All posts by : Nergis Parikh

Apollo Munich will be later merged with general insurance company HDFC ERGO, part of the HDFC group.

Mortgage lender Housing Development Finance Corporation (HDFC) will acquire controlling stake of 51.2 per cent in Apollo Munich Health Insurance for about Rs 1,347 crore from Apollo Hospitals group and few employees who hold stake in the standalone health insurer.

After the acquisition, Apollo Munich Health Insurance will be merged with the non-life insurance arm of mortgage lender HDFC Ergo. The deal is subject to regulatory approvals and the entire process is expected to be completed in nine months.

“We had to do a two-step transaction since if HDFC Ergo had directly bought Apollo stake, it would have breached the 49 per cent cap on foreign investment in insurance for Munich Re,” Deepak Parekh, chairman of HDFC and HDFC Ergo General Insurance, said while addressing a press meet.

Munich Re is already HDFC’s partner in the general insurance company.

Ergo International AG, which holds 49 per cent stake in HDFC Ergo, is a subsidiary of Munich Re and Munich Re also holds stake in Apollo Munich Health Insurance. After the amalgamation, Munich Re will continue to hold 49 per cent stake in HDFC Ergo and the combined entity will have a gross direct premium of Rs 10,807 crore.

To support the transaction with its material benefits for Apollo Munich, Munich Health will give Rs 294 crore to Apollo Hospitals Enterprises and Apollo Energy in connection with the termination of their joint venture.

The merged entity will have a combined market share of 6.4 per cent in the non-life insurance industry with 308 branches in the country. It will also be the second largest private insurer in the accident and health segment in the country, HDFC said in a statement.

Apollo Munich Health Insurance is a joint venture between Apollo Hospitals group and German reinsurer Munich Re where Apollo Hospitals holds around 10 per cent and Apollo Energy 40.4 per cent of Apollo Munich on a fully diluted basis and Munich Re holds 49 per cent. “The combined expertise of HDFC Ergo and Apollo Munich will result in greater product innovation, wider distribution and enhanced servicing capabilities, benefiting their 1.2 crore policy holders,” said Parekh. With this acquisition, three of the seven standalone health insurance companies have been acquired. Recently, Max Bupa Health Insurance was acquired by private equity firm True North. Similarly, Star Health Insurance was also acquired by private equity firms and Rakesh Jhunjhunwala.

“We are sure that the new shareholder will continue to nurture and scale the business to greater heights and confident that all stakeholders will be positively impacted. The funds from the divestment will enable us to focus on investing and growing our core healthcare business,” said Shobana Kamineni, chairperson of Apollo Munich Health Insurance.

In FY19, Apollo Munich Health Insurance collected premiums to the tune of Rs 2,194 crore and the profit after tax of the company was Rs 11 crore. The combined ratio of the standalone health insurer was 100.7 per cent. It has a market share of 4.4 per cent in the health insurance market and 7.6 per cent in the retail health insurance market.

The combined entity will have a portfolio mix of 39 per cent accident and health insurance, 28 per cent health insurance and the rest will be commercial and crop insurance.

https://www.business-standard.com/article/companies/hdfc-to-acquire-apollo-munich-health-insurance-for-rs-1-347-crore-119061900949_1.html

The company has priced its IPO between Rs 970 and Rs 973 per share. The offer will close on June 26.

IndiaMART InterMESH, which operates Indiamart.com, an online listing platform for small and medium businesses in India, will launch its initial public offering (IPO) on June 24. The firm is planning to raise Rs 475 crore. The company has priced its IPO between Rs 970 and Rs 973 per share. The offer will close on June 26.

Intel Capital, Amadeus Capital Partners and Quona Capital will make a partial exit through the IPO. The IPO is purely offer for sale and the company will not receive any proceeds. ICICI Securities, Edelweiss Financial Services and Jefferies are managing the IndiaMART initial share sale.

IndiaMART’s online marketplace provides a platform for business buyers to discover products and services, and contact the suppliers of such business products and services. As of March 31 2019, the company had 82.7 million registered buyers and 5.5 million suppliers.

