• Sun Pharma, Pradeep Drug swap at 1:500
• ICICI to divest 15% stake in bank
• NHB in pact with Canfin Homes
• RIL to divest holding in group company
• Kotak Mahindra arm takes 51 pc in Business Standard
• Bank rate cut to 7 percent
• HDFC cuts loan rates
• Essar Oil, Petrom tie up to bid for IBP stake
• ITC makes counter-offer for VST at Rs 115 a share

ICICI to divest 15% stake in bank

ICICI has decided to divest around 15 per cent stake in ICICI Bank to a foreign strategic partner. The objective is to bring down the promoter’s holding to around 40 per cent from the current level of 55.7 per cent, in accordance with the Reserve Bank of India’s licensing norms.

According to sources, ICICI has shortlisted five prospective "strategic partners" and a formal announcement is expected over the next two weeks. The shortlisted banks include Development Bank of Singapore, Prudential of the UK, UBS and Barclays. Even HSBC Holding was in the race, but could not make it to the final list, sources said.

Senior ICICI executives said that the institution was in talks with prospective foreign players.

ICICI’s stake in the bank, pegged at 62.2 per cent last December, is slated to come down to 55 per cent once Bank of Madura’s merger with ICICI Bank is formalised. Despite the divestment, ICICI will be required to pare its stake further in order to meet the RBI-stipulated licensing norms for new banks.

RBI has been exerting pressure on new private banks to reduce promoters’ stake to 40 per cent by March 31.

Since ICICI Bank cannot dilute the parent’s stake through a domestic or an overseas issue, the only choice is roping in a foreign partner.

NHB in pact with Canfin Homes

The National Housing Bank (NHB) has signed a pact with Canfin Homes Ltd and LIC Housing Finance Ltd (LICHFL) for its second round of securitisation for housing loans worth Rs 137.63 crore.

The issue of mortgage-backed securities comprises Rs 63.40 crore of Canfin Homes and Rs 74.23 crore of LICHFL.

The issue comprises 8,549 individual housing loans originated by the two housing finance companies in Karnataka, Maharashtra and Tamil Nadu.

The agreement was signed today and the issue is likely to hit the market sometime during the second last week of March, NHB chairman and managing director P P Vora said, the coupon rate is likely to be around 10.5 per cent.

The discussions with the merchant bankers and the companies will take place during the next few days and the final decision will be taken soon, he said.

The MBS transaction involves the assignment of retail housing loans from the housing finance companies to NHB.

The loans, repayable in equated monthly instalments, are packaged and offered to investors as pass through certificates (PTCs) by the NHB. The PTCs are trust certificates and represent proportionate undivided beneficial interest in the pool of housing loans.

RIL to divest holding in group company

Reliance Industries Ltd (RIL) is the first company to have made a formal proposal to the Government for divesting part of its equity holding in a group company abroad through the American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) route, according to Government officials.

The Finance Minister, Mr. Yashwant Sinha, had announced in his Budget on Wednesday that Indian companies would be permitted to list in foreign stock exchanges by sponsoring ADR or GDR issues against block shareholding. The current guidelines allow for ADR and GDR offerings only in the form of fresh issue of shares and not disinvestment of shares.

So far, only public sector companies were exempt from this.

The proposal was first referred to the High Level Committee on Capital Markets (HLC) headed by the RBI Governor, Dr. Bimal Jalan, last year which cleared it with certain conditions attached. One condition was that the promoter company while divesting its block holding would have to allow all other shareholders an opportunity to participate in the offer.

It would also be made mandatory for any company which is permitted to do this to repatriate the proceeds raised through such divestment back to India. The guidelines for this are expected to be issued shortly by the Finance Ministry.

According to bankers, RIL is considering divesting its shareholding in RPL.

Kotak Mahindra arm takes 51 pc in Business Standard

Kotak Mahindra Finance Limited (KMFL) informed the Bombay Stock Exchange on Thursday that its wholly-owned subsidiary Kotak Mahindra Investment Ltd (KMIL) has acquired 51 per cent equity of Business Standard Ltd.

With this, Business Standard Ltd, which publishes the financial newspaper Business Standard, becomes a subsidiary of Kotak Mahindra Investment Ltd.

Top official of Kotak Mahindra said that it was essentially a case of equity transfer and not one of hiking stake. We used to hold 51 per cent in Business Standard, he said. Kotak Mahindra Finance is a listed company.

Besides Kotak Mahindra, other corporate investors in Business Standard Ltd include Great Eastern Shipping Company, HDFC and Mahindra & Mahindra.

