Indian Startups Blog

In a significant development, Citigroup has reorganised its investment banking division globally by forming an Alternative Asset Group within the arm. The new unit will bring together groups servicing private equity and infrastructure funds, the bank said in an internal memorandum sent to its employees on Tuesday. The new Alternative Asset Group will be led by Chad Leat, a vice chairman in Citi’s investment bank, as chairman and Brad Coleman, the head of the U.S. financial entrepreneurs group, as global head. (Read the full memo here).
The restructuring is part of measures taken by CEO Vikram Pandit to stay fit. He has been facing from shareholders to cut costs, sell poorly performing businesses, or even break up the largest US bank.

It was only a year ago CitiGroup paid $800 million for Old Lane, the hedge fund of which the current Citigroup CEO Vikram S. Pandit (right) was a co-founder. If reports are to be believed, Old Lane is in trouble. Ten months after CitiGroup bought out the hedge fund (in an attempt to woo Pandit to its fold), the buzz is that almost all of the outside investors in Old Lane Partners are getting out.
Old Lane, which had $4.5 billion in funds under management last year, is now down to just $1.5 billion.
Last month, Citi CFO Gary Crittenden said that clients would be permitted to redeem their investments in Old Lane. In a recent regulatory filing, the bank announced that most investors would exercise the opportunity to flee the underperforming hedge fund by July 31. “In April 2008, substantially all unaffiliated investors had notified Old Lane of their intention to redeem,” Citi said in the filing. It’s not clear if Citi plans to shutter the fund. What it said all was that it is “evaluating alternatives for the restructuring of Old Lane.” (more…)

UBS, the Swiss investment bank, seems to have been hit the hardest by the credit crunch. The bank has announced that it would sell $15 billion of subprime mortgage debt and cut 5,500 jobs in its investment banking business as part of a massive cleanup (see a Thomson report).
The subprime crisis in the United States and the worldwide credit market turmoil that followed have taken a heavy toll on UBS. In a hope to reap bigger returns and compete with Wall Street rivals, the Zurich based bank – once known for its conservative investment strategy – heavily invested in the market for subprime mortgage securities. Now UBS is digesting a net loss of $10.9 billion and write-downs on mortgage-backed securities of $19 billion in the first quarter, bringing the total to about $38 billion since the beginning of the crisis. (more…)

Phoenix India Acquistion Corporation will acquire the identity of a “corporate”, and will lose its status as a special purpose acquisition company (SPAC) or a blank check firm. The SPAC, formed in 2005 by Raju Panjwani and Rakesh Akella, had failed to get the shareholder approval for the acquisition of 65 per cent stake in the wind energy company Citius Power Ltd by April 5 deadline. According to the blank check norms, the SPAC has to be disbanded and the funds (the trust has $58 million) have to be distributed to its shareholders.
In order to avoid the dissolution of Phoenix, the management managed to get the shareholder approval to remove the blank check company restrictions from the company’s charter. This enables the company to continue its corporate existence, past liquidation in a vote held on April 8. “This is the best way to preserve the company and create the most value for our stockholders”, the company said in a statement. The trust distributions were made according to the company on April 22. Phoenix had about $58 million in trust, according to its latest annual filing. (more…)

VC Circle is expanding, and is looking for an editor and also a couple of experienced writers for the website. If you are a reader of the site, then you know what we write on; we cover everything related to private equity, venture capital, mergers and acquisitions, investment banking, corportate law, entrepreneurship and startups, policy implications for investors, human resources and so on.
Our requirements for an Editor are that he/she should be able to lead a compact team of writers, independently oversee the content and newsflow on the website, have an excellent sense of news, ideation skills, and commission articles and columns. If you are networked within the industry or corporate world, that will be an added advantage. Four to five years experience in a newsroom is desirable. (more…)

Even though India’s foreign exchange reserves are brimming with $300 billion in cash, the government has ruled out setting up a sovereign wealth fund. Finance Minister P Chidambaram said in the Rajya Sabha that “there is no such proposal under consideration of the government at present.”
The Prime Minister’s Council on Trade and Industry, in its meeting held on December 18, suggested that there is a need to create a sovereign wealth fund of $5 billion to begin with for financing acquisition of companies abroad,” he had said.
However, Chidambaram maintained that no directive had been issued to the finance ministry and hence the question of any timeframe to set up such a fund did not arise. (more…)

New Horizon Media Pvt Ltd (NHM), a Chennai based regional language book publisher, has received an undisclosed investment from Beacon India Private Equity Fund as part of its second round of funding. The Mumbai-based fund, part of Dubai-based Baer Capital, will pick up a minority stake in the company. This round also saw investments from existing promoters as well as Emergic Venture Capital, which had invested earlier in NHM in 2006 in the first round.
NHM, founded in 2004 by Badri Seshadri, K. Satyanarayan and R. Ananthkumar (the first two, graduates of IIT Madras, were the co-founders of cricket portal Cricinfo.com), is a multilanguage, multi-format publisher of both fiction and non-fiction through printed books, audio books, DVDs, the Internet and mobile platforms. NHM currently publishes in Tamil, English and Malayalam.
NHM is the first and probably the only Indian publisher so far to land institutional venture funding. (more…)

Mumbai-based SME-focused fund BTS India Private Equity Fund Ltd has invested $7 million in Parabolic Drugs, a Chandigarh based pharmaceutical company. Yes Bank was the advisor to Parabolic for the transaction. This is the second investment by BTS group, a fund sponsored by Swiss Tec Group of Switzerland, in the Indian pharma sector. It had earlier backed Arch Pharma Labs, a fast growing pharma company.
Parabolic Drugs, which has facilites at Derabbasi and Panchkula near Chandigarh, is a supplier for APIs and bulk drugs ranging across several products in the betalactum and cephalosporins range to several global pharmaceutical companies, a release said. “The current round of capital raising is a step towards further broadening the product and customer base, and take the company towards its target of crossing Rs 1,000 crore in sales over the next couple of years,” Pranav Gupta, Chairman and Managing Director, Parabolic. (more…)

Merrill Lynch, Deutsche Bank and Indivision Capital Partners, the private equity arm of Future Group, are in race to buy 8-10 per cent stake in travel services firm Cox & Kings in a pre IPO deal. The US-based financial services major Merrill Lynch is the front-runner to pick the stake in a deal which could be valued around Rs 135 crore. The deal is being brokered by Enam Securities.
Cox & Kings one of the oldest travel services firm in India is promoted by the Peter Kerkar family. The pre IPO deal could peg the valuation of the firm at close to Rs 1,350 crore. The IPO will comprise a net issue of 86 lakh equity shares to the public and upto one lakh shares reserved for permanent eligible employees. It will constitute 23.75 per cent of the company’s post issue paid up capital.
Cox & Kings is the first travel firm to tap the capital market in recent years, though there are some existing listed firms like Thomas Cook. Tour operators industry in India, which is growing at 30 per cent year-on-year, is largely unorganised and fragmented in nature. Cox & Kings specialises in destination management, leisure travel, NRI holidays and trade fairs and has offices worldover.

The IPO details
The 250-year old travel and tour operator Cox & Kings is going in for an IPO in India which will raise Rs 370 crore, according to the filing with SEBI. The public issue will see a dilution of 23.48 per cent post-IPO, valuing the company at Rs 1,575 crore.
Out of the total 8.6 million shares of Cox & Kings, a 10 per cent of the post issue paid up capital or at least 3.66 million shares have to be made available for the public. This means the maximum that the pre-IPO deal could involve is about 13.48 per cent equity stake (though its more likely to be about 10 per cent) or about 4.93 million shares.

It seems PSU divestment agenda is back in to the fore again. The government is reportedly mulling a proposal to sell 5 per cent stake in some of the already listed PSUs when these companies tap the market with follow-on offers. And the government has already started valuation and due diligence processes for almost 24 central public sector companies which would be listed over the coming months, according to a report in The Economic Times.
So what is the urgency to sell the stake in an election year, and also when the Left has been against selling any government holding in PSUs? Finance minister P Chidambaram may be hoping to meet the rising wage costs of government employees after the Sixth Pay Commission from the proceeds of disinvestment in state-run companies. Also, the renewed attempt on PSU stake sale could help the government generate funds for the planned waiver of Rs 60,000 crore worth of farm loans, which formed the centrepiece of this year’s Union Budget. (more…)