IndiaMART is the first firm to hit the primary markets with an IPO after the election. Companies had deferred their fundraising plans due to election-related uncertainties.

https://www.business-standard.com/article/markets/indiamart-to-launch-ipo-on-june-24-plans-to-raise-rs-475-crore-119061901408_1.html

M R Rao, currently the MD and CEO of Bharat Financial, will become the MD and CEO of IFIL

IndusInd Bank and Bharat Financial Inclusion shares gained more than 2 percent each on June 20 after both companies board members fixed July 4 as the record date for merger.

“All assets and liabilities of Bharat Financial shall become assets and liabilities of the Bank with effect from the appointed date, being January 1, 2018. Simultaneously with amalgamation, the business correspondent undertaking of Bharat Financial shall be transferred to IFIL, a wholly-owned subsidiary of the Bank. All assets and liabilities originated by IFIL will be booked in the balance sheet of the Bank,” IndusInd said in its BSE filing.

The Bank further said both board members fixed July 4, 2019 as the effective date of the scheme, on which date the NCLT Order will be filed by the bank, Bharat Financial and IFIL with Registrar of Companies.

July 4 will also be the record date, following the effectiveness of the scheme, for determining the shareholders of Bharat Financial who shall be entitled to receive shares of the bank, as consideration pursuant to the scheme, it added.

The board of directors have decided to publish consolidated financial results for the quarter ending June 2019 on July 12.

As per the scheme, the Bank will issue and allot its 639 shares to shareholders of Bharat Financial on the record date against every 1,000 shares held by them in Bharat Financial.

“The scheme also contemplates a preferential allotment of share warrants to the promoters of the bank. Each share warrant, upon exercise, shall entitle the promoters to one equity share. The share warrants shall be issued to the promoters of the bank at Rs 1,709 per warrant,” IndusInd Bank said.

M R Rao, currently the MD and CEO of Bharat Financial, will become the MD and CEO of IFIL.

Bharat Financial Inclusion was quoting at Rs 888.65, up 2.48 percent and IndusInd Bank was up 2.09 percent at Rs 1,411.75 on the BSE at 1013 hours IST.

https://www.moneycontrol.com/news/business/markets/indusind-bank-bharat-financial-record-date-merger-4118221.html

Promoters held 28.65 percent stake in Jain Irrigation, of which 48.41 percent was pledged against loans

Jain Irrigation Systems shares rallied nearly 9 percent intraday on June 20 after the company clarified on its recent share fall and pledged shares.

“We wish to reassure our investors and stakeholders that company is moving forward with normal operations and is confident of fulfilling it’s agenda while making serious efforts to deleverage its balance sheet,” the irrigation systems manufacturer said in its BSE filing.

“Unabated and unprecedented significant fall in share price is not the result of anything linked to company’s current or expected performance but may be linked to exit of company’s stock from F&O and/or negative sentiments born out of speculative operations fuelled by rumours,” it added.

On June 19, it crashed 28 percent amid worries over its pledged shares. On June 20 intraday, it was down 17 percent before showing a sharp recovery.

Jain Irrigation said management remained committed to owning and running all major business based on the intrinsic value that has been created while pursuing deleveraging to reduce debt by Rs 2,000 crore as conveyed earlier.

Any new investment infusion either by private equity / sovereign or other investors in one or more divisions is being done is not to address any immediate shortfall in debt, it added.

The company said deleveraging is part of a well thought out strategy to create a much better balance sheet. “However, one must note that there is no pressure while servicing existing debt as repayments are spread out over the next 5-6 years and aligned with expected normal cash-flows based on company’s growth plan,” it added.

Promoters have informed the company that they are in touch with all their lenders for pledged shares and working on solutions for the current scenario, it added.

Promoters held 28.65 percent stake in Jain Irrigation, of which 48.41 percent was pledged against loans.

The stock recovered 31 percent from its day’s low of Rs 16.30 (the 52-week low) to hit an intraday high of Rs 21.40. It was quoting at Rs 21.05, up Rs 1.35, or 6.85 percent on the BSE at 1036 hours IST.`

https://www.moneycontrol.com/news/business/markets/jain-irrigation-management-clarification-4118301.html

Carlyle could invest up to $200 million in the unicorn at a valuation of $4.5 billion.

Food delivery unicorn Swiggy is in talks to raise money from US-based private equity fund Carlyle Group, two people aware of the matter said.

If Carlyle does invest, it would mark only its second Indian technology startup bet, after backing e-commerce logistics firm Delhivery—first in 2017 and later in March this year.

