"Six NBFCs in race for Citicorp biz"

Bidders Include Shriram Transport, Ashok Leyland, Magma & Rel Cap

V Balasubramanian & George Smith Alexander CHENNAI/MUMBAI


A HOST of non-banking finance companies (NBFC) have shown interest in acquiring the commercial vehicle and construction equipment portfolio of Citicorp Finance. Citicorp Finance, a Citigroup NBFC, has put its portfolio of around $1.2 billion on the block. Sources said six institutions have been shortlisted in the second round of bidding. These include Shriram Transport Finance, Ashok Leyland, Magma Shrachi and Reliance Capital.

The bidders are doing a due diligence of the portfolio and Citicorp is expected to close the deal in the next one or two months. The NBFC is into assetbase financing. Citi is looking at exiting this portfolio as part of its similar global move. The sources point that Citi is looking at realising around $200 million from the sale of this portfolio. But, the bidders have estimated the deal to cost around Rs 450 to Rs 500 crore going by a capital adequacy ratio of 10% based on the size of the portfolio. However, Citi will not go through deal is if it does not get a good enough valuation as it is not in a hurry to sell off this business. Citi officials refused to comment on the issue. STFC’s MD R Sridhar offered no comments saying it is the company’s policy not to comment on speculation. But, Shriram group sources confirmed the company is very much in the race. STFC manages the truck financing portfolio of Indian and foreign banks and has a five-year long relationship with Citicorp Finance.

Magma Shrachi’s MD Sanjay Chamria confirmed its bidding but declined to go into details. Ashok Leyland has joined the fray as it has revived its interest to have its own finance arm to provide a cost-effective financing solutions to truck operators.

ALL looks at focused funding

The company has found a gap in meeting their needs after the Hinduja group decided to strengthen Indusind bank by merging with erstwhile NBFC, Ashok Leyland Finance, which was promoted by ALL. The bank has turned brand neutral in financing vehicles and its share of ALL vehicles has come down.

ALL CFO K Sridharan said, “We have a tieup with more than six banks and NBFCs for vehicle financing. We want to have focused funding arrangement. After the merger of ALF, we have been looking at having our own format for vehicle financing.” He added: “We have bid for the Citicorp business so that we can make a headstart by acquiring a good portfolio and a large number of customers of Tata Motors.” This is because it has found that these customers accounted for bulk of CV portfolio of Citicorp.

Also, 50% of the portfolio consisted of construction equipment financing. It may not be of immediate interest for ALL but its acquisition will bring in synergy once the company diversifies into the manufacturing of construction equipment in a year, Sridharan said. Bidders for this portfolio will have to take on their rolls 300 staff. This is the first time that any institution has asked buyers of the portfolio to absorb staff. Though some private sector banks had looked at this portfolio they backed out as they felt the returns were not good enough.

"STAGE SET FOR ANOTHER BIG M and A PLAY"

IDEA SET TO BUY OUT SPICE FROM MODIS

Adding more spice to an already-hot Indian telecom story, the merger will create a cellular behemoth with 28.5 million users

Rashmi Pratap MUMBAI


THE AVB Group-owned Idea Cellular is buying out the Modis from Spice Communications, taking complete control of the mobile company. The two will then be merged. Telekom Malaysia, which owns a shade less than 40% in Spice, will hold a stake in the combined entity.

ET was the first to report about this development on Wednesday.
Spice shares closed at Rs 51.95 on Friday, down 3% from their previous close. At this price, the market capitalisation of Spice is around $850 million. The value of the deal could not be ascertained. The Modis are likely to exit the company completely. Idea will make an open offer for the mandatory 20% after buying them out.

Telekom Malaysia was also interested in increasing its stake in the company. It wanted to buy out the Modis and later explore the option of merging with Idea.

The Idea board met in Mumbai on Friday. However, the details of the meeting could not be ascertained. Idea MD Sanjeev Aga and BK Modi of Spice refused to comment.

Spice, which operates in the Punjab and Karnataka circles, has been an acquisition target for quite sometime now for various reasons. One, it has remained restricted to the two circles even 11 years after rolling out operations. Two, it has spectrum in the 900 MHz band, which can accommodate a larger number of subscribers than the 1,800 MHz band used by other GSM operators. Spice has nearly 4.4 million subscribers in the two circles.

