Author: Nisha Poddar

Shalimar Paints stock gains 8% as the company looks for investment

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shalimar Paints’ stock jumped 8% on Friday after CNBC-TV18 broke the news about the company looking for investors to infuse funds.

Shalimar Paints, India’s oldest paints company, which is looking for an investor, has already initiated the process for the same, said sources.

The company has launched a deal and has appointed EY(formally known as  Ernst & Young) for the process. The promoters are looking for a strategic or financial investor to infuse funds in the company. The firm is keen on foreign strategic investors, the sources suggested.

Cement companies, private equity firms are said to be interested in the deal, a source confirmed and the company has set a deadline of May 30 for receiving proposals from suitors.

“Shalimar Paints is open to offering up to 20% stake to infuse funds in the company,” said a source. However, strategic investors may demand higher stake and even control of the company.

Shalimar Paints spokesperson said, “Shalimar Paints is not on the block.  There is also no part stake sale of the company. But yes, looking for strategic investor to come in. Current Management will continue, and it’s not going to change.”

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Fragmented renewable energy market will lead to more consolidation, says ReNew Power’s Sumant Sinha

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Renewable energy producer ReNew Power is the largest pure play renewable energy producer preparing to list on the stock exchanges this year.

The Golman Sachs backed company, headed by ceo  Sumant Sinha, is likely to be valued at $4 billion, and the public offering could be around $1 billion.

The company has a pan India wind & solar energy capacity of 5850 MW out of which 3920 MW is operational currently.

Edited Excerpts:

What makes your IPO issuance compelling for the investors to buy?

We have a differentiated model which is fairly unique. The business is de-risked at execution, operation and growth levels. We have lower gestation period with 12 months of construction time period, no fuel risk like in the case of thermal and the units generate cash to service the debt. There is no other Indian listed company with pure play renewable energy generation and we are the largest in the space by far.

We are well diversified across states and buyers with least risk of concentration. ReNew Power gives a good opportunity to an investor to bet on the high growth renewable energy sector. We are growing at a rapid pace with a mix of organic and inorganic routes.

What’s you capacity expansion roadmap? Are more acquisitions on the card?

As we speak, we have 700 MW of capacity addition at advance stages through acquisitions. Renewable energy market is fragmented which will lead to more consolidation and we are ready for it. We have been winning government contracts as well which will enhance our portfolio. We have grown double in capacity in the last few years.

What is the timeline of the IPO and what will be the proceeds utilized for?

ReNew Power has filed the DRHP with the SEBI in early May and waiting for the regulator’s approval. Will assess the market conditions once we get the approval. ReNew Power to get Rs 2600 crore via IPO fund raise and will be primarily used for debt reduction by Rs 1800-1900 crore, Rs 200 will be used for new acquisition opportunities and rest for general corporate purposes.

ReNew has marquee investors like Goldman Sachs, ADIA, GEF, CPPIB. Which investors will exit via IPO?

Part exit to some investors is one of the important reasons for going public. Goldman Sachs is the largest investor with 48.6% stake, will be reduced to 25% post the IPO. ADIA holds 16% and Global Environment Fund owns 3.7% stake, both will reduce their stake by 20% through the IPO. Japan’s Jera & Canada’s pension fund CPPIB are not selling any stake via listing process.

How much do you own? Are you also selling your stake?

I own 6.9% and my holding in ReNew will be reduced to 6.3% by way of the IPO.

How is the debt position of the company, are you looking at ways of further reduction?

Net Debt at FY18 end is at Rs 23,000 cr which is a debt/equity of 3:1. After we use the IPO proceeds to reduce debt, it will come down to 2.5:1. We are quite comfortable with these debt levels since our business generates cash. Our average finance charge is at 10.31% and we have diverse instruments like Masala Bonds worth $475 million for lower interest and longer tenures.

How is ReNew doing operationally?

