VCCircle

A deal is not concluded yet in broking firm UTI Securities. It was reported earlier that Standard Chartered Bank had almost closed a deal to buy a stake in UTI Securities, currently owned by Securities Trading Corporation of India. The firm is still up for grabs if anyone is interested and willing to give the price - probably higher than what Stanchart is offering. A Stanchart executive has been quoted by Press Trust of India (Via The Economic Times) as saying that they were still in "advanced stage" of talks with STCI to buy a stake in UTI Sec.

"We remain interested in it (UTI Securities) and continue to talk," Standard Chartered Bank India CEO Neeraj Swaroop told media. STCI had put 49 per cent stake in UTI Sec on the block. In fact several firms like Kuwait's Global Investment House, Citigroup, Macquarie Bank, and Societe Generale were reportedly in talks with STCI to buy a stake. In May, it was reported that Stanchart had almost done the deal. Several banks are looking for an entry into broking and financial products distribution, so a firm like UTI Sec offered synergy.

STCI bought UTI Sec in February 2006 for Rs 265 crore from the Specified Undertaking of UTI. STCI wants to sell 49 per cent of it now, and the rest after the lock-in period which will end in 2009.

Meanwhile, Stanchart said it's looking for partners for its proposed asset reconstruction company.

Related:

Standard Chartered Bank To Buy 49% In UTI Sec For Rs 140-150 Crore

Citi, Macquarie And Three Other Foreign Firms In Race For Stake In UTI Securities

Acquisition by Indian companies overseas continue. Raman Roy's Quatrro BPO Solutions has announced the acquisition of mortgage loan processing operations and the technology platform of US-based Preferred Financial Group, Inc. The financial terms are undisclosed.

The deal is considered unique since Quatrro would become the first BPO from India to offer an onsite-offsite model. This path has already been taken by software services firms. "We will be acquiring the technology platform, the people and the origination business of the US partner and that would also enable us to provide end-to-end fulfillment services to mortgage lenders across the US," Quatrro Chairman Raman Roy has been quoted as saying.

Apparently this model will hep Quatrro give services at 30 per cent to 50 per cent cheaper than the US.

The acquisition will be done by Quatrro Mortgage Solutions, a subsidiary of Quatrro. PFG is a privately-held financial services corporation that originates, underwrites and funds mortgage products.

In April 2007, Quatrro had bought a majority stake in Chennai-based KPO firm Scope eKnowledge for an undisclosed amount. It bought out Mauritius-based fund eIndia’s stake in the 500 people firm.

Related:

Quatrro Acquires Majority Stake In Chennai KPO Scope eKnowledge

As rumoured earlier, Wipro Technologies, the global IT services business of Wipro Ltd, has acquired Infocrossing, Inc., a Nasdaq-listed IT infrastructure management company for $600 million in an all cash deal. Wipro will pay $18.70 a share, which is about 13 per cent premium over the six month average of Infocrossing's share price.

The deal, the largest by Wipro and the largest overseas acquisition by an Indian IT company yet (see the table, right), is expected to close by the fourth quarter of 2007. It also needs regulatory approvals. The deal is also significant since it's the first acquisition by Wipro of a listed company abroad, which shows that Indian companies are getting better at wading through the complex regulatory hurdles and disclosure norms. Infocrossing had revenues of $232.4 million and net income of $9.3 million for the year ending March 31, 2007.

The company provides integrated managed infrastructure services to global clients. The acquisition will give Wipro Technologies a strong presence in the remote infrastructure management space, by adding five data center locations and about 900 employees in the US, according to Sudip Banerjee, President, Enterprise Solutions of Wipro Technologies. Infocrossing also brings in expertise in health plan and payer management segments. The company has processed over 175 million claims annually and also provides contracted services to over 90 managed care organisations.

The operating margins of Infocrossing is only in the range of 10-14 per cent as against Wipro's 25 per cent. Apparently, the margin differences will be mitigated in the next 2-3 years, according to company officials. The current global IT infrastructure market is estimated to be around $150 billion, of which the remote infrastructure management services (that can be offshored) will be worth $70 billion, according to NASSCOM.

