the world's largest education service provider and one of
the leading media groups, is in advanced stages of discussion with
Educomp Solutions Ltd to buy out the latter's 50 per cent stake in
Indiacan, a vocational education company formed as a joint venture
between the two companies.While the details of the company's
valuation are not known, sources close to the development peg the deal
value (for 50 per cent stake) in the range of Rs 350 crore ($70 million)
to Rs 500 crore ($100 million).In 2009, Pearson Plc. invested $17.5
million in Indiacan (then known as Educomp Vocational Education Pvt
Ltd), thereby valuing the company at $36 million.
Ghari moves out Wheel, to be No 1 in laundry market
Twenty-five years after launching a laundry brand inspired by Nirma,
Ghari detergent appears to have edged out, at least temporarily,
Hindustan Unilever's Wheel from the number one slot in the Rs 13,000-
crore laundry industry. Ghari, manufactured by Kanpurbased Rohit
Surfactants Pvt Ltd (RSPL), had a higher share in October and
November than Wheel, a brand that contributes over Rs 2,500 crore, or
12%, of the Rs 20,000-crore top line of Unilever Plc's Indian unit. "As
per value market share data, on a 12-month average share basis, the gap
between Wheel and Ghari now stands at just 30 basis points; however,
Ghari's shares were higher than Wheel for the last two months," Said
market research firm The Nielsen Company. In November, Ghari had a
17.4% share compared with Wheel's 16.9%, according to people
familiar with the numbers
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5. Healthkart Raises Rs 27Cr From Sequoia Capital, Omidyar
Ten-month-old Gurgaon-based start-up Bright Lifecare Pvt Ltd, which
runs the online health store Healthkart.com, has raised Rs 27 crore in
second round of funding from existing investor Sequoia Capital and
another new investor Omidyar. The fund raised is expected to be used
for expansion of its product portfolio and developing an online
magazine.This comes as one of the first few e-commerce funding deals
in the New Year.Healthkart was reportedly looking to raise as much as
$10 million, according to earlier media reports. Last April, the company
raised $1 million as seed fund from Kae Capital and Sequoia Capital.
Clearwater Capital Makes Open Offer For Kamat Hotels’
Stake
Private equity firm Clearwater Capital Partners has made an open offer
to increase its stake in the hospitality company Kamat Hotels India Ltd
(KHIL). The open offer for another 26 per cent stake comes as
Clearwater has converted its foreign currency convertible bonds
(FCCBs) during the last two months. This has resulted in Clearwater’s
stake in Kamat rising to more than 32 per cent, past the new open offer
threshold of 25 per cent.The deal might see Clearwater shell out up to
Rs 67.01 crore if the entire 26 per cent is subscribed. The offer is being
made at Rs 135 per share, which is more than Kamat’s 52-week high. In
2010, Clearwater Capital also made an open offer, increasing its stake to
26 per cent in Vadodara-based Sayaji Hotels.
Thomas Cook decides to sell its India arm to raise funds
The cash-strapped UK parent of Thomas Cook has decided to sell its
Indian arm to raise money to bolster troubled global operations after
heavy debt and writedown pushed the world's oldest travel firm to the
brink of collapse last year. Royal Bank of Scotland will find a buyer for
Thomas Cook India after the two foreign promoters pledged their entire
holding in the Indian arm with the British bank on Wednesday. A person
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6. with direct knowledge of the development said Thomas Cook is valuing
the Indian business at around 700 crore. However, there may not be
many takers at that price.
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