Thursday, December 25, 2008

IPO Markets Hit 5 Year Low In 2008

Money raised through public offers in India has hit a new five-year low this year. This year saw companies raising Rs 16,927 crore through initial public offers (IPOs) and follow-on public offers (FPOs), a decline of 63% compared with Rs 45,137 crore that was raised last year, says research firm Prime Database. The last time Indian companies raised less than Rs 20,000 crore in a single year was in 2003 when firms mopped up Rs 2,179 crore through 14 issues.


Following the poor show of public offers and low-investor sentiment in the stock market, several Indian companies have withdrawn their plans to raise funds through new public issues.


The only significant factor in 2008, was the issue of Reliance Power, the largest ever IPO in India, which raised Rs 10,123 crore. This single IPO accounted for 60% of the year’s total fund mobilisation through public offers. As per the data compiled by Prime Database, there were only two issues of over Rs 1,000 crore each compared with six in 2007. In 2008, 22 of 38 issues raised less than Rs 100 crore, with 14 raising less than Rs 50 crore.


There was a significant decline in also the number of public issues this year. As against 106 public equity issues in the previous year, 2008 recorded only 38 issues, a drop of 64%.

This was partly due to the response from the public to the issues of the year, unlike 2007. Only six of the 37 IPOs received oversubscription of more than 10 times, compared with 50 out of 101 IPOs in 2007. Moreover, as many as 14 issues barely managed to get a one-time subscription. Worse, three IPOs had to be cancelled because of lack of response, including the Rs 5,436 crore issue of Emaar MGF and the Rs 564 crore issue of Wockhardt Hospitals.


Courtersy : Economic Times and Prime Database 

Thursday, December 18, 2008

Satyam-Maytas "unfair" deal off

Financial crisis call for desperate actions. India's fourth largest IT services firm Satyam Computer was trying to acquire 100% stake in Hyderabad-based Maytas Properties for $1.3 billion and was going to pick up a 51% in public listed firm Maytas Infra for $300 million. The total deal value was pegged at $1.6 billion (Rs 8,000 crore). The smart move by Satyam owners (hold just 8% ) to get the cash move into their pockets and in the process make Maytas  come out of the trouble times.
  
"Nobody can take shareholders for a ride"  that’s the message that’s gone out loud and clear to the owners , promoters of Satyam Computers. 

I fail to understand what are the Independent Directors doing  ? They are on the board on the company to take care of the interests of the company but it seems they failed in  their duties to voice concerns over the unfair deal.

Also a larger question about the corporate governance of Satyam ( it received award in September 2008 for good corporate governance ).

Where do Satyam go from here ? they may buy back the shares and it is difficult for the company to come out of this bad image it created for itself

Saturday, December 6, 2008

American Jobs Vanish


An alarming half-million American jobs vanished virtually in a flash last month, the worst mass layoffs in more than a third of a century, as economic carnage spread ever faster and the nation hurtled toward what could be the hardest hard times since the Great Depression.

Employment shrank in virtually every part of the economy — factories, construction companies, financial firms, accounting and bookkeeping, architectural and engineering firms, hotels  and motels, food services, retailers, temporary help, transportation, publishing, janitorial and building maintenance, and even waste management. The few fields spared included education, health care and government. 

How will this effect India ? Most of the companies which were in list of companies which are in serious down sizing have their offices in India and China. There will be collateral damage and IT & ITES will be worst hit. Many professionals may lose jobs in the next couple of months the effect will be more on non billable employees initially.

Tuesday, December 2, 2008

Detroit Three publish rescue plans


The so-called Detroit Three,Chrysler, Ford and General Motors have all submitted their proposals to Congress for multi-billion dollar loans that could decide the survival of the companies.US Carmakers have asked for a combined total of $34bn. General Motors asked Congress for a loan of $12bn , with an additional $6bn if necessary, to help it survive.Ford meanwhile requested a $9bn  bridging loan, which it hopes it will not need.Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.

Reducing costs, reducing debt levels  and investing in greener technologies form the centre-piece of each proposal. The chief executives of Ford and GM have even offered to work for $1 a year if Congress approves the emergency aid.Sales at all three of the carmakers have plunged as US consumers tighten their belts in the face of the severe economic downturn.

Analysts feel its a tough task. 

