Friday, 28 March 2014

PE funds to buy 49% stake in PNB Housing Finance

Private equity (PE) funds General Atlantic Partners and Apax Partners are planning to buy 49% stake owned by Destimoney in Punjab National Bank's (PNB’s) housing finance company PNB Housing Finance.  New Silk Route (NSR), which owns majority stake in Destimoney, has appointed Morgan Stanley to find a buyer for the PNB stake.

Housing companies are generally valued at 1.2 times of their net worth. PNB Housing Finance has a net worth of Rs 620 crore until fiscal March 31, 2013. This benchmark will offer PNB Housing Finance a valuation of roughly Rs 744 crore. Punjab National Bank has reported 42.14% fall in its net profit at Rs 755.41 crore for third quarter ended December 31, 2013 as compared to Rs 1305.62 crore for the same quarter in the previous year. However, total income of the bank has increased by 3.68% at Rs 11922.30 crore for quarter under review as compared to Rs 11499.27 crore for the quarter ended December 31, 2012.

RBI extends Basel III deadline to March 2019

Giving some respite to the Indian banks, the Reserve Bank of India (RBI) extended deadline for banks to implement global capital norms, Basel III, by a year to March 2019 amid concerns over the asset quality and profitability of the banks.

The RBI notified that prevailing slowdown in Indian industries has been putting pressure on the asset quality and thus impacting performance/profitability of the banks. Therefore, RBI decided to extend time for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III capital regulations. Indian banks will now align full implementation of Basel III norms closer to the internationally agreed date of 1 January 2019.

The central bank has also revised certain aspects of guidelines like Minimum Common Equity Tier 1, Capital conservation buffer (CCB) and loss absorption features of non-equity capital instruments. However, the central bank issued more strict norms for Indian banks as compared to Basel Committee on Banking Supervision (BCBS). Under Basel III, total capital (Tier 1 and Tier 2) of a bank in India must be at least 9 per cent of risk weighted assets (RWAs) while, the BCBS requirement is minimum 8 per cent of RWAs.The RBI suggested Indian banks that capital requirements are substantially lower during the initial years as compared to later years for full implementation of Basel III Guidelines and therefore banks should consider this aspect carefully while undertaking their capital planning exercise. Referring to the dividend distribution, the RBI recommended that the dividend on common shares and perpetual non-cumulative preference shares (PNCPS) will be paid out of current year's profit only. If the coupon payment on perpetual debt instrument (PDI) would lead to result in losses in the current year, then declaration should be precluded to that extent. Coupons on perpetual debt instruments should not be paid out of retained earnings or reserves.

Lupin enters Mexico through an acquisition

Lupin Ltd has acquired Mexico’s speciality pharmaceutical company Laboratorios Grin, for an undisclosed sum. The move marks Lupin’s entry into the Mexican and larger Latin American market.
Mexico is one of the fast-growing pharmaceutical markets, valued at over $13.5 billion and growing at 9-10 per cent annually.Incorporated in 1955, Grin makes and sells branded ophthalmic products, and recorded revenues of approximately $28 million in 2013. The company has over 275 employees.
Vinita Gupta, Lupin’s Chief Executive Officer, said the acquisition is a reflection of Lupin’s commitment to expand into the Latin American market and build its global specialty business. “We see a lot of synergies in this acquisition and plan to bring our ophthalmic pipeline to build the Grin business as well as leverage their commercial presence to enter other promising therapy segments,” she said in a company statement.

Investment limit in CPI-linked bonds hiked to Rs10 lakh for individuals

The Reserve Bank of India (RBI) has doubled the maximum limit for investment in inflation-indexed bonds to Rs10 lakh per annum for individuals. Further, the investment limit for institutions like Hindu undivided family (HUF), Charitable Trusts, Education Endowments and similar institutions that are not profit-seeking in nature has been increased from Rs 5 lakh to Rs 25 lakh per annum.  The subscription for the inflation indexed national savings securities-cumulative will remain open till March 31.

The central bank has introduced Inflation Indexed bonds in December 2013 for retail investors with a view to provide a positive rate of return on their investment. Interest rate on these bonds is linked to Consumer Price Index (CPI).

Inflation-indexed bond is similar to any other government security. While, interest rate payable on these bonds comprise two parts  include 1.5% fixed rate per annum and an inflation rate based on the final combined CPI compounded in the principal on a half-yearly basis and paid at the time of maturity. Final combined CPI with a lag of three months is used to calculate incremental inflation rate.