Wednesday, 16 March 2016

Flipkart denies report of sale talks with Amazon

Talks between both firms were reportedly held to sell Flipkart for $8 billion.


Flipkart, India’s largest online marketplace, has strongly denied a newspaper report that said they had exploratory talks with Amazon in the last quarter of 2015 for possible sale. 

Taking to Twitter, Sachin Bansal, Executive Chairman of Flipkart put out this cryptic tweet.

Citing several sources in the investment community, The Economic Times reported on Wednesday that Amazon had made a preliminary offer of up to $8 billion to acquire Flipkart, almost half of its previous valuation of $15.2 billion. The newspaper said they have spoken to three sources who were top executives in venture capital and private equity firms.  

ALSO READ: Flipkart opposes entry tax by states: Why it is a fight to the finish

Meanwhile, another source informed that Amazon had offered a little over $5 billion for Flipkart’s e-commerce business and $3 billion was pegged for the company’s logistics business.

The talks between both the companies, reportedly held in the last quarter of 2015, went cold after the offer was perceived to be too low. The sources also told the newspaper that there was no reason to believe that a deal will be struck or that the talks were still ongoing between them. 

Valuation woes

The development comes at a time when Morgan Stanley has marked down its investment value in the online marketplace by $4 billion to $11 billion. 

Meanwhile, Flipkart is also currently in talks with Alibaba to raise $1 billion, but the Chinese e-commerce player was said to be investing at a lower valuation than $15 billion.

Kotak Mahindra, CPPIB to invest $525M in stressed assets

The Canadian fund has invested $2 billion in India over the past five years.

Plan Investment Board (CPPIB) to invest up to $525 million (about Rs 3,500 crore) in stressed assets in the country’s banking and corporate sectors.
CPPIB will have the ability to invest up to $450 million of the total amount, the Indian financial services group said in a statement. 


Adam Vigna, MD, CPPIB
“This investment is an important step in CPPIB’s strategy to build a diversified credit business and will add to our direct credit investment capabilities in India,” said Adam Vigna, managing director for principal credit investments at CPPIB. 
A number of companies are looking to invest in or acquire stressed assets in India as bad loans at banks mount and debt-laden companies seek to sell assets.
US private equity firm JC Flowers & Co is floating a joint venture with Ashok Wadhwa-led investment bank Ambit Holdings Pvt Ltd to acquire stressed assets in India. Last month, financial services firm SREI Alternative Investment Managers Ltd, part of Kolkata-based SREI Group, said it was looking to float a Rs 2,000 crore fund to invest in debt instruments of stressed companies.
To encourage overseas investment in asset reconstruction companies, which acquire bad loans from banks and try to recover them, the government in its budget for 2016-17 has proposed to allow 100 per cent foreign direct investment in ARCs without prior approval. 

Kotak Mahindra said that, as per the agreement with CPPIB, the two partners will provide bespoke financing solutions to companies and also invest in stressed asset sales by banks with an aim to restructure and turn around companies in distress.
The Indian company has been active in the distressed and structured credit market for over a decade. It also operates in the segment through its affiliate Phoenix ARC, an asset reconstruction company.













S. Sriniwasan, CEO of Kotak Special
Situations Credit Fund
“The current environment has created a much larger opportunity that requires significant capital commitment,” said S. Sriniwasan, CEO of Kotak Special Situations Credit Fund.
CPPIB manages C$282.6 billion (US$214 million) in assets globally as of December 31, 2015, according to its website. The pension fund opened its first India office in Mumbai last October and has invested around $2 billion in India over the past five years.

Earlier this month, the fund bought just under 1 per cent more in Kotak Mahindra Bank from Japan's Sumitomo Mitsui Banking Corporation for Rs 1,151 crore ($170 million). CPPIB had originally bought a stake in India's fourth-largest private-sector lender in mid-2013. It now owns 4.9 per cent of the bank.
The pension fund has also backed L&T Infrastructure Development Projects and has formed joint investment platforms with Piramal Enterprises and Shapoorji Pallonji Group, besides investing in third-party PE funds as a Limited Partner (LP). Its Indian LP portfolio includes investments in Multiples Alternate Asset Management and India Value Fund Advisors.

