MICO crashes after announcing revised open offer price of Rs 4600/sh

MICO has crashed almost 6% after announcing a revised open offer price of Rs 4600/share. Currently, the share is trading at RS 4429, down Rs 257.60 or 5.50%. It is trading with volumes of almost 10,500 shares. Robert Bosch GmBH (promoter of MICO) had earlier made an offer to buy the 20% stake in MICO India for a price of Rs 4,000 per share. However they have revised this price upwards to Rs 4,600. The revised offer opens today and will close on July 9.

Promoters currently hold 60.55% stake in the company. The total institutional holding in the stock as of March 2007 stand at around 27.6%. According to a report by Edelweiss, they expect that the acceptance ratio could go well above the minimum level as many institutions will not tender the shares in the offer. The minimum acceptance ratio works out to be 50% if we assume that all holdings (except promoters) would tender their shares in the open offer, they say.

The payment of consideration for the accepted shares would be done by 24th July, 2007. "We would recommend accumulating the stock below Rs 4500, as we expect acceptance to be near 100%. The trade will generate a yield of around 2.25% in little less than one month duration (as the last date of communicating rejection/ acceptance of shares and payment of consideration is 24th July)," the report states.




FM: No price freeze for cement companies; Will not interfere with cement or steel pricing, More sops for Sugar sector if required

The FM P Chidambaram says that there will be no price freeze for the cement companies and that the government will not interfere with the cement or steel pricing. Chidambaram said that the government is still confident of achieving the 9% GDP growth this year. He also promised more sops for the sugar sector if required. The FM added that fears of policy inaction till general elections are exaggerated.

On the FDI issues, he says that FDI in retail & insurance are stuck as of now. He also added that there is no conflict with RBI on monetary tightening.




Steel prices likely to go down by Rs 500-1000/tonne

Steel prices are expected to be reduced by Rs 500-1,000 a tonne following a stabilization of global and import prices, due to the appreciation of the Rupee against the Dollar. The price drop, if it happens, would be the first this year. In March, when the industry partially rolled back prices, it was due to the intervention from the government to rein in inflation.

The industry is considering whether it should increase the discounts or bring down the listed price. A final decision in this regard is expected within a couple of days. The reason for a drop is two-fold: the global prices have softened (it has stabilised now) and cheap imports are flooding the market.

Imports of hot rolled coils (HRC) are priced at around Rs 26,000 a tonne, much higher than domestic HRC prices, which are at Rs 35,000-37,000 a tonne. Sources said imports have been on the rise due to the appreciation of the Rupee against the Dollar.

As the percentage of consumption had increased, imports, which were at 2.1 million tonne in 2005-06, increased to 3.9 million tonne in 2006-07 and is expected to exceed four million tonne this year.

Arcelor Mittal, the world’s largest steel maker, recently announced that it would maintain its current pricing structure for flat products in Europe for the third quarter. The company also announced that its production volume in the European market would be lower by 3-4% in the third quarter compared with the second quarter, as a result of mill outages.

The steel behemoth expects the move to reduce the level of inventory in the market, which was slightly inflated due to the recent surge of imports.

According to a market survey, 22% of the companies contributing to its Steel Index expect prices will increase during the next three months, while 32% expect it to decrease. However, the industry expects the current softening of prices to be temporary.

According to Moody’s, steel producers would continue to benefit from strong demand and industry consolidation. “Demand for steel globally is expected to remain solid in 2007 and 2008, given the forecast for the world GDP growth over the next two years,” said the Moody’s report.

"The gap between local and imported steel prices has widened due to recent Rupee gains and investors are anticipating steel companies will announce price cuts in July. Further downside is limited as steel prices are likely to stay stable near term and most companies have fixed price long-term contracts with major clients, “ analysts say.





Indiabulls Financials short-lists German insurance major Ergo & SocGen for its proposed foray into life insurance business

Indiabulls Financial Services (IBFL) has short-listed German insurance major Ergo and French firm Societe Generale (SocGen) for its proposed foray into life insurance business. Both the foreign firms are in an advanced stage of negotiations for a 74:26 joint venture with IBFL. Indiabulls is expected to form a JV with one of them by the month-end. The other two players, which were earlier keen to form a JV with IBFL, included the UK-based Friends Provident, and Mass Mutual from the US.