Wipro was advised on the transaction by Citigroup and represented by the law firm of Wilson Sonsini Goodrich and Rosati, while Infocrossing was advised by Credit Suisse Securities (US) and represented by the law firm Gibson, Dunn & Crutcher.

Prior to this, the largest acquisitions in Indian IT sector were made by Bangalore-based telecom software solutions company Subex Systems (now Subex Azure). In January 2007, Subex bought Canada's Syndesis for $164.5 million, and in April 2006, it bought UK's Azure for $140 million.

Related:

Wipro Closes In On $500-Million Buy Of Nasdaq-listed Infocrossing; Plus Wipro's Past 10 Deals

The IFCI stake sale is getting into fast mode. The board of the Delhi-based lender has decided to receive expressions of interest (EOI) from strategic investors for buying a 26 per cent equity stake in the company. It will start receiving EOIs from August 13 till September 14. Firms like Citigroup, Lehman Brothers, BNP Paribas, Deutsche Bank and Barclays could be interested in buying the stake.

The stake sale is being managed by Ernst & Young. IFCI would need to go to shareholders for an approval for their stake sale too. This will happen in the next annual general meeting.

Currently, IFCI has foreign investors like Morgan Stanley (2.5%), Goldman Sachs (3.3%), Citigroup (2.5%) and Deutsche Securities (4.61%). Some 11 financial institutions, domestic as well as foreign, hold 34.8 per cent in the company (as on 31 March, 2007), which includes 8.4 per cent stake and 5.01 per cent stake held by LIC and IDBI,

The company has holdings in companies like National Stock Exchange (a 7 per cent of its 12.4 per cent stake in NSE was sold in January this year), ICRA Ltd, LIC Housing Finance, and Stock Holding Corporation of India. It also owns stakes in companies like credit rating agency CARE, Tourism Finance Corporation of India, asset reconstruction firm ACE, factoring firm Foremost Factors, and venture capital fund IFCI Venture Capital Funds, and IFCI Financial Services.

According to Hindustan Times, IFCI has an accumulated debt of Rs 800 crore as of March 31, 2007.

Related

Citigroup, Lehman, Barclays Show Interest In IFCI; Could Bid At Rs 70 A Share

India's third-largest software services exporter Wipro Technologies is in talks to acquire Nasdaq-listed technology services company Infocrossing Inc., CNBC-TV18 television channel reported on Friday. The deal could be anywhere between $450 million and $500 million. Business Standard adds that the company's enterprise value is around $492 million and its enterprise value/revenue is 2.12 times of its $232.44 million.

Wipro chairman Azim Premji (right) had recently said that his company was looking for acquisitions in Germany and Canada. "We are looking at taking the inorganic route to expand in Germany and Canada. Germany is an emerging market and in Canada we are a late entrant," Premji had said while announcing the Q1 results for the current financial year.

If Infcrossing deal happens, that will be Wipro's largest acquisition yet. The group company Wipro Consumer Care had recently bought Malaysia's FMCG company Unza Holdings for $246 million. In the IT space, Wipro's largest acquisition in the IT space was Austria's New Logic for $56 million in December 2005.

Acquisitions have started contributing to revenues in a big way. Last year Wipro's buys accounted for Rs 501 crore ($125 million) to Wipro's topline of Rs 15,000 crore ($3.75 billion), as against just Rs 50 crore ($12 million) in 2005-06. Wipro is the most aggressive company on the M&A front with some Rs 3,200 crore ($800 million) dedicated for this alone.

Wipro's Past Acquisitions

It seems there is good interest in picking up stake in India's ailing industrial lender IFCI Ltd. Big boys like Citigroup, Lehman Brothers, BNP Paribas, Deutsche Bank and Barclays could be eyeing a 26 per cent stake in the Delhi-based financial institution, reports Reuters (Via Mint). The buyers may pay even Rs 70 a share (a few months ago IFCI shares were trading at Rs 15, currently it has shot upto Rs 55 levels), the report further adds, which could value the company at Rs 4,500 crore or $1.12 billion.

The board of the government-owned lender is meeting August 4 to start the process of inviting bids, says Reuters, and the sale may be concluded in six months. “We will go by the process and select competitively priced bids, even though there is tremendous interest from domestic and foreign parties,” an IFCI official has been quoted as saying. Ernst & Young is the adviser for IFCI.