Private equity investment hits record $19.5 billion in 2015: report

PE investments during the Oct-Dec period totalled $ 3.9 billion, taking the deal value for the year 2015 to $19.5 billion — the ‘best ever’ for India.


New Delhi: Private equity investments during the October-December period totalled $ 3.9 billion, taking the deal value for the year 2015 to $19.5 billion — the “best ever” for India, says a report.
According to the PwC MoneyTree India report, a quarterly study of PE investment activity based on data provided by Venture Intelligence, the fourth quarter of 2015 saw investments worth $3.9 billion, a 12% drop as compared to the same period of 2014. However, despite the drop, the stellar performance throughout the year helped 2015 become the best year ever, with a total of $19.5 billion worth of PE inflows across 159 deals.
“India’s macros are looking good, with the current account and fiscal deficit at acceptable levels, a relatively stable rupee, inflation at below 5% and, most importantly, a declining interest rate regime. This should encourage private investment as demand picks up,” PwC India leader, Private Equity Sanjeev Krishan said.
Sectorwise, the information technology and IT-enabled services (IT & ITeS) continued to be the biggest sector, as this space attracted $1.3 billion in 93 deals, followed by the banking, financial services and insurance (BFSI) sector that attracted $910 million in 10 deals.
“In 2015, sectors such as banking, insurance and telecom saw the stabilisation of their business and opened up their technology spend over the year, thereby driving the growth of the Indian IT & ITeS industry,” PwC India leader - Technology, Sandeep Ladda said.
“Media & entertainment sector was a surprise, attracting investments worth $414 million,” the report said.
Regionally, Mumbai attracted $1.9 billion, while Bengaluru was a distant second with investments worth USD 733 million. Going forward, Krishan said, “financial services, technology and healthcare continue to see sustained activity in 2016, while e-commerce fund raising may get challenging this year at least in the near term”.
He added that the Indian Government’s focus on making it easier for foreign investors to do business in India will help from a perception standpoint and needs to be backed by real reform.


Tuesday, 15 March 2016

Top 10 tips to boost investing results in 2016.

1. Keep an eye on the Fed (and other central banks)


Central banks may not be in the driver's seat when it comes to world markets right now, but they definitely have a hand on the wheel. A few words from Federal Reserve Board Chair Janet Yellen or European Central Bank President Mario Draghi can send stock markets across the world charging upward or downward hundreds of points.

A big part of the investing story in 2016 will undoubtedly hinge on how well Yellen manages the U.S.'s transition to normal, non-zero interest rates. If she raises rates too quickly, it could push the still-rickety U.S. economy back toward recession. If she raises rates too slowly, cheap credit could fuel a bubble in asset prices.

Young couple organizing their finances in white dining room © Spectral-Design/Shutterstock.com
In general, higher interest rates mean slower economic growth and thinner profits for U.S. firms, so you'd think that the longer Yellen holds off in raising rates, the better for U.S. stocks.

But Yellen's reluctance to raise rates hasn't always been interpreted as a positive signal by the markets, perhaps because it's seen as evidence that the U.S. is on shakier economic ground than we'd like to think.

In short, the Fed is a wild card this year.
One stable investment is a certificate of deposit. Find the best CD rates.

2. Get ready for some volatility in 2016


A number of studies have shown that periods of intense volatility tend to cluster together. The 2nd half of 2015 featured several months of intense volatility, so that would seem to augur for more of the same in at least the 1st half of 2016.

On top of that, changes to the federal funds rate have tended to be accompanied by volatility in the markets over the past few decades, so it's shaping up to be a bumpy ride in 2016.

3. Keep enough cash on hand to avoid liquidating assets


In low-volatility times when asset prices are on an upward trend, it's tempting to be invested in the market as much as possible. Why hold cash that's earning next to nothing, the thinking goes, when you can have your money working hard in the markets for you? In an environment where the market is continually setting record highs, you can always liquidate investments at full value to fund whatever cash needs you may have.

With volatility likely to be strong in 2016, it might make sense for those who depend on their portfolio to pay some or all of their living expenses to set aside a larger cash cushion ahead of time. That's so they don't have to sell assets at temporarily depressed prices in order to meet routine or unexpected expenses.