Monday, December 1, 2008

US Recession Began in 2007

Its official now, the Business Cycle Dating Committee of the National Bureau of Economic Research met on 28th November 2008 determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

Complete text is posted at http://oxdown.firedoglake.com/diary/2133

Post Crisis

I was reading through the speech given by  John Lipsky, First Deputy Managing Director, International Monetary Fund what could be the world economy post crisis and how one can find their answers.read him here 

"Growth prospects for emerging economies also have been undermined by the latest developments. Still, the new IMF forecast anticipates that activity in emerging economies will expand by 5 percent in 2009, although with considerable regional variation. Thus, it is expected that emerging economies will account for 100 percent of global growth next year. It is also true, however, that even this newly reduced forecast can't be taken for granted, as the downside risks to growth, even for the emerging economies, remain significant. Thus, actions to be taken by emerging economy authorities to bolster confidence in the appropriateness of their policies, as well as efforts by the international community to provide necessary financial support in this moment of crisis, will be critical in order to attain the hoped-for revival of global growth by 2010".

He ends his speech by saying that  IMF stands ready to use its financial resources and expertise to help pave the way toward a more resilient post-crisis global economy.

Photo courtesy : imf.org


Saturday, November 15, 2008

Financial Crisis in India

The storm of financial crisis hits India, for nearly a decade, companies in India have had a strong run of growth, pulled along by fast economic expansion and blessed with low inflation. World now is very different from what it used to be for the  10 years. There are some collateral damages which can happen.


There may be sharp decline in consumer spending on houses, cars and other consumer durables, following the sharp decline in lending to households, will cause a recession in the construction industry and also in  production of consumer durables.

 

Most of the loans on houses will default on their  payments and consumer loans, especially as house values will fall below the loan values.

 

Non Performing Assets (NPA's )  in the banking sector will increase as there will more write-off of bad housing loans and personal loans. These  losses to the banks will push  financial institutions into bankruptcy or forced mergers with stronger banks.

 

Then there will be retrenchment of lending even the smallest term loans, which banks and other institutions lend to each other for their  working capital. 

Wednesday, November 12, 2008

Largest Micro Finance Deal

In the largest microfinance deal in the world, Hyderabad based SKS Microfinance has raised Rs 366 crore or $75 million from private equity investors. This is fourth round of fund raising by SKS. Sandstone Capital, an India focused hedge fund with $1 billion capital under management, has led the deal, while the other investors in this round include SVB India Capital and Kismet Capital.

 

SKS has raised funds from Sequoia Capital, Vinod Khosla, Odyssey Capital, Silicon Valley Bank and others. Talking about the exit route to the investors, Akula said its likely to be through an IPO. But they have other options like mergers and acquisitions on the table. Also the investors are likely to get a return of 20%, CEO SKS Microfinance Vikram Akula said.

 

SKS Microfinance was started in 1998 and now has more than 3.3 million clients across the country. It plans to reach 8 million clients till March 2011. SKS Microfinance claims it has the lowest interest rates offered by MFIs across the country, which range between 25-30%. SKS added 400,000 new clients last month and and is now looking to further expand. The total equity capital of the comapny is now $135 million, and with this investment capital adequacy ratio has gone up from 17% to 30%.

 

Photo from: eweek.com

News from: VC Circle 

Tuesday, November 11, 2008

G20 leaders to meet on Financial Crisis

G 20 leaders will be meeting next weekend's at a summit (emergency) on how to reshape the global financial system and give greater importance to developing nations. A showdown appears to be brewing about whether broader groupings like the G20 should supplant the elite, rich-country G7 as the main forum governing the world economy.

France, which holds the rotating European Union presidency, is leading a drive for tough new regulations and oversight in financial markets.Many countries want to beef up the IMF and some want to give it a regulatory surveillance role.The United States, Britain, Canada and Australia are worried that too much regulation could restrain a free-market system and dim the prospects for economic growth.

There have also been questions as to how far such a summit would go since the host President is already on his way out, as he will handover power to Obama and aides close to Obama have disclosed that Obama would not be attending the controversial meeting.

Monday, November 10, 2008

Deal Failures: The Second Wave

In the past few weeks, the next generation of M&A failures has begun to take shape.

 

The first wave of failures consisted of the stream of private equity and strategic deals negotiated before August 2007. This next wave of failure comprises the deals negotiated after that time, deals largely struck in the spring and summer of 2008. This second wave of deals was negotiated with relatively full knowledge of the difficulties in the market and the problems with the pre-August 2007 private equity deal structure, particularly its optionality in the reverse termination form.