We enjoy EBITDA Margin of 86-87%. Our FY18 9 month revenues were at Rs 2718.58 crore crore, EBITDA at Rs 2338.95 crore and PAT at Rs 230.17 crore.

Which companies would be your peers and what has been their valuation drivers?

ReNew can’t be compared to Suzlon or inox Wind which have a different model of equipment manufacturing, thermal power companies are very different from clean energy space.

Global companies like EDPR of Portugal, Northland Power of Canada, Encavis of Latin America are some of the peers which are trading at a multiple of 10-12% of their EV/EBITDA.

What in your view is working for the renewable energy sector in India?

Government’s huge impetus to this sector is also propelling the growth. Government has ambitious targets and is rolling out 10000 MW of wind power contracts and 30000 MW of solar contracts every year.

The demand is likely to outpace the capacity addition in this space. Tarriff levels had hit a low last year but are at much more reasonable levels of Rs 2.60-2.70 for both wind and solar energy.

What are the challenges in the sector and what are the future hurdles you foresee?

Health of the discoms is the perpetual issue in the Indian power sector. Distribution has to be smooth for the well-being of power producers. Government has also decided against the import duty on solar panel or it would have hiked the tariffs. Also, this space is attractive and has a risk that competition may drive down the returns.

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Fortis deal: Manipal-TPG likely to revise bids above Rs 175 per share for, sources say

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the deadline for Manipal-TPG to match the highest bid comes close, a revised bid from the consortium is almost a certainty, sources told CNBC-TV18.

The revised bid could value Fortis Healthcare higher than Rs 175 per share, beating IHH’s offer, sources with knowledge of the matter said.

The bid deadline ends on Sunday, May 6, as per the agreement of getting five days for the right to match.

Sources with direct knowledge also suggest that a few large shareholders had expressed displeasure on the structure of the transaction offered by Manipal-TPG, as it restricts an early exit.

Manipal Hospitals and TPG may be looking to address the concerns of the shareholders and are deliberating on changing the structure, though chances of success may be slim, sources said.

Fortis Healthcare’s strengthened board will be meeting on May 10 to take a final decision on the bids, after the External Advisory Committee gives it’s opinion to the board.

Shareholders’ will have to approve the deal in an Extraordinary General Meeting. Yes Bank, East Bridge Capital are the dominant shareholders with substantial minority stake in Fortis Healthcare.

Fortis Healthcare became the subject of a frenzied takeover battle, with five entities bidding for the cash-strapped hospital operator.

The Fortis board had set up an expert advisory committee, comprising Deepak Kapoor and Lalit Bhasin, to evaluate the bids by these entities that are jostling to buy a significant stake or acquire the company.

The board will meet on May 10 to decide on the advisory panel’s recommendations on the binding bids.

The deadline for submitting the final bids was May 1. The Manipal Hospitals-TPG consortium, one of the first bidders for the hospital, was exempted from the deadline and has until May 6 to match any new bids received until May 1.

Until May 1, the board received four binding bids from Manipal-TPG, businessmen Sunil Munjal and Anand Burman, IHH Healthcare of Malaysia and Radiant Life Care, backed by buyout company KKR. China’s Fosun International submitted a non-binding bid.

While the decision of the board will be depend on the best value and easiest structure, analysts are not ruling out it factoring in a key metric – experience of the bidder.

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Fortis deal: IHH, Munjals-Burmans revise offers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Malaysian firm IHH Healthcare on Tuesday raised its offer to acquire Fortis Healthcare to Rs 175 per share, while Munjals and Burmans also revised their offer under which the Munjal’s office and Burman’s office will directly invest Rs 1,800 crore into the company.

Earlier, the Munjal-Burman consortium had raised their combined bid to Rs 1500 crore from Rs 1250 crore.

The consortium’s proposal was to invest Rs 500 crore rupees through preferential issue of equity shares and Rs 1000 crore rupees through issue of warrants

IHH, in their new proposal, informed the Fortis top brass that their company is indeed best positioned to fund, guide and support the latter in the future.