Bank rate cut to 7 percent

Reserve Bank of India governor Bimal Jalan today cut the benchmark bank rate by half a percentage point (50 basis points) to seven per cent today.

It was the second reduction in the benchmark rate in less than two weeks. The RBI reduced the Bank Rate by 50 basis points on February 16, a move the market said would set the ball rolling for the government to cut the high returns on tax-free provident fund and postal deposits.

Finance minister Yashwant Sinha had cut administered interest rates on government-run small savings by 100-150 basis points in the Budget on Wednesday, setting the stage for lower interest rates.

In the gilts market, long-term bonds’ prices zoomed by over a rupee while short-term bonds’ prices gained around 60 paise. The yield of the 10-year bond crashed to a historic low of 9.60 per cent. In the forex market, forward premiums softened.

HDFC cuts loan rates

The Housing Development Finance Corporation (HDFC) today reduced its loan as well as deposit rates, and introduced two new products. It also created a new slab for loans up to Rs 2 lakh.

HDFC has cut its prime lending rate and deposit rates by an identical margin of 50 basis points. Both the floating rate as well as fixed rate loans will now be priced at 12.5 per cent, down from 13 per cent, while the deposit rates will vary between 6.5 per cent and 9 per cent depending upon the period. The change in loan rate will be effective March 5 and deposit rates March 8.

We have created a new slab for loans up to Rs 2 lakh which is priced at 11.5 per cent for ten-year loans and 11.75 per cent for 15-year loans, HDFC chairman Deepak Parekh said. It has also introduced two new products, a five-year loan priced at 10.75 per cent and a 10-year loan at 12.75 per cent irrespective of the quantum of amount.

Mr. Parekh said that, taking into account the tax incentive (tax exemption on interest outgo up to Rs 1.5 lakh per year), a high tax bracket customer, who has availed of the entire tax benefit on the interest cost, will pay an effective interest rate of around nine per cent

Essar Oil, Petrom tie up to bid for IBP stake

Essar Oil has joined hands with Romanian national oil company Petrom to bid for IBP. The consortium has submitted the expression of interest to bid for the 33.58 per cent equity stake being divested by the Government of India.

The government has received good response for the divestment of IBP. Indian Oil Corporation, Reliance, Essar Oil, Bharat Petroleum, Hindustan Petroleum Corporation and Shell are among the companies which have submitted bids for buying a stake in IBP. February 28 was the deadline for submitting bids. Caltex, TotalFinaElf of France and BHP of Australia also submitted bids, sources said.

The government has set a target of mopping up Rs 12,000 crore in fiscal 2002 through privatisation and sale of equity in PSUs. The pre-qualification bids, which will be scrutinised by IBP’s global consultants, HSBC Securities, will then be vetted by the inter-ministerial group.

IBP is the first oil company in which the disinvestment process has begun. Earlier, there was a dispute between the ministries of petroleum and disinvestment on this issue. The ministry of petroleum was opposing the privatisation move on the ground that the oil sector was strategic for the security of the country.

IBP is seen as a prize catch among the oil companies because of its retail network across the country. The company has about 1,514 retail outlets, which will give the strategic partner access to the oil market which is today restricted to the public sector. The government holds 59.58 per cent equity in the profit-making IBP which has about 5 per cent share in India’s retail petroleum product marketing with its vast network of outlets.

ITC makes counter-offer for VST at Rs 115 a share

ITC Ltd has decided to make a counter-offer for 20 per cent of VST Industries which is the target of a hostile bid by Mumbai-based broker RS Damani, who has offered Rs 112 per share. ITC will offer Rs 115 per share, trumping the Damani offer but still 5.2 per cent lower than VST’s closing price of Rs 121 on Thursday.

Offer documents were filed on Thursday with the Securities and Exchange Board of India. According to Mr. K Vaidyanath, chairman of Russel Credit, the bid was a trade investment in a company operating in an industry of strategic importance to ITC.

ITC believes that the counter-offer would reduce chances of effective control of the company falling into the hands of investors or groups who do not follow wholesome practices in an industry with a high incidence of taxes and plagued by the problem of rampant smuggling, he said.

The move, according to Vaidyanath, was independent of BAT plc, the overseas cigarette giant with single largest shareholding in both ITC and VST. Honestly, ITC is not aware of BAT's level of interest in the matter. At the same time, we are comfortable with the management in VST, he said.

Other than the bid, Russel does not have any stake in VST at present, Vaidyanath said. If the bid were to lead to a change of management control at VST in ITC's favour, it would make the tobacco giant a dominant force in the domestic cigarette market.

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