ICRA assigns `LBBB` & `A2` rating to bank limits of Hinduja Foundries

ICRA has assigned `LBBB` rating, indicating moderate-credit-quality, to the Rs 1,473.8 million term loan facility and Rs 276.5 million fund based limits of Hinduja Foundries (HFL). ICRA has also assigned `A2` rating, indicating above-average-credit-quality, to the Rs 232.7 million fund based limits and Rs 217.0 million non-fund based limits of HFL.

The rating factors in HFL`s long standing presence, strong customer profile in automotive specialty castings and favourable economies of scale. The rating also factors in the healthy long-term prospects in HFL`s customer industry (automobiles) and its plans to tap exports opportunities to diversify revenue base.

HFL`s promoters` have demonstrated their commitment to the Company`s operations through preference capital infusion. The rating is constrained by the weak financial profile, reflected in moderate profitability and stretched leverage. The rating factors in HFL`s high client concentration on group company.

The domestic castings industry is highly fragmented and characterized by high competitive pressure, resulting in weak pricing power. The industry remains vulnerable to cyclicality of the automobile industry and increase in raw material costs, which companies are compelled to partly absorb due to poor pricing power with automobile OEMs.

Shares of the company closed up Rs 14.35, or 10.25%, at Rs 154.35. The total volume of shares traded at the BSE was 3,575. (Friday)

DoT wants BlackBerry servers in India

DoT on Friday asked Canada’s Research In Motion (RIM)—the BlackBerry smartphone developer—to set up servers in India. This was conveyed at a meeting between DoT officials, security agencies, company executives, Canadian High Commission representatives and telecom operators.

Government sources told ET that operators like Bharti Airtel, Vodafone Essar, BPL and Reliance Communications, which offer BlackBerry services in India, supported the DoT’s demand. RIM has sought more time to respond to the DoT request, they added.

It’s also learnt that in the meeting, DoT officials had categorically pointed out to RIM that only emails between one BlackBerry device to another was under the scanner of Indian security agencies. A government source close to the development told ET: “RIM offers many services here. All of them are interceptable, except for emails sent between one BlackBerry device to another BlackBerry device. It is only this part we want to address.”

Friday’s meeting was the latest that DoT officials and security agency representatives have had with RIM executives to address security concerns associated with BlackBerry services. If RIM agrees to the DoT request, the company will have to migrate all data traffic originating from Indian mobile networks to servers located in India. At present, BlackBerry’s email traffic in India is hosted on RIM’s overseas servers (primarily in Canada), which cannot be lawfully intercepted by security agencies.

ET had reported that DoT was exploring the possibility of asking RIM to set up servers in India. Emails between BlackBerry owners in India bypass local networks and directly hit RIM’s servers in Canada. But a BlackBerry email accessed by an end user on a PC or handset passes through the internet network in India, which is being monitored by security agencies. “We are already compliant with emails sent from BlackBerry to other devices and email addresses accessed on computers. It is only BlackBerry to BlackBerry that needs to be monitored,” said a source.

On-road price tag for Jaguar & Land Rover runs to $3 bn

The final acquisition cost of the iconic Jaguar-Land Rover (JLR) brands by Tata Motors is likely to be about 30% more than the $2.3 billion announced on Wednesday. The $2.3 billion covers just the price of the brands, assets and technology know-how. A big part of the additional cost would go for engine and component supply. A Ford Motor spokesperson confirmed that a separate contractual pact has been signed for engines and components.

A Tata Motors spokesperson too confirmed that the purchase price does not include the engine supply cost. “JLR will be acquired with all the technology know-how and IPR required for the business. This is fully built into the purchase agreement of $2.3 billion. However, the supply of engines and components will be outside the purchase agreement,” the spokesman said.

“The total cost is likely to be about $3 billion,” a person close to the development told ET. Neither Ford nor Tata Motors officials were willing to divulge details on the cost per engine or the amount the Indian company will have to fork out, saying it is “commercially confidential information”. Tata Motors, incidentally, has struck a deal with banks to raise about $3 billion for the transaction. As per the deal, Ford will still supply JLR for differing periods with powertrains, stampings and other vehicle parts.

Ford has also committed to provide engineering support, including research and development, information technology, accounting and other services. For most of these arrangements, the Tatas will have to pay Ford separately. The engine supply agreement, for instance, has been signed initially for five years. In addition, Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers and customers during a transitional period—which can vary by market—of up to 12 months.