 

Nonetheless, like this first stream, many of these transactions are foundering on their termination mechanisms and the continued buyer optionality that buyers have been able to negotiate. Importantly, the troubles with JDA Software’s proposed deal for i2 Technologies that emerged Wednesday represents the second attempted renegotiation of a strategic deal with private-equity-like reverse termination fee provisions.

Steven M. Davidoff complete write up at :

 http://dealbook.blogs.nytimes.com/2008/11/06/deal-failures-the-second-wave/


Friday, November 7, 2008

India's share in global M&A less than 1%

The merger and acquisition (M&A) spree of corporate India seems to have hit a low, as India's share in the global M&A tally, which touched a whopping $3 trillion, is less than even one per cent.

Till September this year, corporate India has announced merger and acquisition deals worth $26.43 billion, which is around 0.8 per cent of the total global M&A kitty.

Commenting on the current market situation, KPMG Executive Director (Corporate Finance Group) Gaurav Khungar said: "The environment is plagued with conservatism and a wait-and-watch approach with absence of decision making or aggression... And questions on prospective bankruptcy risks are abound."

Khungar further said beyond the economic factors that have contributed to lack of credit for M&A or business operations, all economic advise in the media is providing guidance to companies to hold on to their cash positions.

Another report from global consultancy major Grant Thornton showed the total number of M&A deals during the first nine months of 2008 stands at 381, with an announced value of $26.43 billion. In the corresponding period a year ago there were around 527 deals amounting to $49.33 billion.

Market experts said that the crisis in financial markets is acting as a dampener for M&A deals. Although, valuations of companies have gone down, banks are cutting down their exposure to funding deals.

 

Courtesy : www.business-standard.com

 

Thursday, November 6, 2008

Time to Buy ? May be Yes

Cisco Systems Inc.  Chief Executive John Chambers said it was a good time to acquire small companies, although an uncertain economy meant it was important to maintain a strong cash position.

"Cash is king and queen and the royal family," he told Reuters in an interview on Wednesday, but added that the network equipment maker will use cash to acquire more shares and invest in small companies once the outlook on the economy becomes more clear.

"It is perfect now to be acquiring small companies because small companies have no exit strategy, the IPO market is dead, and the price of these small companies is very attractive at the present time and probably will remain so," he said.

 

http://www.reuters.com/article/smallBusinessNews/idUSTRE4A53IZ20081106

 

Wednesday, November 5, 2008

Who runs finance at Asia’s companies?

Who runs finance at Asia’s companies?  CFO Asia after 10 years have passed since they launched CFO Asia, thought it was time to ask. They conducted a reader survey that drew 327 responses. The survey shows that the region’s finance chiefs are predominantly accountants, but that over a third have MBAs. About 40 percent hope someday to move out of finance, either running their own business or else serving as boss of another company.

They are a hard-working group. The average CFO clocks 54 hours a week, and nearly two-thirds don’t use up their vacation days each year. But job satisfaction is high and most would choose a career in finance if they could do it all again.

As for the finance function, it has made dramatic progress over the past five years. Finance employees spend more time on strategic activities today and are far more involved in what their business colleagues would consider “value-added” work, such as analyzing channel profitability or helping with pricing decisions.


survey at: http://www.cfoasia.com/images/pic_0811/10th_survey.pdf


Friday, October 31, 2008

Fundraising Slowdown Likely Till 2009

Investors have seen all asset classes suffer during the recent market turmoil, and the long-term outlook remains highly uncertain. In order to assess the impact on institutions’ private equity programs, and their future intentions for the asset class, Preqin’s LP Survey team has undertaken a survey of current LP opinion and sentiment. 

 

Preqin’s LP Survey team polled 100 investors during September and October 2008, covering a representative sample of small, medium and large institutions globally. 51 institutions were from North America, 43 from Europe (of which 13 UK, 12 Scandinavia and 18 mainland Europe), and 6 were from the rest of the world. 31 were public pension plans, 20 fund of funds, 15 endowments and the remaining 34 were spread across asset managers, insurance companies, family offices, private sector pension plans, investment companies, banks and sovereign wealth funds. 

 

Detailed report: http://www.preqin.com/listResearch.aspx

 

Wednesday, October 15, 2008

Microfinance in India



Its almost 25 years since Microfinance taken birth in India and the concept started by Professor Mohammad Yunus (Grameen Bank) in Bangladesh. The Microfinance field has since spread with adaptation and evolution of  ideas to various countries and context.With a large portion of the world’s poor, India is likely to have a large potential demand for microfinance. For this reason, It makes sense to consider the changing face of microfinance in India, in order to shed light on comparable changes in the field all over the world. With all the excitement about the prospects of the field to contribute to poverty alleviation and the integration of the world’s poor into the rapidly evolving global market system, the Consultative Group to Assist the Poorestthe Consultative Group to Assist the Poorest (CGAP) estimates that microfinance probably reaches fewer than 5% of its potential clients. 