IBFL is entering the insurance market at a time when the life insurance business in India seems to be on the verge of an explosive growth. It is planning to invest about Rs 1,000 crore in its new venture. Indiabulls, which has a strong presence in the broking business and a fast-growing consumer finance business, is planning to leverage its distribution capabilities for its insurance business. The company has also roped in AK Shukla, ex-Chairman of LIC, to head the insurance venture. IBFL is also working on a similar JV in the non-life sector as well. It may take some more time.

Many Indian financial service players are entering the life insurance sector “to drive up valuations. On the flip side, the fast-growing life insurance business in India has drawn many global players. A number of global financial majors have evinced interest in the placement with the valuation pegged between $ 10.5 billion and $ 12 billion. Following the 110% growth in the life insurance business in India in 2006-07, there has been a rise in interest in the Indian market. Similar growth rates have been witnessed by the general insurance segment, forcing international insurers to look at launching operations in India.

Apart from IBFL, Ergo is also in talks with L&T Finance for a possible joint venture in life insurance. Ergo, part of the Munich Re group, is also in talks with HDFC for its general insurance foray. Ergo has a premium income of almost $ 22 billion and is No. 2 in the German primary insurance market, with $ 133 billion investments. The group, which operates in 24 countries outside Germany, has 28,310 employees.

SocGen has already rolled out a number of businesses like private banking, corporate and investment banking, car leasing and fleet management and asset management in the Indian market. The group’s India strategy is in line with its plans for Asia Pacific, a region where it is eyeing major growth opportunities, especially in emerging markets such as India and China.





IDFC to raise $ 500 mln via QIP route; Raises stake in SSKI to 66.67% from 33.33%

Infrastructure Development Finance Company (IDFC), the nation's biggest infrastructure lender, has roped in Citigroup, UBS, Kotak Mahindra and JM Financial, to raise $ 500 million through share issuances to foreign and domestic institutions early next month, reports the Business Standard. This will be the biggest ever fund mobilisation through the Qualified Institutional Placement (QIP) route, after GVK Power & Infrastructure’s $ 300 million, handled by Kotak Mahindra, Citigroup and SSKI, and the $ 240 million issue by Max India, which was lead managed by CLSA.

IDFC’s roadshows for the QIP issue will start in the first week of July, said sources close to the development. The funds will be used to meet the growing demand from companies and the government to build ports, roads, power projects and other utilities. In the last eight months, 18 firms have raised more than Rs 4,500 crore ($ 1.09 billion) through the QIP route.

When contacted, an IDFC spokesperson said: "In the last board meeting, we have approved a $ 500 million fund mop-up via the QIP route. However, the approval of shareholders is pending, which is likely to come in the annual general meeting on June 28."
"We would be utilising the funds for lending to infrastructure projects and for our next 2-3 years’ growth plans," he added.

QIPs, which was introduced by the Securities and Exchange Board of India (Sebi), are considered portfolio investments, aimed at helping companies to raise funds by selling shares to foreign institutional investors registered with the Sebi. In 2005-06, IDFC accounted for a quarter of all private sector-focused infrastructure project financing in the country. As on December 31, 2006, IDFC’s balance sheet size was Rs 16,377 crore and as on March 31, 2006 on a cumulative basis, IDFC has approved financial assistance to 162 projects aggregating over Rs 17,530 crore.

Its subsidiary IDFC Private Equity, manages the infrastructure focused private equity fund with a corpus of Rs 2,744 crore. A couple of months back, IDFC, Citigroup, India Infrastructure Finance Company and Blackstone announced the launch of “The India Infrastructure Financing Initiative” to deploy around $ 5 billion in capital for infrastructure projects in India. The plan is to deploy about $ 2 billion in equity capital and $ 3 billion in long-term debt financing with maturities exceeding 10 years.

Meanwhile the ET reprts that IDFC has hiked its stake in SSKI, a Mumbai-based privately held domestic corporate finance and institutional securities company from the current 33.33% to 66.67%. According to market talk, IDFC is said to have hiked its stake by shelling out Rs 150 crore. The company had bought the initial 33% stake in September 2006 for Rs 100 crore. Prior to the current deal, IDFC, Shripal Morakhia and employees held around 33% each in the brokerage entity.




