HDFC fund eyes investment in Puravankara unit

HDFC’s real estate fund is understood to be in advanced stages of investing around Rs 200 crore in a low-cost housing project being developed by the Bangalore-based Puravankara Projects. Puravankara Projects is executing the low cost housing project through a wholly-owned subsidiary Provident Housing & Infrastructure, set up last year. Investment banking sources indicate that HDFC is carrying out a due diligence of the project and the investment is likely to be funnelled into a special purpose vehicle floated by Provident for a 4,500 flats project in Bangalore. Provident is expected to launch the first phase of the project this quarter. The company is rolling out its Bangalore project after a relatively decent success it met with its low-cost housing project in Chennai. The company was able to sell close to 700 flats within a week of its launch. With these two projects, Provident is expected to roll out 6,000 houses in Bangalore and Chennai.Provident Housing during August 2008 had envisaged an investment of Rs 8,000 crore over five years and company officials maintained they are not going slow on the project. Provident is also looking to enter Mysore and Kochi markets at a later stage and is looking to acquire 200 acres for the expansion at a cost of around Rs 2-3 crore per acre.The company already has 70 acres and is looking at a total land bank of 550 acres in all for the project which will see the roll-out of close to 65,000 homes sized 750-1,000 sq feet. The houses will be priced between Rs 12 lakh and Rs 20 lakh.

HDFC-HDFC Bank merger talk hots up once again

There is a fresh buzz over a possible HDFC-HDFC Bank merger, following a report by MNC bank Macquarie Research. The report states how the ‘perfect match’ would yield ‘multi-year benefits’. According to a report by Macquarie Research, the upside would come from marrying HDFC Bank’s liabilities base — the best in the country according to Macquaire — with HDFC’s ‘best-in-class’ loan origination franchise. “This would address the concerns over whether HDFC’s wholesale-funded model is scalable, as well as, fill a major gap in HDFC Bank’s asset portfolio. Cross-selling to HDFC’s large customer base would be a secondary opportunity,” the report added. According to Macquarie, HDFC has moved from being a minuscule player in the overall market to being a significant user of national resources. As Figure 6 shows, HDFC’s borrowings now comprise a significant share of incremental deposits in the system. And this will put some pressure on its long-term growth opportunities. We expect that by FY3/13E, HDFC will need bank funding to the extent of 2.8% of incremental bank deposits in the system, which is fairly large for a secondary borrower. Another hurdle for HDFC’s funding is single-borrower limits for banks. Banks cannot lend more than 15% of their total capital to any single borrower.

Citigroup is not likely to sell stake in HDFC

Citigroup doesn’t intent to sell its stake in India’s HDFC, said Keki Mistry, managing director of HDFC. The U.S. bank classified its 12 percent holding in HDFC under the group it refers to as Citicorp, which will hold businesses it wants to keep, Mistry said at an investor conference in Mumbai today. Citigroup Chief Executive Officer Vikram Pandit, struggling to revive the business and repay $45 billion of government aid, has been selling assets to raise capital. Still, Pandit said on Feb. 28 that the company will continue to own banking units in other countries, such as Banamex in Mexico. The bank has also said it was profitable in January and February. "We had a chat with them a month ago and they have kept the HDFC holding under Citicorp," Mistry said. At least four funds are willing to buy the stake if Citigroup opted to sell, he said. Mistry said HDFC’s loans may grow 20 percent in the fiacsl year ending March 2009. In the nine months ended December, its loans grew 22 percent. "We always set a target which we are comfortable with," Mistry said.

Private equity firms invest record $3.8 bn in India

Global private equity firms, including Blackstone and Carlyle Group, have made an investment of $3.8 billion in 2007 so far in the country, up 50 per cent from the year-ago period.

The record volume has been reached through 81 M&A deals. Last year, foreign private equity players had invested $2.6 billion, data compiled by global consulting firm Dealogic showed.

Carlyle Group is the leading "financial sponsor" in India with investment of $777 million via two deals, including acquisition of over six per cent stake in HDFC.

It is followed by Dubai International Capital, which acquired a 2.87 per cent stake in ICICI Bank for $741 million, and Blackstone Group with $619 million inflow via eight deals.

