Archive for April 5th, 2012

April 5, 2012

Exports outlook for FY 2013: A bird’s eye view

The Commerce Ministry has churned out another round of foreign trade data yesterday, revealing that our exports have continued to drift down. In February, overseas shipments grew 4.3 percent to $24.6 – at the slowest pace in the last three months. These statistics are, however, not shocking as it was widely anticipated that the third and fourth quarters of the last fiscal were to be challenging due to economic slowdown in European economies.

From the recent happenings in most of the European economies, it is quite clear that 2012 will be a rough ride for the European Union. A recent World Bank report has also cautioned this the euro-zone crisis along with weakening growth in several big emerging economies may have some downside effects on developing countries. Keeping these dimming global growth prospects, I think that it is the right time for our government to extend a helping hand to the sector.

Firstly, our exporters and MSMEs are facing two major hurdles at this moment: they are high cost of credit, which, needless to say, is the side effect of the RBI’s past monetary measures, and infrastructure bottlenecks, which have been taking competitiveness out of our exports. In the recent Budget announcements, the second issue has been addressed to some extent but the first one is still left unaddressed. Policy makers need to do something urgently in this area.

Secondly, I think market diversification should further be encouraged to minimize dependence on traditional export markets and the possible impacts of demand slowdown there. Already, we have reaped considerable benefits from this strategy and in the upcoming Foreign Trade Policy (FTP) announcements, I hope the government will broaden the scope of some schemes, such as the Focus Market Scheme (FMS) and Focus Product Scheme (FPS) to help our exports diversify further.

The recent BRICS summit reminds us again about the potential opportunities in our neighboring countries, and the five-member nations’ decision to allow trade in local currency will reduce exporters’ dependence on the US dollar and the euro, and insulate them from sharp fluctuation in currencies. Another recent positive development in the export front is the decision by Pakistan to ease trade with India by shifting from a Positive List regime.

Keeping the above developments in mind, I think the government can catapult our export performance by means of some crucial supportive measures, particularly by ensuring adequate credit to the sector and additional export assistance to promote the market diversification strategy. In addition, it is equally important for individual exporters to do away with over dependence on some select few markets. There are still many untapped markets far and near that get little limelight but offer great opportunities. Those who will discover this secret will certainly beat any odds and bask in success.

Business Updates With Caston

April 5, 2012

History of Hostile Takeover Bids in Inda

Subhash Chandra-led Essel Group’s decision to buy 12.27% in Reddys-controlled IVRCL has sparked speculation of a possible hostile takeover bid for the Hyderabad-based construction firm. In the past, corporate raiders in India have rarely succeeded in taking over their targets, mainly due to cultural and political issues. In some cases, the bidders chose to cash out for a handsome profit, which seems to have been the primary motive rather than management control.

We look at some of the hostile takeover bids that made headlines over the last couple of decades.

Swraj Paul vs Escorts, DCM Shriram

In the early-80s, UK-based NRI business magnate, Swraj Paul made a hostile bid for Indian companies Escorts and DCM Shriram, but had to eventually backtrack in the face of political opposition.

Reliance Industries vs Larsen Toubro

Initially roped in as a white knight in the late 80s, Reliance Industries tried to take control of L T, but had to retreat after financial institutions withdrew support. The development coincided with Congress losing power at the Centre.


In the mid-90s, global tobacco major BAT tried to take control of ITC, in which it already owned a stake. Here too, political opposition and regulatory hurdles forced BAT to give up its ambitious plan to strengthen its presence in India.

Financial institutions vs Modi Rubber

In 1998, financial institutions threatened to sell their holdings in Modi Rubber to any interested buyer, for non-repayment of loans. Brothers BK Modi and VK Modi averted a hostile takeover by repaying the loans, and later buying out the FIs stake.

ICI vs Asian Paints

In 1997, the Indian arm of UK-based paint major ICI bought 9.1% in Asian Paints from investment bank Kotak Mahindra. However, the FIPB refused to approve the deal, forcing ICI to sell the stake.

India Cements vs Raasi Cements

In possibly the only case of a successful hostile takeover in corporate India, Tamil Nadu-based India Cements bought out Hyderabad-based Raasi Cements in 1998 after winning over key shareholders—public as well as some members of the promoter group.

Arun Bajoria vs Bombay Dyeing

In 2000, Kolkatta-based Arun Bajoria bought 15% in Bombay Dyeing, and threatened to make an open offer to public shareholders. He finally sold out his stake to the Wadias– the promoters of Bombay Dyeing–at a profit.

Abhishek Dalmia vs GESCO

In 2000, Abhishek Dalmia cornered 10.5% in the Sheths-controlled GESCO Corp and made an open offer for another 20%. But rather than dislodging the existing promoters, Dalmia sold his stake to them for a profit of Rs 9 crore.

RK Damani vs VST Industries

In 2001, stockbroker Radhakishen Damani made an open offer for BAT-controlled VST Industries, but was foiled by ITC which entered the fray as a white knight, with support from BAT. Damani still holds 26% in VST.

Harish Bhasin vs DCM Shriram Industries

In 2007, stock broker Harish Bhasin bought 25% in DCM Shriram Industries through a combination of open market purchases and an open offer. But the promoters countered the move by issuing warrants to themselves and increasing their stake.


In 2010, Reliance Industries played white knight to the promoters of EIH by buying 14.1% in the flagship hotel chain. The move was seen as an attempt to thwart the ITC group which had gradually raised its stake in EIH to 14.8% over the years.

Business Updates With Caston

April 5, 2012

In biggest sell-off quarter, Private equity firms cash in

MUMBAI: Private equity firms sold shares worth over $1.8 billion in the first three months of 2012, making it the busiest quarter of exits for long-term risk investors in India. Most of the selloffs came in the listed companies when the PE biggies like Carlyle, Temasek and Warburg Pincus liquidated holdings on the back of share price rebounds in volatile markets.

Initial data suggested that PEs exited in the January-March quarter almost 88% of what they sold in the entire 2011, and over 50% of what they recouped in 2010 which was the biggest year in terms of share sale till date.

The latest quarter topped the October-December period of 2010 when PEs redeemed $1.3 billion investments, said a JM Financial note of private equity sector in India. The record profit-booking by private equity investors came even as another data from Grant Thornton said fresh investments by value declined 22% to $2.01 billion in the first quarter of the calendar year.

PEs liquidated some marquee Indian stocks to show returns to their investors-called limited partners (LPs) in industry parlance who are mostly global pension funds, university endowments and family offices. Some of these profit bookings, which were struck a shade below ideal returns, were done even as the big global funds embarked on fresh fund-raise . LPs, of late, have raised concerns about the quality of returns on investments made into India, which is sitting on dry powder estimated at over $20 billion.

Mumbai realtor Lodha Group’s buyback of $508 million equity from a private equity arm of Deutsche Bank provided the single biggest exit. But the momentum came from Carlyle, Warburg and sovereign wealth fund Khazanah when they offloaded shares in the publicly quoted Indian banks. Warburg completed its exit from Kotak Mahindra Bank when it sold shares worth $486 million in January-March quarter this year.

Temasek divested $299 million shares in ICICI Bank, which it held for nearly eight years, even as Carlyle booked nearly two-fold return on its investment in HDFC when it sold shares worth $276 million. Khazanah sold Yes Bank shares worth $104 million in another deal in the banking space.

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