Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Wednesday, January 24, 2007

Reliance Money-CMC account will help you trade in Corus shares

Reliance Money, the financial services arm of the Anil Dhirubhai Ambani Group (ADAG)-promoted Reliance Capital, is partnering with UK-based CMC Markets, a global player in the online derivatives trading segment, to bring overseas investment products to Indian investors.

This tie-up will enable customers’ of Reliance Money to gain access to several offshore products including —foreign equities, currency and commodities within the RBI-mandated limits. The central bank currently permits a single Indian resident to invest up to $50,000 (Rs 22.5 lakh) overseas per year, which has been raised from the earlier $25,000.

CMC Markets, which has presence across more than 100 countries and has transactions in excess of $1 trillion worldwide over the past two years, offers more than 1,000 instruments across various asset classes. While further details about the tie-up were not available, the product is likely to find a larger audience among the more sophisticated investors, such as large high net worth individuals (HNIs) or institutions, who are keen on diversifying risks across various markets worldwide.

For instance, an investor with Reliance Money can buy Corus shares through an account created for him or her by CMC. The shares will then be credited to the account. If the investor wants to sell, he follows the same procedure, places an order and the shares in the account are offloaded in the market.

“Investors, who normally look at such products, are the cream. It is doubtful, whether this product will be successful with the smaller investors mainly due to lack of knowledge about these markets and discomfort to test their fortune there,” said an official with a top rival brokerage. The partnership is part of Reliance Money’s attempts to offer a gamut of services to its customers, in addition to the domestic brokerage services, which is yet to take off.

Talk of ADAG’s entry into retail broking has changed the dynamics of the industry in the past few months, with several brokerages introducing new products and slashing brokerages rates to match the likely rates of Reliance Money. ADAG’s retail broking venture is expected to send brokerage rates to new lows, at least for the short-term.

Though no formal announcement has been made on the rates, the talk is that Reliance Money may offer a brokerage rate of 7.4 paise on every Rs 100 worth of delivery-based trades, and 2 paise on non-delivery trades, as against the average rate of 15-25 paise for delivery-based trades for every trade worth Rs 100, and 3-5 paise for non-delivery trades. Reliance Money plans to offer products in equities, derivatives, mutual funds, IPOs and insurance products, other than the overseas investment products.

Tuesday, January 23, 2007

Anil picks up 31% in logistics firm BLR

In its first private equity investment in a logistics firm, Anil Ambani’s Reliance Capital has picked up a 31% stake in BLR India.

This Rs 175 crore Mumbai-based firm offers manifold transport and logistics services and is among the largest players in corporate surface transportation.

While confirming the acquisition, an official spokesperson decline to divulge the transaction value.

BLR is the first investment by Reliance Anil Dhirubhai Ambani Group in any major logistics company; Reliance Capital already owns a 44% stake in the courier and cargo business of DTDC.

Among the top five logistics companies in India, BLR owns over 250 vehicles including a truck fleet of more than 130. It contracts another 800 on a daily basis.

With a network of more than 50 offices across the country, BLR’s client list includes DuPont, Honda Siel Cars, Owen, Samsung India and Sony India.

BLR’s specialised services include over-dimensional cargo (ODC) and Exim transportation as well as government-approved bonded warehousing and bondedtrucking services. The company, which was started in 1968 by L C Goel, is expected to use the funds raised through this transaction for investing in warehouses, trucks and trailers. Tower Capital was the investment advisor to the deal.

Saturday, January 13, 2007

PE players rule the deal street, big boys steal show

It was a year when private equity (PE) ruled on deal street and the big boys emerged right on top of the heap. According to data compiled by Grant Thornton, while single big ticket deals by players such as Kohlberg Kravis Roberts (KKR) and Providence pushed them up the pecking order others like ChrysCapital, Citigroup, Sequoia, IFC and UTI Ventures ruled the roster thanks to the number of deals that they sealed.

The league tables of PE firms revealed that there were close to 150 firms who struck deals in 2006. The data, however, does not include investment figures from those deals where the amount is undisclosed. But it does factor in club deals (where more than one PE firm invested together) as separate deals by the individual funds.

In terms of investment value, KKR’s $900 million buyout of Flextronics comes out right on top. Apart from being the first deal by an investing goliath — which hit headlines in the 1980s thanks to its $31.4-billion leveraged buyout of US tobacco and food conglomerate RJR Nabisco — it also opened the floodgates for other global PE funds to rush into India.

Others who made it to the top of the value list were Providence which struck a $400-million pre-IPO deal with telecom service provider Idea and Temasek whose two deals included the 9.9% stake it picked up in Tata Teleservices.

Warburg Pincus, the most successful PE fund in the country which has already encashed its booty in Bharti Airtel, was among the top spenders with investments in hospitality, coal & mining and media companies.

In the ranking sweepstakes, though, it’s neck-to-neck with ChrysCapital and GLG Partners. However, unlike Warburg and ChrysCapital, which struck multiple deals across sectors, GLG Partners focused on a single deal — its investment in Idea.

Other firms that invested more than $100 million through one or more PE deals included Actis, Farallon, Morgan Stanley, Citigroup, Xander Real Estate, IDFC Private Equity, 3i, ICICI, Silver Peak Investments, Sequoia Capital, Abu Dhabi Investment Authority, Olympus Capital and Siachen Capital.

The PE top dog roster included ChrysCap, Citigroup, Sequoia, IFC and UTI Ventures all of whom struck eight deals each in 2006. They were followed by ICICI Venture and New Vernon with seven deals each.

Then there were a set of firms that totalled six transactions each. That list includes Actis, IDFC Private Equity, IL&FS, Baring Private Equity Partners and SIDBI Venture Capital. Warburg Pincus and Reliance Capital were next in line with five deals each.

There were also a set of about 15 PE firms that did not disclose the investment amount. This roster includes Evolvence and GEM India Advisors who struck multiple deals. Swiss Re, Lehman Brothers, Band of Angels, TA Associates and Tano Capital were among others that closed single deals whose size was not announced.

Soros fund, Blue Ridge to buy 21% in Reliance ARC

Billionaire investor George Soros-owned fund Dacecroft and New York-based investment firm Blue Ridge are picking 21% equity stake in Anil Dhirubhai Ambani Group’s Reliance Asset Reconstruction Company (Reliance ARC).

While Dacecroft, which would pick 11% stake, would come on board as the sole foreign sponsor of the company, Blue Ridge would be putting in its money as another investor.

The equity would be acquired through a preferential allotment, which would induct close to Rs 21 crore in the asset reconstruction company (ARC). Cyprus-based Dacecroft, a wholly-owned entity of Quantum Endowment Fund, which, in turn, is backed by George Soros, would invest Rs 11 crore in the company.

Blue Ridge, on the other hand would invest Rs 10 crore through two arms. While Blue Ridge Limited Partnership would pick 6.2% stake, Blue Ridge Offshore Master Partnership would hold 3.8% in Reliance ARC. Pursuant to the transaction the holdings of the existing shareholders would also rejigged.

While Reliance Capital along with Reliance Capital Asset Management would more or less maintain their shareholding, the other minority investors equity stake would come down.

For instance, Corporation Bank, which holds 20.76% and is the second largest investor in Reliance ARC, will hold 10% after the induction of foreign investors. The holding of General Insurance Company(GIC) would also come down from 17.65% to 10%. As per the existing foreign direct investment(FDI) policy, FDI up to 49% is permitted in asset reconstruction business subject to mandatory approvals.