Currently, IFCI has foreign investors like Morgan Stanley (2.5%), Goldman Sachs (3.3%), Citigroup (2.5%) and Deutsche Securities (4.61%). All told, 11 financial institutions, domestic as well as foreign, hold 34.8 per cent in the company (as on 31 March, 2007), which includes 8.4 per cent stake and 5.01 per cent stake held by LIC and IDBI,

We have earlier mentioned why IFCI is an attractive bet now. Although saddled with accumulated losses of Rs 4,000 crore (because of bad debt), the company has holdings in quality companies like National Stock Exchange (a 7 per cent of its 12.4 per cent stake in NSE was sold in January this year), ICRA Ltd, LIC Housing Finance, and Stock Holding Corporation of India. It also owns stakes in companies like credit rating agency CARE, Tourism Finance Corporation of India, asset reconstruction firm ACE, factoring firm Foremost Factors, and venture capital fund IFCI Venture Capital Funds, and IFCI Financial Services.

Related:

IFCI Board Meets Today On Strategic Sale Of 26%; May Complete Process In September; E&Y To Manage Sale

This just in. Media mogul Rupert Murdoch has bought over Dow Jones, the parent company of The Wall Street Journal, in a $5-billion deal, reports WSJ.com. After three months of hectic debate within the controlling Bancroft family and among the editorial fraternity if it should sell to business-minded Murdoch, finally the Australian-born has clinched the deal at $60 a share, a 67 per cent premium over the compay's share price when it went public.

See the detailed story in WSJ.com.

The M&A in Asia Pacific market has been booming if the latest numbers from Dealogic are to be believed. M&A deals grew by 50 per cent in the first half of 2007 to touch "a record $253 billion", reports Reuters (Via Mint), quoting Dealogic stats. Australia led the region, excluding Japan, with deals worth $76 billion, while China ($55 billion) and India ($39 billion) followed.

Dealogic also has the league tables of investment banks in the region. The top five were UBS, which led the table by far with deals worth $62.4 billion, followed by JPMorgan ($46.5 billion), Macquarie ($34.6 billion), Deutsche Bank ($32.8 billion) and Morgan Stanley ($32.8 billion).

Pivate equity accounted for 11 per cent of the deal activity in H1 compared to 8 per cent a year ago. Globally, PE funds account for 20 per cent of the M&A deals.

Some of largest deals involving India were Vodafone Group's $12.9 billion acquisition of 67 per cent stake in Hutchison Essar, Tata Steel’s $12-billion buy of Corus, and Hindalco's $5.9 billion deal with Canada’s Novelis Inc.

PepsiCo India says it has identified a juice brand in India to acquire. (Any guesses? Dabur's Real juice is unlikely to be up for sale). Sanjeev Chadha, CEO, Pepsi Co Holdings India, has been quoted by Business Standard as saying that the multinational beverages company had already identified its targets. He also told the paper that the company would focus on juices and not bottled water acquisitions.

Earlier, PepsiCo International President and CEO Indra K Nooyi had said that the company would focus on its health-based drinks (non-carbonated products) portfolio. Nooyi had also pointed out that PepsiCo would make a couple of acquisitions outside the US in this space. PepsiCo already owns Tropicana brand.

Are there any juice brands worth acquiring in India?

Accounting firm Ernst & Young complains that there are not enough people to do the growing M&A work in Asia so much so that it's declining work nor is it doing any business development. Reuters quotes Dave Read, the London-based head of Ernst & Young's transaction advisory services: "There is so much demand that we just don't have enough people. We are turning away business or not chasing business. We can get graduates and MBAs, but the key thing is to get people who have experience in transactions."

According to Read, reports Reuters, the M&A market in Asia - especially in China and India - is booming, and so it would need to double its transaction team over the next three years. The firm has 850 people in Asia currently, which it hopes to expand to 1,500 in three years.

Read says his firm is expecting a 30 percent growth in revenue from Asia, excluding Japan, over the next three years from $200 million in the year that ended in June. Asia, excluding Japan, accounted for 8 percent of E&Y's $2.4 billion in global revenue from transaction advisory services in 2006-07.

According to Dealogic, China saw M&A transactions worth $55 billion, while India saw deals worth $39 billion.