“It is hereby informed that the Company today i.e. May 1, 2018, has received an Enhanced Revised Proposal, as attached herewith, from IHH to invest directly into the Company at a per Share price of INR 175,” the filing stated.

As per reports Fortis, that is a key player in countries healthcare sector has been the target of at least four companies and investment groups.

(With inputs from Reuters)

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Star Health Insurance sale in limbo over shareholder dispute

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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There is trouble brewing in what could be the largest merger deal in the general insurance sector in India, the sale of Star Health Insurance for around Rs 6000 crore.

A shareholder dispute has stalled the process as ETA Trading shareholders have taken the matter to a court in Chennai. Till the matter is resolved, the deal cannot go ahead due to uncertainty, sources said.

Sources said ETA Ascon Star Group, a Dubai-based conglomerate which is a joint venture between Al Ghurair and Tamil entrepreneurs BS Abdur Rahman and Syed Ahmed Hussain, was faced with a shareholders’ dispute over title and ownership of Star Health insurance shares.

ETA Trading holds around 30% stake in the company.

The general insurance company has a clutch of investors like Sequoia, ICICI Venture, Tata Capital, Apis and Oman Insurance who together hold 70% stake.

PremjiInvest-Prudential, ICICI Lombard and WestBridge-Kedaara are the three suitors in the race for Star Health Insurance, bidding around Rs 6000 crore for the company.

This hotly contested battle to buy Star Health insurance has come to a grinding halt while the shareholders fight over their rights.

Star Health Insurance did not comment on this development.

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Manipal-TPG to climb down on conditions for Fortis bid process

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After Fortis Healthcare’s scathing letter on restrictive conditions put by Manipal-TPG on competitive bid process, the suitor keen to buy Fortis has decided to climb down from its position.

Manipal-TPG is ready to waive condition to put its offer to vote against the board’s decision, said sources.

The company had sought special rights as part of their agreement with the Fortis board. In letter to the board, it said, “The FHL shareholders shalI (by way of a special majority resolution of the voting shareholders) determine if they wish FHL to proceed with the deal or the board selected offer.”

This was after Manipal-TPG had received the right to match the highest offer for Fortis and in case the board selects another offer over Manipal-TPG’s revised offer.

The letter and the conditions were proposed before the Fortis board announced the appointment of the independent advisory committee to decide on the best offer, said the sources.

Also read: Renuka Ramnath resigns from Fortis expert panel

However, after the announcement of the independent panel, Manipal-TPG decided that it did not want to put restrictions on the board decision.

Fortis Healthcare in its letter to the exchanges said, “Manipal and TPG sought to impose additional onerous conditions on the company over and above those contained in the implementation agreement that would limit the ability of Fortis to run a competitive bid process if such conditions were to be accepted.”

Manipal-TPG has retained its right to match the highest bid for 5 working days, this is by way of the agreement with the board which had entered into a transaction with the suitor in March. Sources also suggested that Manipal-TPG retained some rights specially in the absence of a break-fee in the deal with Fortis Healthcare.

In response to Fortis Healthcare’s letter, Manipal spokesperson said, “No new onerous conditions that would be detrimental to Fortis shareholders were added to the agreement. On the contrary, following feedback from shareholders, we waived our exclusivity right, in turn allowing the Fortis board to engage potential bidders and giving them an opportunity to conduct due diligence. All we asked was that the Fortis board tables our offer for shareholders to consider alongside any other offer the board may select from the process. This would give the Fortis shareholders an option to choose between at least two offers.”

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Race for Fortis: the story so far

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As competition heats up ahead of the Advisory panel meet today, Manipal -TPG improved its binding bid for Fortis Healthcare.

In what could be a compelling development for shareholders, Manipal proposed an open offer to public shareholders for buying 26% in the hospital business post its demerger.

The open offer price will not be less than Rs 121 per share for the hospital arm. Manipal also improved the hospital valuation to Rs 6,322 crore from Rs 6,061 crore for a more favourable swap ratio for Fortis, and values the company at Rs 160 per share.