4. Be aware of assets outside of your brokerage account


When you're planning out your portfolio, it's easy to lose track of non-financial assets because they don't appear on brokerage statements. That can lead to accidentally concentrating too much of your overall wealth in some sectors and not enough in others.

For instance, say you decide you want exposure to the residential housing market, and you go out and put a sizable chunk of your stock portfolio into the SPDR S&P Homebuilders ETF (XHB). If you're also a homeowner and have a big percentage of your net worth tied up in your home equity, as many homeowners do, your total exposure to residential real estate is your equity, plus whatever percentage of your overall assets are in XHB. At that point, you may be overexposed if the housing market goes sideways again.

The same applies to your human capital -- a complicated-sounding term that means the present value of all your future paychecks put together. For example, if you're a petroleum engineer, your paychecks, and consequently, the value of your human capital, are very much tied up in the fate of the oil industry.

If things go really bad, you could end up seeing your wages stagnate or, worse, you could become unemployed. In that case, it may not be a great idea to have a huge allocation to oil companies in your portfolio on top of that.

A good financial planner would take into account all of your assets, not just the financial ones, and so should you.


5. Make a plan and stick with it

When you see the value of your portfolio take a big hit, it's understandable to want to log on to your investment accounts immediately and sell, sell, sell.

But how do you avoid falling into the buy-high, sell-low trap? Mostly by having -- and sticking with -- a comprehensive investment plan. That plan should have 2 essential parts:
  1. An investment policy statement, or IPS, that takes into account your particular time horizon, risk tolerance and goals.
  2. A strategic asset allocation designed to help you reach the goals within the constraints outlined in your IPS.
Of course, your investment plan shouldn't be carved in stone. It's important to update it regularly, particularly if something fundamental changes with your investing needs or market conditions.
Stick to your plan through day-to-day fluctuations rather than going on a selling frenzy every time you get uncomfortable. Think of it as a guardrail to keep you between the ditches when market turns get twisty.

6. Dollar-cost averaging can be your friend


Research seems to suggest that if you have money on the sidelines, you're more likely to get better returns by putting it into the market all at once rather than making smaller securities purchases at regular intervals -- a practice known as dollar-cost averaging.

But dollar-cost averaging can have benefits from a behavioral finance perspective -- that is, it helps investors not to freak out and sell everything when the blue chips are down.

For example, say you get a $2,000 bonus at work and want to put some money into a tax-advantaged 529 college plan account for your kids' education.

If you put the entire lump sum in right before the market takes a big hit and your brand-new investments lose 10% of their value in a day, you're going to be tempted to sell it all and move into unproductive cash investments.

On the other hand, if you put $200 per month in for 10 months, day-to-day price fluctuations may not have the same emotional impact.

Particularly in a year that's looking to be fairly volatile, that type of strategy might be useful, especially for beginning investors.

7. Watch for bargains


When you're investing for the short term, big drops in asset values are bad news. The prices may never recover before you have to cash out, locking in your losses.

But when you're investing for the long term, bear markets and large-scale drops in asset prices should be looked at the same way you look at a buy-one, get-one-free sale at the supermarket -- as an opportunity to stock up (no pun intended) when prices are low.

There are a few key sectors that look likely to be depressed in 2016, most notably energy, materials and utilities. As long as it fits in with your overall investment plan, taking the opportunity to pick up some of the historically highest-performing companies in those sectors may help boost your returns over the long term.

8. Be skeptical of portfolio-based lending


Portfolio-based lending, or using securities in your portfolio as collateral for loans, has become a big business for banks' wealth-management arms. It's often sold this way: Why liquidate investments that are doing well when you can take out a low-interest-rate loan and pocket the difference?
But there's 1 big reason that portfolio-based loans are usually a bad idea: If the securities decline substantially in value, you could be on the receiving end of a margin call. If that happens, you may either have to put up more collateral or face having the loan come due immediately.

In an environment where security prices could be fluctuating more than in the recent past, that could end badly for investors. If you need cash to make a purchase, a better move might simply be liquidating part of your portfolio and using the proceeds from the sale instead.

9. Take advantage of tax management opportunities


One positive effect of rocky markets is that they allow for some substantial capital gains management on taxable investments.

Basically, any investment you own in a taxable account that has gone up in value a lot is a tax bomb waiting to explode and stick you with a bill for up to 20% of the gain, depending on your income.
The 1 thing that can defuse these tax bombs is using losses on investments that didn't work out to offset the gains.