After 16 yr old long battle, Hindustan Unilever & Nirma reached out of court settlement over using trademark similar to Hindustan Unilever’s Surf

After a bitter battle for 16 years, India’s largest fast-moving consumer goods (FMCG) company, Hindustan Unilever (HUL), and its arch rival Nirma have reached an out-of-court settlement over the latter using a trademark similar to HUL’s power brand, Surf. In a settlement ratified by the court last week, Nirma had undertaken not to use a packaging device — known as a starburst — similar to HUL’s Surf.

The case goes back to 1991 when HUL, then Hindustan Lever, filed a case against Nirma for infringement and “passing off” of the registered trademark and copyright of Surf on its own detergent brand.

The close resemblance to Surf’s packaging caused many consumers, especially rural and illiterate customers, to confuse the two brands. As Nirma products are priced lower than HUL’s fast-selling detergent Surf, the similarity in trademarks caused Nirma to eat into Surf’s sales.

Hon’ble Bombay High Court had granted an injunction restraining Nirma from using the Super Nirma label with the “star device/flash of star” in 1991. Subsequently, this order was stayed because both parties filed appeals. In 2006, both parties withdrew their appeals mainly on the basis of Nirma informing the court that it was not using the impugned label/carton.

Since then, Nirma has used a sea wave logo on its Super Nirma detergent powder packets and a girl with a blue circle in the background on its packets. When the case came up for hearing this month, the Court allowed HUL to withdraw the suit with leave to file a fresh one if Nirma uses the impugned label in future for its goods.

While most trademark violation cases are filed by established companies against the unorganised sector, this was the first time two of the country’s top FMCG majors fought over a packaging design.

This is not the first time best-selling FMCG brands have fought over trademark violations or packaging designs that look similar to theirs. Colgate has sued newcomers Anchor and Ajanta toothpaste over the latter’s use of red and white colours in their packaging.

Nirma first challenged HUL’s leadership in the detergent segment in the late 1970s. Surf, one of HUL’s flagship brands, was launched in 1959 and is now sold in three variants. While Surf has moved on to higher price points, Nirma has maintained lower prices. However, the resulting price war for greater market share between the two companies has continued. HUL today claims a market share of 36.4 per cent in the fabric wash segment.

Both companies are facing tough competition from local and regional brands, which have gained significant market share in the last few years.




Retail king Kishore Biyani's Future Group may shop for $ 1 Bn in capital market

Retailers are gearing up to put themselves on offer. First it was Vishal Retail and now its Spencer and Kishore Biyani’s Future Group that are planning to go public. India's retail king Kishore Biyani is out - shopping for funds. And he's looking for no less than $ 1 billion - all from Dalal Street. Sources tell that Biyani is exploring the possibility of listing his group of retail companies - the Future Group. They say that merchant bankers Kotak, Enam and JM Financial have already been mandated to lead the offer.

When contacted, Future Group CEO, Kishore Biyani denied the possibility of taking Future Group public. But he clarified that hiving off Pantaloon's mall format Central, as a separate listed entity is work-in-progress.

But Central alone may not get Biyani the bucks that he is looking for. And so it is speculated that he might spin off the Future Group as a whole new holding company which owns some of Pantaloon Retail's existing subsidiaries, formats and JVs. Interestingly, over the past few years Pantaloon Retail has also been referred to as Future Group. Pantaloon Retail entails 9 subsidiaries, 8 joint venture partnerships and 10 retail chains like Food Bazaar, Big Bazaar and Central.

Analysts speculate that Biyani may be looking to split his network of companies into 2. One half they say could be Pantaloon Retail and the other half - Future Group. It is possible that the 'to be listed - Central' and Biyani's durable and furnishing venture Home Solutions will be hived off under the Future Group umbrella. And to do that Biyani has put in place a legal team to structure his holdings. Also re- structuring the group could be investment bankers and lead managers for Future Group's IPO - Kotak, Enam and JM Financial. Biyani is expected to announce Future Group's $ 1 billion IPO in September.