India is home to a growing and innovative sector microfinance.

Microcredit organization can be a burgeoning field that combines the best in economic strategy with human policy making. Microcredit programs, and other developmental economic initiatives, represent a new way of forging international relations through humanitarian and financially viable aid. It is the branch of microfinance that involves lending small amounts of money to very poor people. The borrowers, often women, use this money to start a business or improve upon an existing one. The money is often used to buy goods that the women can later resell at a profit. These small loans give women the capital they need to create sustainable businesses enabling them to support themselves and their families.

Mirocredit requires specialized financial knowledge as well as a unique combination of skills, such as knowledge of social science, local languages and customs.

I feel microcredit is a very critical part of helping communities grow and achieve sustainability. 

Micorfinance is here to stay as  it is yet to reach millions of poor .  

Photo from: World Bank


Tuesday, October 14, 2008

Is the worst over?

Markets around the world doing Bungee Jumping, there are still uncertainties in the financial markets and global economies which are unlike what most people have seen in the last decade or so, and it is extremely difficult to predict whether market conditions are heading south or northward simply because the world is very different from what it used to be 10 years ago. 


No expert is expert enough to say worst is over with the currrent crisis which is kind of one year and half old and  people slowly get used to the  bungee jumping by the markets and there will be less panic.Many experts whom i talk to and tell them that worst is over they tell me 

"if you thought worst is over think again" we have to see this week and may be there will be some clarity.

US Financial Crises -Lessons

I repeat what i wrote on September 18th and even this day it is relevent 

The current market jitters are centred on disturbances in the world's credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.

But what happened in previous financial crises, and what are the lessons for today?

There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).

Among the key lessons of previous major financial crises are:

Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity

Early intervention by central banks is more effective in limiting their spread than later moves

It is difficult to tell at the time whether a financial crisis will have broader economic consequences

Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

Wednesday, September 24, 2008

Why Mergers Fail

It's no secret that plenty of mergers don't work. Research shows that 70-80% of mergers fail.Those who advocate mergers will argue that the merger will cut costs or boost revenues by more than enough to justify the price premium. It can sound so simple: just combine computer systems, merge a few departments, use sheer size to force down the price of supplies and the merged giant should be more profitable than its parts. In theory, 1+1 = 3 sounds great, but in practice, things can go awry.

 

 Historical trends show that roughly two thirds of big mergers will disappoint on their own terms, which means they will lose value on the stock market. The motivations that drive mergers can be flawed and efficiencies from economies of scale may prove elusive. In many cases, the problems associated with trying to make merged companies work are all too concrete. 

A merger may often have more to do with glory-seeking than business strategy. The executive ego, which is boosted by buying the competition, is a major force in M&A, especially when combined with the influences from the bankers, lawyers and other assorted advisers who can earn big fees from clients engaged in mergers. Most CEOs get to where they are because they want to be the biggest and the best, and many top executives get a big bonus for merger deals, no matter what happens to the share price later.

 

On the other side of the coin, mergers can be driven by generalized fear. Globalization, the arrival of new technological developments or a fast-changing economic landscape that makes the outlook uncertain are all factors that can create a strong incentive for defensive mergers. Sometimes the management team feels they have no choice and must acquire a rival before being acquired. The idea is that only big players will survive a more competitive world. 

courtersy: investopedia 

IPO- Is the Party over ?



The gloom that has descended on stock markets worldwide in the wake of a financial turmoil in the US.Is the IPO party over? For now, that appears to be the case. About 30 IPOs, aiming to raise some $9 billion, have been withdrawn from markets around the world in the last few months most of them in the US and Hong Kong. Unfortunately, things aren't likely to improve in the near-term as the pipeline of companies waiting to go public remain backed up. With the future direction of their IPO market held in the balance, we only hope that things may become better some day in near future



Thursday, September 18, 2008

US Financial Crises -Lessons

After the bailout of American International Group (AIG) on the heels of Fannie Mae, Freddie Mac and Bear Stearns, many Americans are no doubt wondering why the government appears to be coming to the aid of fat cats who mismanaged large corporations. Some economists ask a related question of whether it would be better to let these companies fail to send a message to future managers that they had better be prudent.

