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Rewind 2014: Top deal activity in BFSI sector

31 December, 2014

Banking, finance services and insurance space saw some big announcements during the year both for private equity as well as acquisitions besides other developments including those on the policy and regulation side.

The most watched out event was RBI’s grant of new banking licences. The banking regulator stuck to its cautious stance on expected lines and decided to grant its in-principle approval to IDFC and microfinance firm Bandhan to start new private bank.

It effectively kept away business houses from the first set of new banking licences. But it came out with new category of small banks which could see many others get a chance to become a deposit taking lender.

Microfinance firms such as Equitas and Janalakshmi raised significant rounds of private funding as the sector is now building a firmer base after having gone through its baptism over regulatory clamps in the erstwhile biggest top market, the state of Andhra Pradesh.

With primary market opening up and stock market said to be at the beginning of a new long term bull-run, equity capital market side investment bankers saw a ray of hope for strong revival in business.

Here is a quick flashback of top deals in the BFSI sector:-

Kotak Mahindra Bank buying ING Vysya

The top deal was announced in the banking sector, otherwise starved of consolidation in the recent past. Kotak Mahindra Bank agreed to acquire ING Vysya through an all stock transaction worth over $2.4 billion. The deal, which is subject to shareholders’ approval besides other regulatory nods, would be the first significant M&A in the banking sector since 2010, when ICICI Bank snapped Bank of Rajasthan. In 2008, Centurion Bank of Punjab merged with HDFC Bank in a $2.9 billion deal. The merged firm would have 1,214 branches, 1,794 ATMs points, 39,811 employees, total income (based on FY14 numbers) of Rs 13,576 crore and PAT of Rs 3,123 crore; total asset of Rs 1,98,983 crore with advances of Rs 1,20,976 crore and deposits worth Rs 1,10,963 crore. With this, Kotak would consolidate its position as the fourth largest private lender in the country, behind ICICI Bank, HDFC Bank and Axis Bank. ING Vysya shareholders will own approximately 15.2 per cent of the equity share capital of the merged Kotak.

CPPIB buys stake in Kotak Mahindra Bank

Uday Kotak-led promoter group of Kotak Mahindra Bank Ltd sold 3.24 per cent stake in the private lender for Rs 2,200 crore ($372 million) to reduce its holding in the firm. The shares were bought by the Canada Pension Plan Investment Board, which manages Canada’s national pension fund. RBI had recently asked the bank to cut promoter holding to 40 per cent by September 2014 from the current 43.58 per cent. The lender has also been asked to bring down the promoter holding further to 30 per cent by December 31, 2016, 20 per cent by 2018 and 10 per cent by 2020. CPPIB, which has been active in making large bets on Indian real estate and infrastructure space, will own around 3.9 per cent of Kotak Mahindra after the proposed merger with ING Vysya. CPPIB had previously struck three significant deals in infra and realty space partnering Shapoorji Pallonji, Piramal Enterprises and L&T Infrastructure Development Projects.

Piramal Enterprises buys stakes in Shriram Capital, Shriram City Union

Cash rich Piramal Enterprises, which encashed a neat profit in its short term investment in Vodafone’s India unit last year, took fresh calls in terms of investments and bet big on the Shriram Group of south India. It picked a stake in Shriram Capital for Rs 2,014 crore ($334 million). Privately held Shriram Capital is the holding company for the Chennai-based Shriram group’s various financial services units, including Shriram Transport Finance and Shriram City Union Finance besides the two insurance ventures. Pirmal Enterprises separately also acquired close to 10 per cent equity stake in Shriram City Union Finance for a total consideration of Rs 790 crore (around $133 million), through a preferential allotment of shares. Piramal’s effective holding in Shriram City would be 16.5 per cent factoring in its 20 per cent stake in Shriram Capital, the promoter of Shriram City Union Finance. This comes as further extension of its partnership with the group. Last year it had bought a 10 per cent stake in Shriram Transport Finance, the Chennai-based commercial vehicle financier, for Rs 1,652 crore ($307 million) from private equity major TPG.

Japan’s Nippon raising stake in Reliance Capital Asset Management

Japan’s largest life insurer Nippon Life Insurance Company agreed to raise its stake holding in Reliance Capital Asset Management (RCAM) to 49 per cent from the current 26 per cent in two or more tranches by shelling out around $108 million. The new deal values RCAM at Rs 7,300 crore ($1.2 billion) or 3.3 per cent of the assets under management (AUM) of Rs 2,18,338 crore ($36 billion). This is just over half of its valuation when Nippon first invested in the firm around three years ago. The latest deal between Nippon and Reliance is an extension of their existing partnership in the financial services domain. Nippon had recently struck a deal to acquire 26 per cent in Reliance Life Insurance Co Ltd for Rs 3,062 crore ($680 million).

TVS Capital led consortium buying FTIL’s stake in Indian Energy Exchange

A clutch of investors led by private equity firm TVS Capital inked a transaction with Blackstone-backed Financial Technologies (India) Ltd (FTIL) to buy 25.64 per cent in Indian Energy Exchange (IEX) for Rs 576.84 crore ($94 million). The consortium includes, besides TVS Capital, S Gopalkrishnan, Lakshmi Narayanan, Rajeev Gupta, Dalmia Cement Bharat Power Ventures Ltd, Kiran Vyapar Ltd and Agri Power and Engineering Solutions Pvt Ltd. IEX offers an online electricity trading platform for trading, clearing and settlement operations. It also counts several other private equity and venture capital investors including Multiples PE, Bessemer Venture Partners and Lightspeed Venture Partners. This transaction was to comply with Central Electricity Regulatory Commission (CERC) regulations to bring down FTIL’s stake in all bourses in the country.


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Rewind 2014: Top deal activity in BFSI sector

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