Here's the basic trick: You see that stocks in a particular category are falling across the board because of some broad economic trend. You happen to own a stock in this category that's been a loser compared with its peers for some reason -- its products aren't as good, its management is clueless, whatever. You don't want to own it anymore, but you believe the sector it's in will recover at some point before the end of your time horizon.

But wait! There's another stock in that same category that's consistently beaten your bad stock and looks well-positioned for a comeback. You can sell the bad company's stock, use the proceeds to buy the good stock, and boom, you have a tax loss to offset gains elsewhere in your portfolio, and you haven't violated the wash-sale rule.
Times of elevated volatility, like 2016 is looking to be, are a perfect time to pull off just such a maneuver. So, if you have chronically underperforming investments that you've wanted to unload for a while and have some long-term capital gains issues that need to be addressed, keep tax-loss harvesting in mind.

10. Be aware of the difference between cyclical vs. secular trends


A cyclical trend is just what it sounds like: a market trend that will reverse itself within a few months or years and go back the other way, like how broad stock market indexes fall in the lead-up to a recession and then begin rising as an economy comes out of recession.

A secular trend is different. It's a longer-term trend in an industry or market brought on by some fundamental change, like the fall of Polaroid as digital cameras gained in popularity or the decline of newspaper stocks as Web-based news consumption became the norm.

Sometimes in the moment, it can be difficult to tell the difference between the 2. For instance, are current low oil prices a cyclical trend that will soon reverse, leading to prices rising to record levels in the future? Or are oil companies looking at more or less permanently slow growth, thanks to gains in renewable technologies and increasing environmental regulation designed to slow global warming?
Will financial stocks recover as they adjust to (and lobby against) new regulations designed to keep them from blowing up the global economy again? Or, are their low stock prices a symptom of disruption by prepaid debit card providers, robo-advisers and other fairly recent "fintech" competitors?

As the pace of technological change accelerates in 2016 and beyond, these types of questions will become even more pressing for investors, increasingly determining which investors win and which ones lose.

Sun Capital

IDBI Federal Life Insurance buys office space worth Rs 111 cr in Marathon Futurex

In one of the major office space transaction, IDBI Federal Life Insurance Company Limited has bought commercial space worth over Rs 111 crore at Marathon Futurex in Lower Parel in Mumbai. The company has acquired around 61,720 sq ft office space spread over two floors at the IGBC’s Gold rated Green Building. The deal was registered last week after completion of all formalities.

The 450 employees of IDBI Federal Life Insurance will occupy the offices on 22nd and 23rd floors of the tower. The deal works out at around Rs 18000 per sq ft and falls within the ongoing property rates for outright transactions. Rates in Lower Parel are in the range of Rs 18,000-20,000 per sq ft based on the profile and facilities offered in commercial complexes here.

Mr.Mayur Shah, Managing Director, Marathon Group said, “This is one of the biggest commercial realty deals in the recent time which instills the hope that commercial real estate is on track.”


He added, “Among the biggest commercial real estate deals that have taken place in last couple of months, maximum deals have taken place in Marathon Futurex in Lower Parel. The reason is the distance of railway stations from the iconic building and the gold rated green building with amenities and facilities that are at par with international standards. With increasing standards Indian corporate houses and entry of multinationals, Marathon Futurex is the apt office space solutions for these companies.”

Sun Capital

Kotak Mahindra, Canada pension board launch $525 mn stressed asset fund

The fund has a flexible investment mandate with aim to restructure, recover and turn around companies in distress.



