General Electric (GE) plans banking foray via acquisition

18th May 2005: GE is planning to foray into the banking sector in India through acquisitions of an existing bank or by setting up a subsidiary of its own. "We are interested in either acquiring an existing bank or setting up a greenfield bank," said GE India CEO Scott Bayman.

Bayman said the current regulatory environment in India was moving in a direction which would facilitate the company's foray into the banking sector. However, Scott refused to set a timeframe for the proposed venture.

The planned foray into the banking sector comes after the GE's initiatives for establishing a presence in the highly competitive housing finance and personal loan segments in December last year under the 'GE Money' brand.

All retail financial products of GE consumer finance are now marketed under the GE Money brand. At present, GE runs 17 banks in Europe under the GE Money Bank brand with assets worth $20 billion.

GE India, which was among the first US multinationals to establish a presence in India, has revenues of over 100 crore. It has business interests in a wide variety of fields such as BPO, medical equipment, power and defence.

Ministry of Finance (MoF) calls for review of KRL-BPCL swap ratio

17th May 2005: The ministry of finance has opposed both the big boom mergers in the oil sector. Close on the heels of its objection to the IBP-Indian Oil Corporation (IOC) swap ratio of 1:1.25, the finance ministry has now asked for a review of the amalgamation scheme of Kochi Refinery Ltd (KRL) with Bharat Petroleum Corporation Ltd (BPCL). The KRL-BPCL swap ratio was fixed at 2.25:1.

As per the finance ministry, the swap ratio for KRL-BPCL should be worked out on the basis of networth of the two companies and the number of shares outstanding as on the appointed date, which should be March 31, 2005. Also, the net asset value (NAV) based valuation may be cross checked with the discounted cash flow (DCF) based valuation and details of both may be incorporated in the final proposal for merging the two companies.

Moreover, as per the finance ministry, any valuation should be preceded by drawing out liquidity from KRL through special dividends. Upon merger, full cash flow stream of erstwhile KRL will be available to BPCL which should fetch it adequate return on investment.

The finance ministry feels that the merger scheme proposed for KRL-BPCL merger would result in a significant reduction in the Centre’s shareholding in BPCL. The government’s current holding in BPCL stands at 66.2% and a merger with KRL as per the current ratio could see this decline by near 6%. BPCL holds a 54.81% stake in KRL, but the Centre has no direct holding in the company.

Golder Rauner LLC (GTCR) acquired majority stake in BPO firm Zenta

16th May 2005: GTCR, a US-based private equity company, has acquired majority stake in Zenta, a Business Process Outsourcing firm with operations in the city and committed $100 million for the deal. Zenta has entered into an equity partnership with GTCR, the BPO Company said in a release today.

Under the terms of the transaction, H-Cube LLC, a GTCR affiliate through which GTCR has committed up to USD 100 million of equity capital, has acquired a majority interest in Zenta, it said. But it did not clarify as to how much stake the private equity firm would hold in the company.

Priya Hiranandani, the founder of Zenta, would continue to serve as Chief Executive Officer and Henry Hortenstine, former Executive Vice President at Affiliated Computers Services Inc, would become Executive Chairman.

Zenta delivers end-to-end back office solutions to the financial services industry, including credit card servicing, mortgage servicing, accounts receivable management and insurance claims processing, it added.

Zenta, headquartered in Wayne, Pennsylvania, has 2,600 employees, most of whom are located at its primary operations centre in Mumbai. Wachovia Securities acted as advisors to the transaction.