Incidentally, the Tatas had signed 20-odd separate agreements with Ford for the JLR takeover. Of these, around 10-12 pacts that involved engine, power trains, R&D etc would entail payment by Tata Motors to Ford over the next few years. The Tata-JLR pact is a unique M&A deal in that it is rare for the buyer and seller to have these sort of agreements. Meanwhile, Ford is likely to make a ‘significant contribution’ towards JLR’s pension funds. At closing of the deal, Ford is contributing up to around $600 million to the funds.

Four Soft, Take Solutions merger on cards

Hyderabad-based Four Soft Ltd and Chennai-headquartered Take Solutions Ltd, providers of IT products and solutions in the supply chain management (SCM) space, announced their intent to merge. The combination will create a global, comprehensive company with one of the largest product offerings in SCM. Both companies have received in-principle approval from their board of directors to consider the merger.

Both boards will appoint independent firms of chartered accountants and financial advisers to reach a fair valuation for the shareholders of both the companies. The boards of Four Soft and Take Solutions expect to meet within six to eight weeks to consider the reports of the advisers. The merger, if approved by the boards, will be subject to shareholders’ approval of both companies and other regulatory approvals.

“Four Soft has full service products and offerings. Take Solutions' product offerings complement this very well on the enterprise side. The combined range of intellectual property (IP) is unmatched globally and will enable both good customer traction and good shareholder value,” Palem Srikanth Reddy, chairman and chief executive officer of Four Soft, stated in a press release today.

Commenting on the proposed merger, Srinivasan HR, vice-chairman and vision holder, Take Solutions, said, “The coming together of two leading first-generation IT companies with similar philosophies and vision will create a significant IP company based out of India with worldwide operations. Four Soft is a perfect foil to Take Solutions. Our strong presence in the US and Asia Pacific complements Four Soft’s dominance in Europe and Japan. The proposed merger of the two companies will leverage Indian innovation and a strong partnering philosophy to become a truly global company in size and capability in the coming years.”

Four Soft, which has over 300 customers across 120 countries and 50,000 users in the supply chain domain, clocked revenues of Rs 150 cr during the last financial year. The company has been registering revenues of Rs 45 cr per quarter and expects to keep the current performance level to touch Rs 180-190 cr by this fiscal end. While 60% of Four Soft’s revenues flow in from Europe, the US and Asia markets account for 25 per cent and 15 per cent respectively.

Sebi begins review of public issue norms

Regulator revisits retail quota, pricing and refund rules.

Triggered by the recent market volatility and low floating stock of high-value shares in the market, the Securities and Exchange Board of India (Sebi) has kick-started an extensive review of various issues related to the primary equity market.

According to sources close to the development, the review is based on recommendations forwarded by the Parliamentary Standing Committee following the IPO demat scam and recommendations of the Securities Markets Infrastructure Leveraging Expert Task Force (SMILE) headed by Axis Bank Chairman P J Nayak.

The major issues under review are pricing of IPOs, quota reservation for the retail segment in IPOs, reducing the timeframe for listing IPOs, the refund system in case of unallotted IPO shares and the minimum public holding in a company.

There is a view that the quota system for the retail segment should be scrapped since the small investor base is not widespread.

Instead there could be a proportionate allotment for small investors, given that they comprise a minuscule portion of the total market participants.

Incidentally, in 2006, National Securities Depository (NSDL) had suggested the abolition of quota for retail investors in IPOs in its report to the market regulator on multiple dematerialised accounts.

Under the current practice, while 50 per cent of the allotment in an IPO is set aside for institutional investors, 15 per cent goes to high networth investors and the remaining 35 per cent is reserved for small investors.

NSDL had said quota for small investors should be done away with till the infrastructure for checking frauds involving multiple accounts were put in place.

The regulator is also revisiting the option of a fixed price mechanism for IPOs as against the book-building process, which is akin to auctioning bids.

Sources said in recent times, the book-building mechanism had been questioned as most of the promoters had failed to earn a good price for their public floats.

This is because shares get traded at a much higher price right on the first day of trading compared with the issue price. This has also led the regulator to ask for the circuit filter to be imposed by exchanges even on the first day of trading.

While the regulator has decided in principle to make it mandatory for all promoters to offload 25 per cent of their shares to the public for being listed on exchanges, it may give a timeframe of six months to a year from the date of the final notification for companies to comply with the new norms.

The other proposals under consideration are bringing down the timeframe for the IPO process, expediting the listing process and quickening the process of refund for unallotted IPO shares, provided payments have been made through the electronic fund transfer of banks.