The current market jitters are centred on disturbances in the world's credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.

But what happened in previous financial crises, and what are the lessons for today?

There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).

Among the key lessons of previous major financial crises are:

Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity

Early intervention by central banks is more effective in limiting their spread than later moves

It is difficult to tell at the time whether a financial crisis will have broader economic consequences

Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

Sunday, September 14, 2008

CHEAPER CRUDE OIL

The basket of crude oil that Indian refiners buy fell below $100 per barrel , the latest day for which data are available, nearly five months after it first breached the three-digit mark.This will allow the country’s oil marketing companies to make profits on a third of their petrol sales, for the first time in 13 months.More importantly, the oil ministry is considering a proposal to reduce diesel prices if the crude oil prices fall below $85 per barrel to control the 13-year high inflation with an eye on elections, said two senior officials in the petroleum ministry.Diesel is used largely by the transport sector and high diesel prices have a cascading effect on general price levels as 78 per cent of goods are transported by road.

courtesy:Business Standard

Wednesday, September 10, 2008

Doing Business Index: India slips behind Pak


India slipped two notches to 122nd rank, below neighbours including Nepal, Bangladesh and Pakistan in the 'Doing Business Report 2009' prepared jointly by the International Finance Corporation and the World Bank.

The report which ranks the country on the basis of ease of doing business has placed Nepal above India at 121st position, Bangladesh at 110th place and Pakistan at 77th place in the overall ranking.

The 2008 report had ranked India at 120th position, while Pakistan was at 74th place.

Singapore retained the first place in ranking, which covered 181 countries of the world that provides quantitative measure of regulation for starting a business, getting credit, paying taxes, enforcing contracts and closing a business reports Financial Express today .

Photo courtesy  : worldbank.org


Monday, September 8, 2008

Future Ventures IPO Cleared

Future Ventures will be the second Indian fund to be listed in stock markets, after IL&FS Investment Managers. Future Ventures India, the venture capital arm of the Future Group, has recieved the approval of market regulator Securities and Exchange Board of India (SEBI), for an initial public offering (IPO). Interestingly, SEBI has cleared the IPO with certain riders, when contacted officals from Future Group who confirmed the development. The market regulator has said that Future Ventures, which is modelled on the basis of a venture fund, has to invest the amount raised in three years and if not, it should be returned to the investors. Also if the firm decides to pick up a stake larger than 20%, then it has to seek shareholder approval. SEBI is looking to list the fund in a seperate segment, although details are not known repots vccirle.com.

Saturday, September 6, 2008

Infosys-Axon Deal !

Hailed as the largest outbound deal by Indian IT Company Infosys-Axon, some market analysts believe it will have no major financial impact on the company. Agreed it’s a strategic buy in the SAP space, but any sharp appreciation in the rupee against various currencies and a prolonged recession in major user economies may be a difficult path  choosen by Infosys. 


Infosys announced acquiring UK-based Axon Group in a 407-million pound (Rs 3,310 crore) all-cash deal after market hours Monday. The deal is expected to be consummated by November 2008, with the payment being made in December, and would add to its earnings from January 2009,


There is  a mixed reaction for the deal in the market and most of them are worried as investing in a company that draws majority if its earnings from the US where slow down is the buzz word. Analysts feel that is not a very good buy.

Photo courtesy : Nasdaq

Thursday, September 4, 2008

Banks Ready For New IPO Payment Facilty

The Hindu Business Line reports that  eleven banks participated in the mock test carried out by the Bombay StockExchange (BSE) for the new IPO payment facility recently permitted by SEBI. The first IPO in which the facility will be used is that of 20 Microns, which opens on Monday.


This facility, called the Application Supported by Blocked Amounts (ASBA), allows banks to block IPO application money in the applicant’s bank account till the time of allotment of shares. Only that amount proportionate to the share allotment will be transferred from the account.

The markets regulator has said that ASBA will be operationalised from Monday. . This coincides with the opening of the IPO of 20 Microns, the first issue in which the ASBA process will be used by investors.

Interface tested

“BSE has successfully tested its interface with 11 banks for participation in the ASBA (Application Supported by Blocked Amounts) process,” said a BSE news release.

The exchange is in the process of testing the interface with other banks that have evinced interest in participating in the ASBA process, BSE said. Using this interface, the banks participating in the IPO process would be able to upload the bids with respect to their customers, into the electronic book of the BSE.