It also offers to buy an additional stake of 5% in diagnostics company SRL to help Fortis meet its fund requirements.

Proposal stated that it had arranged a Rs 750 crore letter of intent (LOI) from ICICI Bank to provide immediate cash to company.

KKR backed Radiant Life Care also put in a binding offer for Fortis Health as the deadline for the bids ended.

Malaysian giant IHH also revised its offer to be eligible for the deal process. Manipal-TPG, Munjal-Burman had already been considered as their bids met the “binding bid” criteria.

Radiant has offered upfront amount of Rs 1,200 crore by buying Fortis Mulund asset.

The bid also states that the asset buy will not restrict any other bidder from participating in the process.

Rest of the offer for buying whole of hospital business including RHT is contingent on due diligence.

Radiant sought three weeks of due diligence for the rest of the offer to be binding in nature.

Diagnostics chain SRL is not part of the deal by Radiant. It proposes to spin off SRL and depending on the value the offer will give an implied value of Rs 170-175 per share for Fortis Healthcare.

Malaysian company IHH has also put in a binding bid offering to give Rs 650 crore, upfront and Rs 3,350 crore post due diligence.

Total offer by IHH stands at Rs 4,000 crore and it values the company at Rs 160 per share.

IHH in its offer has asked for three weeks of due diligence process before they can infuse the rest of the Rs 3,350 crore amount, they have also sought exclusivity of four weeks from the start of the due diligence exercise.

The company’s offer seeks seats on the board of Fortis as part of the deal, and wants to complete a proper financial and legal due diligence process before they go ahead with the full transaction.

The Munjal-Burman offer is a binding bid with no requirement of a due diligence. The offers totals Rs 1,500 crore, out of which Rs 750 crore is upfront.

It’s Rs 1,500 crore offer is divided into two parts, a Rs 500 crore payment via preferential allotment of equity at Rs 156 per share, or a SEBI formula, whichever is higher.

The remaining Rs 1000 crore would be paid via a preferential allotment of warrants at Rs 161.60 per share, or a SEBI formula whichever is higher. They also seek two board seats for this deal to be sealed.

Sources suggest that Manipal-TPG has the “right to match” the highest bidder as part of the agreement with the board.

Fortis Healthcare has instituted an independent advisory board to evaluate the binding bids which will meet on April 25.

The healthcare company’s board will meet on April 26 to take the decision. If Manipal exercises its right, it will need to be given 5 days for matching the highest bid, sources said.

Needs to be seen if Manipal-TPG will exercise its right to match. It will be interesting to see what the Fortis board decides, will it consider due diligence requests.

While TPG-Manipal, Munjal-Burman bids are definitive agreements without any requirement for due diligence, IHH & Radiant have proposed 3 weeks to counduct the diligence process for the deal to be firmed up.

While shareholders like East Bridge and Jupiter have sought to dismantle the present board of Fortis, proxy advisory firm IIAS has cried foul and questioned the entire sale process.

The advisory firm has pushed for a consideration of all the bids and lamented the widening trust deficit between the Fortis board and its shareholders, given this kind of pressure Fortis Board will have to tread cautiously.

All signals suggest a final outcome is unlikely on April 26. The street will take keen note of the developments at Fortis not only because of the deal considerations, but also the transparency, corporate governance and protection of minority shareholders’ right point of view.

It will be crucial to see if the board decision is palatable to the key shareholders whose votes will be the deciding factor for the finalisation of this deal.

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Radiant makes binding bid for Fortis Healthcare

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KKR backed Radiant Life Care put in binding offer for Fortis Health as the deadline for the bids end.

Malaysian giant IHH also revised its offer to be eligible for the deal process. Manipal-TPG, Munjal-Burman had already been considered as their bids met the criteria.

