At it again: That's Uday Kotak, the master dealmaker

IfHemendra Kothari decided to sell his stake in DSP Merrill Lynch to foreign partner Merrill Lynch last December, Uday Kotak, Kotak Bank's Executive Vice Chairman and Managing Director, has done the exact opposite. On March 16, Kotak Bank announced that it was acquiring the 25 per stake held by Goldman Sachs in its subsidiaries Kotak Mahindra Capital Company (KMCC) and Kotak Securities (KS). The total size of both deals is Rs 333 crore, a fair value according to most i-bankers.

The buzz in D-street is that late in 2005, around the time the Merrill Lynch deal was struck, Goldman Sachs was in talks with Kotak to acquire a 51 per cent stake in KMCC and KS. The deal never happened, and Goldman whose India CEO Brookes Entwistle clearly stated after selling its stake in the joint ventures to Kotak that his firm's intention was "to build a wholly owned onshore investment banking and securities firm in India", has gone ahead and cleared the way to do just that.

For the record, Kotak and Goldman have entered into a 'cooperation agreement' that will presumably see the former helping the latter meet licensing and regulatory norms. The two companies are also rumoured to have signed a non-poaching agreement. That means, Goldman will have to worry about where its team is going to come from, although the firm is sure to do what other multinational i-banks setting up shop have done: skim the cream from existing players.

Kotak, true to his reputation of being a master dealmaker, not only gets to keep his cake and eat it too, but all this without having to spend too much money.

-Krishna Gopalan

NUMBERS OF NOTE

Rs 5,700 crore: The amount raised by Reliance Capital Asset Management Ltd through its new scheme, Reliance Equity Fund. This is the largest amount ever raised by an Indian mutual fund.

30%: The proportion Indian companies account for in all foreign investment in London, making India the second largest overseas investor in the city after the US

164 minutes: The time an average Briton spends online everyday compared with 148 minutes spent watching TV Rs 2.64 crore: Loss to the airline industry because of the five-day strike by AAI employees from January 30 to February 3, 2006

$7,00,000 (Rs 3.15 crore): Value of contract signed last fall by the Indian embassy in US with lobbying firm Barbour, Griffith & Rogers, an outfit led by Robert Blackwill, the US ambassador to India between 2001 and 2003. The embassy is also paying $6,00,000 (Rs 2.7 crore) to Venable, a firm that boasts former Democratic Senator Birch Bayh of Indiana as its point man

11%: Increase in HSBC's annual pre-tax profits ($21 billion or Rs 94,500 crore) for 2005, the largest ever profit reported by a British bank

$650 million (Rs 2,925 crore): FDI (foreign direct investment) inflow in January 2006, a record increase of 340 per cent over FDI inflow in January 2005 ($152 million or Rs 684 crore)

$90 million (Rs 405 crore): The amount Google has agreed to pay to settle a lawsuit alleging the online search engine leader overcharged thousands of advertisers who paid for bogus sales referrals generated through a ruse known as "click fraud"

30 million: The estimated number of Indians who pay taxes

Rs 1.5 crore: The sales turnover of Viagra since its launch by Pfizer in India in December. At Rs 594 a tablet, Viagra is 20 times expensive than the generic versions available in the country. It was launched in India four years after its global launch

CHILE: CALLING INDIA

Heine: Trade's on his mind

India has signed a preferential trade agreement (PTA) with Chile, the first with any Latin American nation. In 2005, Chile imported goods worth $30 billion (Rs 1,35,000 crore). Of this, Indian exports were a mere $130 million (Rs 585 crore); Chile exports $490 million (Rs 2,205 crore) worth of goods to India. Ambassador Jorge Heine believes there is scope for expansion in trade, and that Chile could serve as a beach-head for India's foray into the region. Maruti 800s, he points out, are popular in Chile and India's IT and pharma firms, are present in the country and growing their interests. Interestingly, Chile's pride-wine-does not figure in the list of items approved in the agreement.

NOTED

CLEARED: By the Government of India, 150 special economic zones, including those that will be set up by the Reliance Group (Chairman Mukesh Ambani, left), Biocon, Bajaj Auto, and Satyam Computers. The move is part of the government's strategy to use SEZs to drive growth.

INDICATED: By BMW, that it would launch its cult car, the Mini Cooper in India latest by 2009. The company is in the process of setting up an assembly plant (at an investment of Rs 110 crore) in Chennai. The Mini Cooper, a British marque, is now owned by the German carmaker.

WARNED: By i-bank JP Morgan in a recent resesearch report that Infosys' strategy of hiring more fresh graduates than its peers has created problems for it on the delivery front and that it has resulted in the company facing a shortage of middle managers (individuals with between three and six years of experience). The report goes on to downgrade Infosys from Overweight to Neutral.

ANNOUNCED: By UK-based Cairn Energy that it will list on Indian stock exchanges with a partial initial public offering (IPO). The company, which estimates the reserves in its Rajasthan oil-find at 3.5 billion barrels, will become the first multinational oil firm to list on Indian bourses.

RECEIVED: By Indian Institute of Management, Ahmedabad, a notice from the Income Tax Department in Ahmedabad asking that the school pay service tax because it charges recruiters who participate in its placement season. (India's service tax rules mandate that executive search firms have to pay tax). The school (Director Bakul Dholakia, left) has responded saying that it is not a placement agency.

ANNOUNCED: By Aditya Birla Group, a $350 million (Rs 1,575 crore) investment in Laos to develop plantations and build a pulp plant to feed its viscose business.

20>120

Udaia Kumar: A clear victim

That unique math has been worked out by Naveen Mittal, the District Collector of the Krishna district of Andhra Pradesh, who has forced several microfinance companies such as Share Microfin and Spandana to shut down their operations in the district. Mittal claims that the microfinance companies were exploiting rural women by loaning them money at a rate of interest of 12 per cent (flat) or 19-20 per cent (reducing). "We offer one of the lower (microfinance) rates in the world," says Udai Kumar, Chairman, Share. Kumar is right: the average cost of providing microfinance works out to 24 per cent (cost of funds is 8 per cent, of transactions, 14 per cent, of defaults, 1 per cent, and the company keeps a 1 per cent margin to ensure capital adequacy). If the companies have been able to offer a lower rate, it is by pruning transaction costs. "In China, where the government is involved, the rate is 24 per cent," says Vijay Mahajan, CEO, Basix Microfinance. For the record, the informal sector in Andhra Pradesh and many other parts of India (read: local money lenders) charges rates that can sometimes be as high as 120 per cent.

-E. Kumar Sharma