VCCircle

The private equity arm of Kotak Mahindra would invest around $10 million in Hyderabad-based Heritage Foods, reports The Economic Times. Heritage is promoted by Chandrababu Naidu, politician and former chief minister of Andhra Pradesh. The deal was signed on Monday evening, the report added, quoting sources.
Heritage has informed stock exchanges that it would hold its board meeting on Friday, January 4, to consider the proposal of issuing equity shares/warrants on preferential basis to promoters or non-promoters. The Kotak investment is to be decided in this meeting.
The proceeds of the fund would be deployed to expand its retail format 'Fresh@' stores from the present 50 to 100. The store plans to expand the footprint and look at other markets in mid term. They currently have stores in Chennai, Bangalore and Hyderabad, and sell 50 grocery products like cereals, pulses and staples under brand name Farmers Pride. The company is primarily into milk and milk products and has established a network of procurement and chilling plants across South India.

HDFC sells 7.15 per cent in Life JV to partner: Housing Development Finance Corporation (HDFC) will transfer 7.15 per cent stake in HDFC Standard Life Insurance Company to its foreign partner - Standard Life - at a pre-agreed price, reports The Hindu Business Line. Standard Life is said to have paid about Rs 201 crore to HDFC for the 7.15 per cent stake, according to the report. With this stake buy, Standard Life will hold 26 per cent in the insurance JV, the maximum foreign equity allowed in insurance ventures. Earlier, Standard Life could not hold 26 per cent in the insurance company as it held 9.2 percent stake in the parent HDFC. But, following Standard Life's last year's sale of its stake in HDFC to Citigroup for Rs 3,100 crore, that hurdle has been removed. After the current sale, HDFC's stake in Life insurance business will come down from 81.15 per cent to 74 per cent.

Austrian co ZKW to pick up 26% stake in Neolite: Austria-based ZKW Zizala Lichtsysteme GmbH will pick up a 26 per cent stake in automotive lighting manufacturer Neolite Industries for an undisclosed amount. ZKW, an OEM supplier for the front lighting for premium segment vehicles in Europe, has revenues of about 200 million euros from automotive lighting business. Neolite Industries has inked a joint venture agreement with ZKW- Zizala Lichtsysteme GmbH. ZKW will be taking an initial stake of 26 per cent in existing business of Neolite group, with an option to increase its stake up to 40 per cent.

ICICI Bank to sell 5% in Mascon Global: Mascon Global promoters have bought back 5 per cent stake from ICICI Bank. , K Chandra, the company's Executive Chairman & CEO, will see his holdings in the company rising to 9.26 per cent from the existing 4.25 per cent. Mascon Global develops and implements end-to-end IT solutions for clients, ranging from Fortune 500 companies to start-ups, from diverse industry segments. The firm also provides software implementation and consulting services throughout the US, Canada, Latin America, Europe, India and Asia Pacific.

UBS Global Asset Management has called off its plans to acquire Standard Chartered Bank's mutual funds management business in India after the sale and purchase agreement expired.
In a statement issued today, UBS has said: "Following the expiry of the Sale and Purchase Agreement that they executed in January 2007, UBS and Standard Chartered Bank have decided not to continue negotiations regarding the acquisition by UBS of the Standard Chartered mutual funds management business in India." UBS had agreed with Stanchart to acquire the latter's mutual fund business in India for $118 million. Although UBS did not mention the reason, it's probably that Reserve Bank of India did not give its approval to UBS for the deal. The Swiss firm however, said a strategic alliance between the two companies for fund distribution in Asia, announced at the same time as the planned acquisition, would remain unaffected.
Meanwhile, The Economic Times reports that StanChart is in talks with other global players for selling the AMC business. They include Credit Suisse, Morgan Stanley, Goldman, Lotus and Aviva.

India's largest real estate firm DLF plans to list several companies from its stable to raise about $5 billion more from the capital markets. The Economic Times reports that the company over the next three years may list at least five companies such as DLF Homes, DLF Retail, DLF Hotels, DLF Utilities and DLF Infrastructure. The parent DLF had listed early this year raising about Rs 9,000 crore. DLF in all is looking at infusing about $10-12 billion in its various businesses over the next three years, the paper report, quoting DLF group chief finance officer Ramesh Sanka.
DLF is planning to list its office space development arm DLF Assets in Singapore in the first quarter of next year. It could be a $2-2.5 billion issue. However, other businesses are expected to be listed in Indian capital markets only.