Radiant has offered upfront amount of Rs 1200 crore by buying Fortis Mulund asset. The bid also states that the asset buy will not restrict any other bidder from participating in the process. Rest of the offer for buying whole of hospital business including RHT is contingent on due diligence.

Diagnostics chain SRL is not part of the deal by Radiant. It proposes to spin off SRL and depending on the value the offer will give an implied value of Rs 170-175 per share for Fortis Healthcare.

Malaysian company IHH has also put in a binding bid offering to give Rs 650 crore upfront and Rs 3350 crore post due diligence. Total offer by IHH stands at Rs 4000 crore and it values the company at Rs 160 per share.

IHH in its offer has asked for three weeks of due diligence process before they can infuse the rest of the Rs 3,350 crore amount, they have also sought exclusivity of four weeks from the start of the due diligence exercise. IHH offer seeks to board seats as part of the deal.

IHH wants a proper financial and legal due diligence before they go ahead with the full transaction, they intend to have access to auditors Deloitte and Luthra & Luthra which is conducting an investigation into the alleged fund diversion case.

Munjal-Burman and Manipal-TPG are already in the fray with binding bids. Sources suggest that Manipal-TPG has the right to match the highest bidder as part of the agreement with the board. Fortis Healthcare has instituted an independent advisory board to evaluate the binding bids which will meet on April 25, Fortis board will meet on April 26 to take the decision.

Most bids are partially binding with only a small portion promised as upfront payment but a bulk of deal is still contingent on the due diligence process.

While shareholders like East Bridge and Jupiter have sought to dismantle the present board of Fortis, proxy advisory firm IIAS has cried foul of the entire sale process and asked for a consideration of all the bids. IIAS report lamented about the widening trust deficit between the Fortis board and its shareholders. Given this kind of pressure, Fortis Board will have to tread cautiously.

All signals suggest a due diligence process being granted to all aspirants for maximization of value from the deal. After all, the value has to be palatable to key shareholders whose votes will be the deciding factor for the finalisation of any transaction at Fortis.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IHH Healthcare submits binding offer for Fortis Healthcare

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the deadline for submitting the binding offer for Fortis Healthcare nears, IHH Healthcare of Malaysia has put in a binding bid to join the race against Manipal Hospital-TPG and Burman-Munjal consortium.

IHH, a provider of premium integrated healthcare services, offered a total investment of Rs 4,000 crore, including Rs 650 crore upfront and Rs 3,350 crore post due diligence. It also values the company at Rs 160 per share.

Earlier this month, IHH has reached out to the Fortis board with a non-binding offer.

IHH in its offer has asked for three weeks of due diligence process before they can infuse Rs 3,350 crore. It also sought exclusivity of four weeks from the start of the due diligence exercise.

According to the Malaysian company’s offer, IHH wants to do a proper financial and legal due diligence before they can go ahead with the full transaction. They also asked for access to auditors, Deloitte and Luthra & Luthra, which is conducting an investigation into the alleged fund diversion case.

As of now, three out of five bidders — IHH Healthcare, Manipal-TPG, Burman-Munjal consortium — have offered binding bids.

Other two bidders, China’s Fosun International and Mumbai-based Radiant Life care offered non-binding bids.

Earlier, CNBC-TV18 had reported that Manipal-TPG has the ‘right to match’ the highest bidder as part of the agreement with the Fortis board.

On Monday, Fortis Healthcare said that Hero Enterprise Investment and the Burman family have extended the validity of their improved, joint binding offer to invest Rs 1,500 crore in the company till May 4.

Last week, the Fortis board had appointed an advisory committee to evaluate the offers made to buy out the company. The committee, which is headed by Deepak Kapoor, former Chairman and CEO of PriceWaterhous Coopers, India, will meet on April 25.

The board will decide the final winner for Fortis Healthcare on April 26, after taking the opinion from the committee.

CNBC-TV18 was the first to highlight the severe deficiencies in the composition of the Fortis Healthcare board and argued that the board will have to appoint an independent committee to advise on the bids.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow