P-Note investors step up their activities in equity markets

Recent bulk deal information (over the past one week) released by Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) reveals that P-Note players have stepped-up their activities in the equity markets. CLSA (Mauritius) and Deutsche Securities (Mauritius) were the major buyers in the street cumulatively investing more than Rs1.3 bn in Indian equities. Some of their major investments include

(1) Unitech – CLSA (Mauritius) bought Unitech stock worth Rs883 mn after the real estate company concluded its QIP issue—abating concerns on its bankruptcy
(2) Sintex Industries - CLSA (Mauritius) bought Sintex stock worth Rs100 mn
(3) Eicher Motors – Deutsche Securities (Mauritius) bought Eicher Motors stock worth Rs200 mn
(4) Jubilant Organosys - Deutsche Securities (Mauritius) bought JOL stock worth Rs122 mn

Morgan Stanley and Merill Lynch together divested stocks worth Rs0.6 bn. Some of their major divestments include

(1) Gruh Finance – ML (Espana SV) sold Gruh Finance stock worth Rs135 mn
(2) Morgan Stanley (Dean whiter) sold stocks of (a) Educomp – Rs256 mn, (b) Karuturi Global – Rs87 mn, (c) Bajaj Hindustan - Rs82 mn and (d) Ziacom – Rs40 mn.

What are P-Notes?

Participatory notes (PNs / P-Notes) are instruments used by investors or hedge funds that are not registered with the SEBI (Securities & Exchange Board of India) to invest in Indian securities. Participatory notes are instruments that derive their value from an underlying financial instrument such as an equity share and, hence, the word, 'derivative instruments'. SEBI permitted FIIs to register and participate in the indian stock market in 1992.

Indian based brokerages buy Indian-based securities and then issue PNs to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors.
Participatory notes are instruments used for making investments in the stock markets. However, they are not used within the country. They are used outside India for making investments in shares listed in that country. That is why they are also called offshore derivative instruments.
In the Indian context, foreign institutional investors (FIIs) and their sub-accounts mostly use these instruments for facilitating the participation of their overseas clients, who are not interested in participating directly in the Indian stock market. For example, Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. According to an expert group constituted by the finance ministry in India, in August 2004, participatory notes constituted about 46 per cent of the cumulative net investments in equities by FIIs

Source: Exchanges, Team M&A

Unitech on assets sale spree, sells Gurgaon hotel

Unitech Ltd, the country’s second largest developer, on Friday said it has sold out a hotel in Gurgaon for Rs231 crore and is in advance stages of talks for selling out an office complex in the national capital.
The company has also signed memorandum of understandings (MoUs) for sale of school plots in Gurgaon and another realty project in Kochi.
In a presentation to the investors, Unitech said that Marriott Courtyard hotel, comprising 199 rooms, in Gurgaon has been sold out for Rs231 crore to a high networth individual based out of Delhi. Unitech, which raised $325 million to retire part of its Rs8,400 crore debt, plans to sell four more hotels in Noida, Kolkata and Gurgaon within six months. It is also expecting “induction of private equity at project level”. The company is also expecting to close a deal to sell out its Saket office complex, comprising 2.2 lakh sq ft, in the current quarter. As part of its strategy to deal with the slowdown in the realty sector, Unitech is monetising its non-core assets by “deleveraging through sale of assets like hotels, offices and infusion of private equity at individual project level”. The sale of non-core assets are expected to contribute to cash flow of the company. It said that its sales have dipped to an all-time low because of slowdown in property market.

Och-Ziff Capital Management, Orient Global and Sandstone Capital invests in Unitech QIP

India's second-biggest real estate developer Unitech Ltd has raised $325 million through qualified institutional placement (QIP) issue. The funds have been raised by the real estate major to retire part of its over Rs 8,900 crore debt and strengthen the balance sheet.
The investors in the QIP include private equity hedge fund players like Och-Ziff Capital Management, Orient Global and Sandstone Capital, reports Business Standard. Other investors include HSBC and Prudential. Around 90% of the issue has been lapped up by overseasinstitutional investors, while the rest has been bought by domestic institutional investors.
The holdings of promoter Chandra family would fall to 51% after the QIP from 64%. The QIP has been issued at a price of Rs 38.50 per hare. Unitech was trading at Rs 51.5 today at 1 pm, reaching a days high of Rs 54.2. The deal is being touted as the largest QIP in realestate space and was advised by UBS AG's India unit and IDFC-SSKI Securities Ltd.
This is also the first QIP issue since market regulator SEBI allowed firms to fix the price based on the average price of two weeks. Earlier the period of average price calculation was 6 months. Theissue will reduce the debt to equity ratio of Unitech from 2.4 as of December 2008 to 1.4.