Delhi-based IT hardware and diversified electronics company Intex Technologies plans to raise funds via an IPO or private equity placement, says a report. The company, which started as an importer of ethernet cards from Taiwan in 1996, is now a leading distributor and manufacturer of computer peripherals. The company also recently ventured into the marketing of mobile phones, essentially targeted at rural markets, besides car audio and accessories.
Intex, founded by first generation entrepreneur Narendra Bansal, wants to position itself as an end-use products company (an electronics brand?) from a mere computer peripherals player. It's now looking for a foreign partner in a joint venture to start manufacturing of audio products. The joint venture should happen in the finnacial year 2008-09. Intex has a factory in Jammu and Baddi in Himachal Pradesh. Intex is targetting a turnover of Rs 380 crore this financial year, up from Rs 260 crore this year. The profits are not known.

Boston-based Venus Capital Management has launched its first private equity offering to invest in late stage India-based companies. The firm is also readying a beta product and a real estate offering for the region to be launched next year, says a report. Venus is targeting between $25 million to $50 million. "It will invest in companies that are going to have liquidity events within two years," the firm's founder Vik Mehrotra has been quoted as saying.
Mehrotra mentioned that the firm is prepping a beta product that will look to outperform the Nifty Index for investors with hedge fund exposure in the region. The firm's India-focused $400 million Venus Arbitrage Fund, which invests in equity-related arbitrage opportunities, is up 14.6 per vent YTD through November. Its 19-month old $110 million Venus Special Situations fund has also fared well, returning 30.05 per cent during the same period.
Venus Capital, founded in 1994, manages some $700 million in total assets. First ever private equity investment in an Indian art house was made by Venus Capital. It picked up 5 per cent stake in Osian's Connoiseurs of Art for Rs 11.2 crore ($2.5 million). The firms has been betting big on hedge funds till now.

Global Broadcast News Ltd, the Delhi-based broadcaster of news channels, CNN-IBN and IBN 7, has got the government nod to induct up to 26 per cent foreign direct investment (including foreign institutional investors) at an investment of Rs 500 crore. The company already has the board approval to raise upto $200 million via international instruments.
In a news report, the company has said that it would invest Rs 500 crore in an entertainment venture with US media group Viacom Inc. and in launching regional news channels. GBN is part of the Network18 Group (earlier known as TV18). GBN had raised Rs 105 crore via an IPO early this year. GBN had recently bought out the 10 per cent stake of New Vernon Private Equity in IBN 7 (a JV owned by GBN and Jagran Group) for Rs 20 crore. GBN is consolidating IBN 7 to itself from the current JV arrangement (see details here.)

The rumour about Wipro Ltd, India's third-biggest software exporter, eyeing France's Capgemini is back again. The Hindustan Times reports that Wipro may make a bid by the end of January, and that could value the French firm at $7 billion. Apparently the bankers Citigroup and HSBC are in discussions with the Bangalore based IT company to finalise a plan before the year-end holidays, the paper added, citing investment banking sources. It could be a leveraged buyout, and various financing options are being discussed, according to the paper. Wipro's bid for Europe's largest computer consultancy firm could be close to 48 euros per share, the paper said.

Gujarat NRE Coke has completed the acquisition of the Australia-based Elouera mine from BHP Billiton a part of the Australia-based Illawarra Coal Business for an undisclosed amount. The acquisition was made by Gujarat NRE Resources NL(Gujarat), the Australian flagship firm of the Gujarat NRE Coke group,. The coal lease and associated licences, including the mine, would be transferred along with associated land holdings and the responsibility for rehabilitation and closure of the mine once operations are complete. Post-transfer, the mine would be re-christened NRE Wongawilli. With the global surge in coal demand, the buyout is expected to reap benefits for the group.

LT Overseas — which owns the 'Daawat' brand of basmati rice — has bought the US-based rice brand Kusha Inc for $20 million, reports The Economic Times. The acquisition was made through LTO NA, a wholly-owned US subsidiary of LT Overseas. Kusha, promoted by Sam Nayyer, is an established brand in Southern California with revenues of around $40 million. It imports premium quality basmati rice from several countries in the Asian market including India. The rice industry in the US is currently worth around $80 million and is growing 20 per cent year-on-year.

This was probably the reason why Travelguru recently gave $25 million valuation to Desiya. In October, VC Circle first reported about Travelguru acquiring online hotel consolidator Desiya.com. It's the first M&A in Travel 2.0 - the second wave of online travel portals. In 2004, although Kuoni Travels acquired hotel booking engine Resnet from Traveljini, an ICICI Venture funded company, only the industry noticed that deal. But what is striking this time is the valuation of the acquisition. The Economic Times last week reported that the Desiya deal was done at $25 million (in stock mainly and a little bit in cash). If the number is true, this clearly is one of the largest deals in Indian online space, after, of course, Sify's 1999-acquisition of IndiaWorld for $115 million.
The industry reaction is mixed on the deal size. Some say it could be hyperbole, while some say it might not be completely unrealistic. Desiya, founded in 2005, claims to have 1,500 travel agents and 250 travel portals among it's clients. It also claims to have about 2,800 hotels in its inventory all over India, while registering 600 transactions a day (over 500 B2B transactions and 100 inbound hotel bookings). VC Circle spoke to Amit Taneja, 32, the founder of Desiya and a former executive of Expedia in the UK, on the sellout and where the combined business is headed.