As recently as December, Swiggy raised $1 billion in a round led by existing investor Naspers Ltd, the biggest ever funding round in the country’s booming food-tech sector.

Carlyle could invest up to $200 million at a valuation of $4.5 billion which Swiggy (Bundl Technologies Pvt. Ltd) is seeking, a jump from the $3.3 billion it was valued at in December, said the first of the people cited above.

While a spokesperson for Carlyle declined to comment, Swiggy did not respond to emails seeking comment.

“Swiggy’s meteoric rise in the last two years have seen heavy interest from late-stage investors including private equity funds. While it is still growing quickly and burning cash, investors see it as a long-term bet,” said a third person, an investor aware of the discussions.

Founded in 2014, Swiggy became a unicorn—a startup valued at more than $1 billion—last year. The Bengaluru-based firm has so far raised $1.5 billion from several investors, including DST Global, South Africa’s Naspers, New York-based hedge fund Coatue Management and venture capital firms Accel and Norwest Venture Partners.

Swiggy plans to use the funds to grow its delivery fleet, expand beyond food to other delivery services and ramp up its hyperlocal offerings, said the two people, both of whom spoke under condition of anonymity.

“Swiggy’s ambition is that it wants to be the only one delivering anything to your house. Food is only one part of that,” said another investor. This is evidenced by its acquisition of Supr Daily last September, which focuses on milk and grocery delivery. In February this year, Swiggy also launched Swiggy Stores, where it ties up with local grocery and mom-and-pop stores for home delivery, posing a direct threat to Google-backed Dunzo, a startup which specializes in delivery outside food. It is currently piloting the programme in Gurugram.

Over the past year, both Swiggy and rival Zomato have held discussions with Japanese investment giant SoftBank’s Vision Fund for an investment, but neither has concluded. Mint reported on 12 June that Swiggy is in advanced talks to raise as much as $1 billion from investors, including $300-500 million from SoftBank.

The Times of India reported on 6 June that Google is also expected to invest in Swiggy, with Naspers said to lead the round.

Food-tech funding has also seen a surge globally, with UK-based delivery startup Deliveroo raising $575 million from Amazon Inc., while US-based Doordash raised $600 million, valued at $12.6 billion, from investors including SoftBank, DST Global and Sequoia Capital.

Over the past year, private equity has emerged as a steady source of late-stage capital for India’s tech startups. In this month alone, PE firm General Atlantic led a $52 million investment in brokerage-free real estate platform NoBroker, while The Economic Times reported that Canadian pension fund CPPIB is investing $150 million in Delhivery, acquiring shares from existing investors. Other instances include Warburg Pincus’ investment in trucking logistics firm Rivigo and Ecom Express and CPPIB and General Atlantic’s investment in online learning firm Byju’s.

https://www.moneycontrol.com/news/business/companies/carlyle-group-likely-to-invest-200mn-in-swiggy-4113531.html

MNCs, foreign investors invest on the Big Four’s advice, it says

The United States has told India that any move to ban Deloitte and other big auditing firms would disrupt businesses and investment inflows into the country.

This was disclosed to Deloitte global CEO Punit Renjen by US ambassador Kenneth Juster last week, sources said.

The US government has also conveyed to India that multi-national corporations and foreign investors make their decision to invest globally on the advice and guidance from the Big Four networks, which also provide consultancy services, according to sources.

It has said the government, or the regulator, could impose a penalty on Deloitte, but a ban would not have any rationale, particularly when the case is sub-judice.

During talks with New Delhi, Washington cited the example of KPMG which recently agreed to pay $50 million over altered audits in the US.

Renjen comes to India once in two years to meet his family in Haryana’s Rohtak. He met the ambassador and officials in his “spare” time, sources said, adding that he did not go to the ministries — North Block or Shashtri Bhawan — to meet the officials, but met them “somewhere else”. He left India on Monday to take part in a meeting in Singapore. When contacted, Deloitte spokesperson said, “Punit makes frequent personal trips to India. However, as a policy, we don’t comment on the specific travel plans of our executive leadership.”

A query sent to the US embassy remained unanswered.

MCA has sought a ban on Deloitte Haskins & Sells and BSR and Co, a part of KPMG, for their alleged role in not disclosing full facts on IL&FS, which defaulted on its payments last year.