Kotak Mahindra Group has tied up with Canadian Pension Plan Investment Board (CPPIB) to launch a $525 million fund to invest in the stressed asset market in India. The Canadian pension fund manager will have the option to invest up to $450 million in this partnership, Kotak Mahindra Group said in a statement on Monday.
“This investment will address the growing opportunity arising from the current stress in the Indian banking and corporate sectors,” the statement said.
The fund has a flexible investment mandate—providing financing solutions to companies—in addition to investing in stressed asset sales by banks with the aim to restructure, recover and turn around companies in distress, it added.
“Through this agreement, CPPIB will selectively invest in assets that we believe will deliver value in line with our long-term investment mandate,” said Adam Vigna, managing director, principal credit investments, CPPIB.
On 22 January, Mint had reported that Kotak Mahindra Group and CPPIB are in the process of launching a $500-600 million stressed asset fund in India, before the end of the financial year.
The fund will work closely with Kotak Mahindra Group and its affiliate, Phoenix Asset Reconstruction Company (ARC) Pvt. Ltd, to locate opportunities in the stressed asset market in India. Kotak Mahindra Bank currently owns 49% stake in Phoenix ARC.
Kotak Mahindra and the CPPIB have been in discussions since 2015, as stressed assets piled up at domestic banks in the aftermath of an economic downturn that made it difficult for many borrowers to repay debt.
In January, Ajay Piramal-led Piramal Group said it will launch a $1 billion stressed assets fund in association with Nirmal Gangwal, founder of Brescon Corporate Advisors Ltd, a corporate turnaround firm. The fund will be looking at investing in stressed firms and possibly take over management where needed.
The stressed asset market is looking attractive to domestic and foreign investors due to a pile-up of bad loans in the Indian banking system, which is working on a March 2017 deadline to clean up its books.
Gross non-performing assets (NPAs) of 39 listed banks surged to Rs.4.38 trillion in the quarter ended 31 December 2015, from Rs.3.4 trillion at the end of the September quarter, according to data collated by corporate database provider Capitaline.
In a statement last week, ratings agency Crisil Ratings had said that it expects stressed assets (a sum of gross NPAs and other troubled assets) in the Indian banking system to rise to over Rs.7 trillion (or 11.3% of total loans) by March 2017, from about Rs.4 trillion (7.2% of total loans) as on March 2015
Sun Capital


Monday, 14 March 2016

Regulating real estate States need to do much more to help cut realty prices

The Rajya Sabha may have cleared the Real Estate (Regulation and Development) Bill, but land is a state subject, so the legislation will need to be worked on by states who may want to alter the norms. That could delay the implementation by anywhere between 12 and 24 months. Maharashtra already has a Bill in place, cleared in 2015, but other states such as Karnataka, Tamil Nadu and West Bengal—where there is a fair bit of construction taking place—may take time ushering it in.
Maharashtra already has a Bill in place, cleared in 2015, but other states such as Karnataka, Tamil Nadu and West Bengal—where there is a fair bit of construction taking place—may take time ushering it in.
Nevertheless, the stringent norms will chasten developers across the spectrum since smaller projects and commercial ones too now fall within the ambit of the law. Since consumers and developers will now be paying the same penal interest rates, developers will hopefully complete projects on time. They will need to be far more disciplined while allocating funds and cannot divert money since 70% of the collections for a project must be kept aside by the developer in an escrow account, and used only for the cost of land and construction of that property. While builders had been lobbying to bring down this amount to 50%, the government, to its credit, did not yield. Given that the norms have been tightened, developers will be more circumspect now, ensuring they are protected against unforeseen events. For example, environmental bans—such as the one near the Okhla bird sanctuary in Noida—have taken a toll on projects, and builders will not leave themselves vulnerable to such rulings.
While the law appears to benefit the buyer since the price will be determined according to the carpet area rather than what is known as the ‘super built up’ area—which includes the walls and common areas—it would be naive to believe that builders will not extract the profits they want. As such, unless supply overtakes demand, it’s hard to see home buyers not being exploited. In cities such as Mumbai, the FSI should be increased but this should be accompanied by appropriate infrastructure provided by the state government and the builder. The new law rightly requires promoters to register themselves with the Real Estate Regulatory Authority that needs to be set up within a year in every state—before he books, sells or offers for sale any project. Section 11(3)(a) of the Bill mandates that developers share the final project plans as part of their disclosure terms, with no room for changes. The penalties, for violating the rules, are high and could amount to 10% of the project cost and up to 3 years in jail. However, in all fairness, the authorities that give the necessary clearances also need to be made accountable for delays; a single-window would be helpful. The regulator must monitor the government agencies as much as it does the developers. The real estate sector has been a law unto itself allegedly because of its nexus with politicians and a symbiotic relationship of this nature doesn’t break up easily. Nevertheless, the new law is a good attempt at cleaning up the space.


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