Why did you sell?
In terms of our presence, we are still at an early stage in an industry which itself is so nascent. In our own right, we have been doing quite well. By joining hands with Travelguru, we are set for the bigger game.

The valuation of $25 million? How do you explain that?
It's in accordance with the long term potential of the industry. India today is considered one of the fastest growing aviation markets. As internet users grow, the number of people making travel arrangements online is expected to increase substantially. The hotel category operates on a very high margin, unlike 'air' which primarily is a commodity. With similar seating arrangements, and facilities available in almost all the flights, only cost matters to the end user.
The valuation is explained in terms of the gains that could be leveraged from the growth of this category (hotels). After all, we haven't yet seen holiday planning tools and user recommended travel destinations which make life of a traveller easier. Once we start seeing such interactive tools, online travel sites could move beyond being just online booking engines.

Is it an all-stock deal? Is there a cash component?
It is largely a stock deal with a small component in cash. The acquirer would be able to give you more information.

What is your gross merchandise revenue and the commission revenue?
Sorry, we will not be able to share these numbers.

Why did you sell to Travelguru?
We decided to partner with Travelguru after much deliberation, given the company's vision, range of online services, extensive reach across India and its technological capabilities. They had been our clients and we share a comfortable relationship, both professionally and personally. We were able to develop a sense of confidence in each other. They understand this space very well and had expressed sufficient interest in this. We will continue to be run as an independent subsidiary of Travelguru.

What does this acquisition mean to both Travelguru and Desiya?
The acquisition is strategic and should not be looked at merely as a financial acquisition. We thought over it. Joining hands will make the combined entity the no.1 in online hotel consolidation market. The key challenge for local OTAs is the technology platform, mid and back office systems. This is where a company like Desiya with its global experience and expertise, coupled with localised offering would be able to differentiate. The teaming up would mean delivering a great value proposition and good customer service both from a consumer point of view and B2B point of view.

Will you continue to be a hotel aggregator? Any plans to get into airline aggregation?
Yes, I will continue with my plans of being a hotel aggregator and moving up the value chain by integrating with many more five star hotels, structuring the supply chain and consolidating with suppliers. With the kind of revenues, expertise and customer value that we have created, I would rather continue focusing on this (with a high commission revenue basis), and there is more game here than venturing into airline aggregation space. Probably, we are open to airline aggregation space later, but not in the short term.

What will be the new management structure post-merger?
I will continue taking care of the online B2B activities as I have been doing previously. There has not been a major revamp in the organisational structure as Desiya will run as an independent subsidiary to Travelguru. And by very nature of the two businesses, the skillset required is complementary to each other. But new roles will certainly emerge on the managerial side as the business evolves. No short term change as of now.

What is the future course of action?
Integration is the high priority job in hand. Identifying synergies and people integration of the two portals will be completed by January. Technology integration will take around four months.

Is the online space going to witness more consolidation in the times to come?
Yes, as the volumes keep growing, there is much more consolidation and activity to be seen in the online travel space. There are players competing aggressively and waiting to get the larger pie of the internet market. There are international biggies who are doing their homework on this, and watching this space very closely. They might have not made any formal announcements yet, but niche travel sites like Orbitz, Expedia or Viator, Booking are all looking at India. With Travelocity already entering the Indian market, this space will see a lot more consolidation and activity in three to four months from now. Also, there are a lot of offline players looking at online presence, now.

Is there any impact of rupee appreciation against the US dollar on the business?
This certainly will pose indirect implications. There will be an slack in the number of inbound tourists in the overall sector with occupancy of the hotels dipping in the tourist season and India has the most expensive destination hotels in Asia. Hotels in Thailand and Singapore are much cheaper. In terms of rupee appreciation, this does not really matter because our commission on the hotel tariff is actualised as a percentage commission in the Indian currency.

Private equity investor Citigroup Venture Capital (CVCI) plans to pare a part of its 75 per cent stake in retail broking firm Sharekhan. The Economic Times reports that Merrill Lynch and Baring private Equity are potential suitors for the stake in the Mumbai-based company. CVCI chief Ajay Relan has confirmed to the paper that they are indeed looking at bringing in new investors to the broking firm.
CVCI and IDFC had bought out the stake of promoters led by Shripal Morakhia (37 per cent), and private equity investors General Atlantic, Intel Capital and HSBC Private Equity (together 48 per cent) in Sharekhan. CVCI is said to be holding about 75 per cent stake, employees 15 per cent and the rest by IDFC. ET reports Merrill is set to pick up about 10-20 per cent from CVCI in Sharekhan. The valuation is reportedly anywhere between Rs 1,500 crore to Rs 2,000 crore.