Capital raising activity picks up in real estate

The risk appetite is back! otherwise how could we see real estate companies/REITs gobble up a few billion dollars in capital raising over the last 2 weeks- Prologis, a warehousing REIT has raised $1 billion in stock offering.

This definitely sounds good news for Indian developers who are saddled with debt (DLF has Rs15,000 cr and Unitech has Rs8,500 cr debt) and would wish to raise capital as and when possible. Unitech has already moved fast to lap up the opportunity and is doing a road show for its $250 million QIP.

ProLogis raises $1 billion in stock offering
ProLogis PLD.N, a U.S. owner and developer of warehouses, raised $1 billion in a stock offering and plans to use the proceeds to pay down debt.
The company sold 152 million common shares for $6.60 per share in a public offering. The underwriters have a 30-day option to buy up to 22.8 million additional shares to cover over-allotments.
ProLogis shares have suffered more than most REITs because of its huge debt load. The REIT said the money will be used to reduce the balance due on the $3.8 billion of its debt that matures during the next two years. The company has vowed to reduce its debt by $2 billion in 2009. Last week Standard & Poor's Ratings Services took ProLogis off of CreditWatch. The outlook is negative.
Source: http://uk.reuters.com/article/bondsNews/idUKN0851479820090408

Kimco raises US$717 mn in stock offering; larger than expected demand
Shares of shopping center owner Kimco Realty Corp KIM.N closed up 25.5 percent on Friday after strong demand for its stock offering prompted the company to increase the number of shares offered, lifting the badly beaten real estate investment trust (REIT) sector. Kimco sold 91.5 million shares, up from the previously expected 70 million, after demand was stronger than expected. The shares were offered at $7.10 each. After the close of the market, the company said its underwriters exercised an option to sell an additional 13.725 million shares, up from the previously planned 10.5 million over-allotment,

Unitech plans $250mn QIP issue to part-pay debt
http://mergers-in-india.blogspot.com/2009/04/unitech-plans-250mn-qip-issue-to-part.html

DLF, DAL raise Rs 1,100-cr debt from HDFC Bank
http://mergers-in-india.blogspot.com/2009/04/dlf-dal-raise-rs-1100-cr-debt-from-hdfc.html

Unitech plans $250mn QIP issue to part-pay debt

Unitech Ltd, the country’s second-biggest real estate developer, plans to raise as much as $250 million (Rs 1,250 crore) through private placement of shares to qualified institutions, company officials said, to repay part of its debt of over Rs 8,000 crore.
The New Delhi-based developer plans to raise the funds by the end of this month, a company official, said declining to be identified. The company is planning to reduce Rs 1,000 crore of debt on its books by June this year. Unitech Managing Director Sanjay Chandra and key officials of the company have been in Mumbai over the past couple of days to gauge investor sentiment. The real estate company has hired UBS and IDFC as arrangers for issue. A Unitech spokesperson declined to comment. Unitech’s move comes after the developer withdrew its application with the Foreign Investment Promotion Board (FIPB) in February to raise Rs 5,000 crore from the sale of securities. A year earlier, the company planned to raise Rs 7,500 crore through a qualified institutional placement or QIP.

Telenor's Unitech Deal Finalised; To Get 67.25% Instead of 60%

Norway-headquartered telecom major Telenor will now get a 67.25% stake in Unitech Wireless as against the earlier agreed 60% stake. In October this year Telenor announced its deal to buy a 60% stake in Unitech for Rs 6,120 crore. The additional stake is being picked up for the same price. Telenor has said in its statement :
"While Telenor's initial investment under the agreement will continue to be the previously agreed INR 61.2 billion (approx. USD 1.2 billion), it has been agreed that Telenor, after this investment, would be holding 67.25% in Unitech Wireless."

The company will pick up a 33.5% stake for Rs 1,260 crore in the first stage of the transaction. The deal will be completed in four stages. The transaction is still subject to regulatory approvals, however, a statement from Telenor said that the closing formalities have been finalised.
Telenor is the world’s seventh largest telecom firm by customers and Norway government owns a 54% stake in the firm.

The deal, which was expected to be completed in December, got delayed as Telenor took time to arrange funds. Telenor was initially planning a rights issue to fund the deal which it later scrapped. It is funding the deal through a combination of cash flow and additional debt.Unitech Telenor last month entered into a tower sharing agreement with Tata-Quippo combine. Unitech Wireless has licences to operate in all 22 telecom circles.

Among the new telecom entrants, Unitech is the only player that has sold out a majority stake to a foreign telco. Other deals involving new telcos include Swan selling 45% stake to Etisalat and S Tel selling 49% to Bahrain Telecom. Datacom is yet to decide on a foreign partner