Financial sponsor is a term commonly used to refer to private equity investment firms, particularly those engaged in leveraged buyout transactions.

Blackstone Group, the world's leading private equity firm, has acquired stake in companies such as Intelenet Global Services, Punj Lloyd and Gokaldas Exports.

The US-based Group has also decided to pump in $150 million to acquire a stake in Nagarjuna Construction Company. A move that comes close on the heels of its decision to acquire up to 70.1 per cent stake in Gokaldas Exports, the country's biggest apparel exporter, for about Rs 675 crore.

Blackstone Group manages around $90 billion of assets worldwide. In January, it invested about $275 million in Ushodaya Enterprises Ltd (UEL), a media and film production company owned by Ramoji Rao.

Source: (Economic Times)

Australia's IAG in JV talks with HDFC

Insurance Australia Group Ltd is in talks to buy 26 per cent in an Indian insurance firm founded by Housing Development Finance Corp, media reported on Monday.

HDFC in May bought out its partner Chubb Corp in a general insurance venture after an uneasy relationship stalled growth. IAG, Australia's top car and home insurer, is in "advanced" talks to buy the stake, media said, citing unnamed sources.

Other "strong contenders" were US insurer Travelers and Munich Re's insurance unit ERGO, the paper said, adding HDFC expected to receive a premium for the stake.

(Source: Economic Times)

Standard Life to up stake in HDFC JV to 26%

UK-based life insurance company Standard Life will increase its stake in HDFC Standard Life Insurance Company to 26% from 14%. The insurance company is a joint venture between the Housing Development Finance Corporation (HDFC) and a group company of Standard Life. HDFC holds 84.2% in the joint venture.Deepak Parekh, chairman, HDFC, said,''Standard Life will increase its stake in the life venture to 26% in a months' time by the return on equity formula.

For the general insurance business, we are in talks with four or five international players. The partner will be finalised in a month or so. The partner for the general insurance business will come in at a premium as HDFC is a established brand, and has a set business and distribution network in the country.''HDFC recently bought out Chubb Corporation's 26% stake in HDFC Chubb General Insurance Company, following which it has been scouting for a joint venture partner for its general insurance business.

When asked if HDFC is considering listing of the life insurance venture, Parekh said, ''We don't see any need to list the company as the current preferential issue made to the Carlyle Group and Citigroup will bring in enough capital. We plan to invest around Rs 500 crore of the proceeds from the preferential offer in the insurance venture, and the balance of around Rs 1,300 crore will be invested in HDFC Bank's preferential offer.

(Source: Business Standard)

Intelenet sold in country’s largest management buyout

In the largest management buyout (MBO) in the country, the management team of BPO firm Intelenet, backed by PE firm Blackstone, has bought out the existing promoters, Barclays Bank Plc and HDFC. Under the terms of the deal concluded on Sunday morning, Blackstone will hold 80% in the firm and employees, including the current management team, will hold 20%.
Sources pegged the value of the deal in the region of $200 million. ET had reported the value of the deal and that Blackstone was close to clinching it on Saturday. No official confirmation was available on the deal value, because Blackstone is in the silent period. Around 300-400 employees in the senior management of Intelenet will become shareholders in the firm once the transaction is completed

The deal values Intelenet at over two times its FY07 sales of around Rs 380 crore, compared with the over 3x sales valuation of EXL (March 07 annualised) and WNS. In terms of the employees, the 6-year-old firm is the third largest thirdparty BPO firm in the country with around 17,000 employees.

Interestingly, Barclays, which will now exit firm as a shareholder, will continue as a ‘long term’ client for the businesses it currently outsources to Intelenet. It will also set up its own captive in the Delhi with the help of the Intelenet management team. HDFC, which was one of the original promoters, seems to have taken a strategic decision to exit the firm, unlike ICICI which took its BPO firm — Firstsource— to IPO this year. The value of HDFC stake has increased nearly three times since 2004. In 2004, Tata Consultancy Services’ 50% stake in Intelenet got it $35 million.

(Source: Economic Times)

Carlyle picks up 5.6% in HDFC

HDFC plans to raise Rs. 3114 crore via preferential offer to Carlyle Group, which translates into a 5.6% in HDFC post the issue.

The money is basically for investing in the insurance business.