Aditya Birla Private Equity picks up stake in BSE

Aditya Birla group today announced its maiden private equity fund with an initial commitment of $100-million and said that it has picked up stake in the Bombay Stock Exchange for an undisclosed amount. The fund--Aditya Birla Private Equity Fund--targets to collect $250-million over the next few quarters, Aditya Birla Private Equity funds' Managing director and Chief Executive Officer, Bharat Banka, told PTI here. Banka, however, did not elaborate on the stake that the fund has picked up in the BSE and said the stake purchase was as part of the demutualisation of the bourse.

Punjab government to launch venture capital fund

Punjab Government would set up a Venture Capital Fund in collaboration with private companies with an intention of providing financial assistance to new ventures in the state. "We are in the process of setting up a venture capital fund in which state as well as private companies will be putting in money to give funds for setting up new projects coming up in the state," Punjab, Principal Secretary, Industry and Commerce, S.S. Channy said here on Monday. He further stated that the said fund would be managed by the private companies while adding that the government had sought Expression of Interest from the consultants to suggest ways of making it operational.

Tata, Birla target mid-size PE deals

Tata Capital is banking on its ability to source deals by judiciously exploiting the ecosystem of suppliers and customers of as many as 98 operating companies of the salt-to-steel conglomerate. Its large companies such as Tata Motors have hundreds of suppliers. The group plans to invest about 15 per cent of the first corpus on its own as anchor investment. Tata Capital had earlier announced its plan to raise $400-500 million as its first fund for the PE business. “With a unique opportunity to source deals and capability to evaluate them, we think we can transform the company,” said Bhandari. Apart from the Tata Capital team, the PE business wants to use the expertise of group establishments such as Tata Strategic Management Group, Tata Quality Management Services and Tata Management Training Centre, besides the resources of larger operating companies of the group

. Unitech eyes $560 mn from PE funds

India’s second-biggest real estate developer Unitech is in talks with private equity (PE) funds for investments up to $560 million (Rs 2,750 crore). The realtor is also in negotiations with banks to restructure an additional Rs 500 crore of loans as part of its plan to cut debt and secure funding to complete existing projects, sources in the company said. The Gurgaon-based realty firm, whose stock is now trading at less than a tenth of its 52-week peak on the Bombay Stock Exchange (BSE), plans to draw down $110 million (Rs 540 crore) from Unitech Real Estate International Fund to invest in its realty projects in the National Capital Region (NCR). When contacted, the company declined to comment on the development.

Reliance oil price bets go awry

Mumbai, Jan. 5: Reliance Industries Ltd (RIL), the country’s largest private sector company, has racked up big losses as its bets on oil futures went wrong in 2008. Speculation is rife that the mark-to-market losses on the oil price hedges are over $1 billion. It is not immediately clear whether this will impact the third-quarter results that are due later this month. However, a source close to the development said the loss estimates were way off the mark and would be in the region of “hundreds of millions of dollars”. RIL is the largest oil refiner in the country with a fairly large presence in the oil exploration and production business. Asked to comment on the development, a RIL spokesperson said, “We will not be able to comment specifically on your query on account of the silent period.” There have also been unconfirmed reports that a large number of treasury officials, who worked in the supply and trading division and were involved in these transactions, are no longer with the company. “It is difficult to assess how much losses have been incurred on oil futures trading as it depends on the contracts they have entered into, what prices these were struck at and when they ended. This kind of trading has nothing to do with physical operations of the company and, therefore, crude requirements are not the benchmark,” said an analyst who did not wish to be named. RIL has suffered losses because the price of crude oil has dropped from $136.32 a barrel in the third week of July 2008 to $35.99 in the last week of December 2008 (see chart). There is little clarity on whether Reliance traded in crude or a basket of products, and the prices and the tenures of these futures contracts. The company suffered losses because it may have contracted to buy or sell a particular product at a date in the future at a price determined by market forces. Since it isn’t clear whether all the contracts have expired, it is possible for the company to recoup some of the losses if oil prices recover. Oil prices have been rising since the December lows. As oil prices plummeted by over 60 per cent in the past six months, the company, like the rest of the oil industry, was caught on the wrong foot. RIL posted a turnover of Rs 89,163 crore and a net profit of Rs 8,232 crore in the half year ended September 30, 2008, an increase of 38 per cent and 10 per cent, respectively, compared with the corresponding period of the last year. The RIL scrip closed at Rs 1,365.75 on the Bombay Stock Exchange today. Most brokerages are expecting RIL’s gross refining margins to tumble to a single digit in the third quarter from $13 per barrel in the second quarter ended September 30. While reaffirming its BBB long-term corporate credit rating for RIL, Standard and Poor’s had said last week: “Profitability is expected to be adversely affected by lower fuel demand, especially in developed markets. We project refining margins to decline further to $9-$10 per barrel in the near term.” The Telegraph.Culcutta.

MARKET OUTLOOK

More pain before gains Though the Indian economy is better placed than many of its Asian peers, it is in no way decoupled with the rest of the world and in the next few quarters it will grow at a rate much lower than the average growth rate seen in the past few years. Besides, the forthcoming Union elections and the unrelenting negative global news flow would continue to act as an overhang on the markets. But the good news is that the Indian economy is likely to respond to the recent monetary and fiscal measures, and could possibly witness a meaningful revival by the second half of CY2009. Consequently, we expect the markets to remain range-bound and consolidate around the current levels for most of the first half of CY2009. In our view, the consolidation phase should be exploited as it offers a great portfolio building opportunity for the long-term investors. Though the uncertainties abound, the downside risk is limited and the risk-reward ratio is hugely in favour of the long-term investors. Especially since the benchmark index is trading at close to the historic low of around 10x one-year forward earnings. source:Sharekhan