The merged entity will become the fifthlargest telco in terms of mobile subscribers (28.5 million plus) after Bharti, RCOM, Vodafone and BSNL and move ahead of Tata Teleservices, with 25 million subscribers. Idea has been allotted spectrum in the 11 circles where it does not operate and is readying plans to roll out services there. It is set to become a pan-India operator by 2009.

Spice Communications is 39.2% owned by Malaysia’s state-controlled Telekom Malaysia. The BK Modi family holds 40.8% through Modi Wellvest while the rest 20% is held by the public and financial institutions.

TM is an emerging leader in the Asian communications market with a presence in Indonesia, Singapore, Cambodia, Thailand, Bangladesh, Pakistan, India, Sri Lanka and Iran besides Malaysia. TM’s investment philosophy is to play an active role in its international operations, with an emphasis on management control, which it has been seeking in Spice for almost a year now. TM’s regional mobile customer base (across nine countries) was 39.8 million in 2007 end.

39.2%
TELEKOM MALAYSIA’S STAKE

$ 850m
MARKET CAP OF SPICE COMM

4.4m
SPICE’S SUBSCRIBER BASE

MAIN ATTRACTIONS

Strong foothold in Punjab and Karnataka circles Spectrum in 900 MHz band, which can accommodate more subscribers than the 1,800 MHz band used by other GSM operators

"‘HR has a role in making M&As work’"

ET INTERACTIVE DHIRENDRA SHANTILAL

INDIAproduces talent in abundance. However, with the rapid economic strides, talent crunch for the country continues. On the other hand, spate of M&As has made people management a critical issue. Dhirendra Shantilal,senior vice president (APAC), Kelly Services, spoke with Bhanu Pande about the major bottlenecks for filling the demand-supply gap and emerging trends in recruitment in India in the wake of the slowdown in the US:

There have been a large number of M&As in the last one year.
What is the role of HR in making M&As successful?

The biggest challenges for HR during a merger or acquisition are those related to communication, compensation and talent management, culture and managing uncertainty. Most M&As follow a four-stage process of pre-deal, due diligence, integration planning and implementation. A successful M&A deal is where HR gets involved right from the first stage. HR can add value at this stage by assessing the culture of the target organisation and by mapping the management styles of the two organisations.

Similarly, at the due diligence stage, where the financial and strategic implications of the deal are assessed, HR plays a critical role in evaluating the financial implications of retirement and other benefit plans and the compensation structure of the target company.

At the integration and planning
stage, the acquirer creates a comprehensive plan for integrating the two organisations. At this stage, HR plays the key role of developing a strategy for employee communications, retention of key talent, a new organisation structure and compensation strategy and in change management.

What are the recruitment trends for senior executives in India, especially after the US slowdown?

The recession in the US has not had a huge direct impact on the India growth story. Although the impact is visible in export-oriented industries like IT, textiles and pharma, it has not affected the hiring trends of senior executives in India and it is business as usual.

How do you see Indian staffing solutions firms vis-a-vis their counterparts in more evolved markets like the US?

The Indian market has evolved over the last few years at a rate faster than the developed markets due to a boom in foreign investments, an unprecedented increase in M&A deals and a large number of Indian companies acquiring a global footprint. This has brought with it global management trends and also a huge interest in human capital management. The staffing solutions companies, therefore, have got their desired place under the sun in India, as they have elsewhere in the world.

Having said that, the staffing industry in the country still has a long way to go to catch up with its western counterparts where it is perceived to be a more strategic partner to organisations and in the US itself, the industry was valued at $112.2 billion in 2007.

What is Kelly’s outlook for the job market for 2008?

As the Indian growth story continues, this would translate in a growth in the job market in most industries with the possible exception of sectors that have been impacted by the export market. Retail, insurance, real estate, banking and financial services, health services and biotechnology would show higher growth in recruitment process.

Do you see Recruitment Process Outsourcing (RPO) catching up in India?
India has the unique opportunity to take a significant share of the RPO market in the coming years. The country is predicted as one of the fastest growing markets for RPO at an annual rate of 30% or higher in the years ahead.

While applying for or switching jobs what are the factors one should consider at senior positions?

Over and above hygiene factors such as quality of assignment, career growth and direct and indirect monetary benefits, the several factors should be considered at senior positions. For instance, it is critical to understand the environment in which the new organisation functions and its core competence, knowledge of the key stakeholders involved, internal and external dynamics associated with the role like matrix reporting, etc. A thorough understanding and study of the financials of the new organisation is a must and his career path as the organisation sees it and live examples of employees moving on that path.