The MCA had also instructed the serious fraud office to initiate disciplinary action against statutory auditors before the ICAI and the NFRA. It was asked to share the investigation report with the current management of IL&FS for initiating action under various provisions of Companies Act.

Invoking Section 140 (5) of the Company Act in the case would allow debarring an audit firm for at least five years.

The moves comes after the SFIO filed a complaint against 30 people, including these two audit firms, for concealing information by not flagging the alleged criminal conspiracy and misreported the financial statements of IL&FS firms.

The companies Big Four firms, including PwC and EY, audit, have up to 65 per cent of the total market cap of listed firms.

https://www.business-standard.com/article/companies/deloitte-ban-to-disrupt-businesses-and-investment-inflows-us-to-india-119061900060_1.html

The RBI said it had received a reference from Customs authorities regarding submission of forged bill of entries by certain importers to the bank for remittance of foreign currency

The Reserve Bank of India (RBI) has fined HDFC Bank Rs 1 crore for non-compliance with the central bank’s norms on ‘know your customer (KYC)/anti-money laundering (AML)’ and ‘reporting of frauds’.

“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers,” the RBI said in a statement on its website.

Elaborating on the background, the RBI said it had received a reference from Customs authorities regarding submission of forged bill of entries by certain importers to the bank for remittance of foreign currency.

“Examination in this regard revealed violations of RBI directions on ‘KYC/AML norms’ and on reporting of frauds based on which a notice was issued to the bank advising it to show cause as to why monetary penalty should not be imposed for non-compliance with the aforesaid directions,” the statement said.

The fine was imposed after hearing from the bank, as RBI thought imposition of penalty was warranted.

https://www.business-standard.com/article/economy-policy/rbi-fines-hdfc-bank-rs-1-crore-for-non-compliance-of-kyc-norms-119061900067_1.html

The GST Council is set to take up the proposal at its June 20 meeting, said a govt official aware of the development.

India may cut the goods and services tax (GST) on electric vehicles to 5% from 12% to provide a stimulus to the sector that’s a high priority for the Narendra Modi government.

The GST Council is set to take up the proposal at its June 20 meeting, said a senior government official aware of the development. “There is a proposal to cut tax rates on EVs among other issues,” the official told ET.

Lower duties are expected to encourage global manufacturers to invest in India’s planned shift to electric vehicles in order to try and bring down pollution levels. This comes as Punjab has written to the Centre seeking a review of tax rates.

Tackling Slowdown

The state has sought new rates for automobiles, textiles, micro, small and medium enterprises (MSMEs) and real estate to provide a boost to the economy, which has slowed to the lowest in five years in FY19.

Punjab finance minister Manpreet Badal has suggested to union finance minister and GST Council chairman Nirmala Sitharaman that tax rates for these sectors need to be lowered to address the slowdown.
The automobile sector has sought urgent measures to boost demand, after recording the steepest decline in sales in 18 years. Passenger vehicle sales have been sliding and fell by 21% in May, prompting closure of dealerships and plant shutdowns.

The RBI consumer confidence index, based on a survey in 13 cities, fell to 97.3 in May, indicating pessimism about jobs and prices.

Electric Vehicles

Policymakers favour incentivising electric vehicles in line with the government’s long-term strategy. The Niti Aayog has prepared a roadmap that envisages all vehicles sold after 2030 being electric. The roadmap lays down that all two-and three-wheelers should go electric from 2023 and all commercial vehicles from 2026.

Experts said tax cuts would encourage manufacturing. “A reduction in the GST rate on EVs would incentivise global players to set up their manufacturing facilities in India and is also in line with the phased manufacturing programme of the government,” said Pratik Jain, national leader, indirect taxes, PwC. Under this, customs duties on EVs are proposed to be gradually increased. However, what needs to be seen is whether such a move would lead to an inverted duty structure, Jain added.

Anti-Profiteering Framework

The council is also expected to consider a proposal to extend the tenure of the National Anti-Profiteering Authority (NAA) by a year as there are a number of pending cases at various stages of disposal.

The meeting is expected to take up several changes to the GST law to check tax evasion.

https://economictimes.indiatimes.com/news/economy/policy/gst-on-electric-vehicles-may-be-reduced-to-5/articleshow/69850537.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23