Recap 2013: Key deal activity in banking & financial services

By Anuradha Verma

  • 31 Dec 2013

Banking, microfinance and other financial services witnessed soft deal-making activity this year compared with the previous year. However, there were some bright sparks, including investments moving into microfinance as the sector is turning around; the stage being set for corporate activity in banking as new entrants are expected to line up next year and stock market indices rising, providing succour for brokerages though partially.

Notable trends this year included deal flow in the insurance space with Exide buying out foreign partner ING among others in ING Vysya Life Insurance; DLF selling stake in DLF Pramerica to Dewan Housing Finance group and Future Group selling stake in Future Generali Life Insurance to Industrial Investment Trust Ltd and separately divesting majority stake in its general insurance venture through a merger with L&T General Insurance besides part stake sale to its other partners.

Here’s a quick flashback of some important developments from a deal standpoint in the banking and financial services domain.

TPG Capital exits Shriram Transport Finance as Piramal Enterprises checks in

Private equity major TPG Capital exited the country’s largest commercial vehicle financier Shriram Transport by selling its entire stake in two phases, making a total of around Rs 3,272 crore or $608 million from its investment. It scored a multi-bagger exit and also paved the way for Piramal Enterprises’ picking a stake in the business. Cash rich Piramal Enterprises has been looking at a bigger play in the financial services domain.

Singapore’s GIC buys 2.6% stake in Kotak Mahindra for about $239 million

GIC, one of the world’s largest sovereign wealth funds, announced a deal to buy a 2.6 per cent equity stake in Indian private lender Kotak Mahindra Bank for Rs 1,296 crore or about $239 million. 

The deal was part of the bank’s efforts to help it shore up its tier-I capital and reduced its promoter holding in line with the Reserve Bank of India's guidelines. Singapore’s sovereign wealth fund had previously also backed ICICI Bank and HDFC Bank, the top private banks in the country, though it has cut its holding in ICICI Bank lately.

Vikram Pandit joins hands with JM Financial

Former Citibank chief executive Vikram Pandit, along with his partner Hari Aiyer, decided to pick 50 per cent stake in non-banking finance company of Mumbai-based financial services company JM Financial, which is controlled by veteran investment banker Nimesh Kampani. The pair also decided to pick 3 per cent stake in parent JM Financial, which had a joint venture in India with Morgan Stanley until 2007, through an issue of warrants. The deal was seen a precursor for supporting JM Financial’s bid for the new banking licence. Pandit is non-executive chairman of the proposed bank and has a right to buy a stake in it.

Ratnakar Bank raises $60M in fresh PE funding; buys RBS' corporate banking, credit card, mortgage units

Regional private bank, which has slowly been expanding its presence across the country, raised Rs 324 crore ($60 million) in another round of funding from half a dozen private equity investors led by IFC. Others who invested include Aditya Birla PE, IDFC Alternatives, Ascent Capital and Faering Capital. This took its total private funding to date to around $200 million. The private lender soon went about striking inorganic expansion by snapping Royal Bank of Scotland’s corporate banking, credit cards and mortgage businesses in India, beating peers such as Yes Bank and IndusInd Bank who were also in the race.

Microfinance firm Janalakshmi raises $53M in Series D

Bangalore-based microfinance institution Janalakshmi closed its Series D funding round worth Rs 350 crore or about $57 million from a consortium of new and existing investors. This is one of the largest private investment transactions in the Indian microfinance industry to date and the biggest after the outbreak of the regulatory crisis in Andhra Pradesh in 2010. Investors who participated in this round included Morgan Stanley Private Equity, CVCI and Tata Capital.

(Edited by Joby Puthuparampil Johnson)