India Inc cuts flab in fitness drive

Cos Sell Non-Core Assets In A Restructuring Year To Pare Rising Debt Mumbai: After B-town, Ctown is on a fitness drive. Corporates across sectors want to shed flab as sluggish growth and debt overhang raise stress levels. Companies are knocking off non-core assets after they undertake business reviews leading to the biggest asset sale in recent times.      Consider this: Essar, Jaiprakash Associates, Lanco, UB, Suzlon, Larsen & Toubro, among others, are exploring sale of small, low-margin, non-core units as financial stress and re-arranged corporate priorities force them to speed up divestments and divert resources towards mainstream businesses. And their moves have perked up private equity investors, sovereign wealth funds and Japanese and North American firms which are looking for a larger play in the Indian market. "Global growth is slacking. It makes sense to realign businesses in line with the challenging environment. Why invest in non-core assets and block money. It is better to sell them and invest funds in mainline businesses," said Venugopal Dhoot, chairman of electronics-to-energy Videocon Group. The conglomerate is looking to sell its real estate assets in prime locations in Delhi and Mumbai and utilize the proceeds to invest in its oil and gas and direct-tohome businesses.      Retail magnate Kishore Biyani showed the way when he sold two businesses, Pantaloons and Future Capital Holdings, deleveraging his group significantly in the last 30 days. Future Group pared Rs 6,000-crore debt after Aditya Birla acquired fashion retailer Pantaloons and Warburg Pincus took stake in the financial services company. Biyani wants to focus on building the core food and grocery retailing now.      Nipun Goel, president and head of investment banking at India Infoline, said the capex cycle has slowed down and companies were reprioritizing their businesses. "Corporates are looking at divesting non-core assets and in some cases, even parts of the core businesses to tide over the tough times. This has attracted a fair bit of interest from financial sponsors (read private equity) as they are becoming a relevant pool of capital in the current environment," he added.      Real estate developer DLF divested subsidiary Adone Hotels & Hospitality last week and has sought buyers for Aman Hotels & Resorts, an overseas acquisition done just before the subprime crisis five years ago. DLF wants to cut an over $4-billion debt pile through non-core sales in the next one year.      Apollo Hospitals Enterprises is nearing a sale of the healthcare BPO business. Other southern groups Chemplast Sanmar, Aban Offshore and Shree Renuka Sugars have explored stake sale options after overseas acquisitions piled up debt.      Essar, Anil Ambani's Reliance Group and Jaiprakash Associates—leveraged anywhere between $7 billion and $12 billion—are among the frontline conglomerates that are in talks with financial investors to sell stakes in group companies. The younger Ambani and Ruias of Essar have also explored overseas IPOs to pay down loans. Vijay Mallya's beer-to-airline UB Group finally asked bankers to find buyers to sell Mangalore Chemicals & Fertilizers, an asset identified as non-core long ago. Lanco Infratech, an infra major of first generation entrepreneur Lagadapati Rajagopal, has discussed sale of road assets and power ventures to pare $6 billion in debt.      Corporate India—which has been on an overseas shopping drive in recent years to acquire markets, brands and technology—has now slowed down. India outbound M&A deals stood at $2.7 billion in 2012 year-to-date, down from $6.5 billion in the same period last year, data from Dealogic showed. Some of the companies like Suzlon and GVK are now looking to part-divest or sell foreign assets to revamp the balance sheet.      A June 15 Assocham study said that 85% of acquisitionminded businesses looked at domestic buyouts compared to 33% who are looking at crossborder transactions. An industry observer said that many leveraged Indian companies are left only with the option of strategic sales unless stock markets recovered and the central bank affected further interest rate cuts.      The debt-laden infrastructure companies, which aggressively bid for projects, have looked to divest completed projects (one estimate suggests that more than $10 billion worth of roads are seeking buyers) to raise capital for new and ongoing ones. Some are veering to the belief that developers shouldn't be managing commissioned projects.      "There is a shortage of senior management in the country and the upcoming middle management didn't know how to handle the downturn as they had grown through the boom years. There has been a crisis of management even though the larger conglomerates have pockets of quality managers," said Ramprasad M, chairman and cofounder of Mape Advisory, a boutique-investment bank, adding that the list of sellers have increased but not that of serious buyers.      It appears that all C-town now wants is to remain fit and not fat!  UNLOCKING VALUE  tKishore Biyani deleveraged his group significantly with Pantaloons & Future Cap's sales  tEssar, Anil Ambani's Reliance and Jaiprakash Associates in talks with investors to sell stakes in group cos  tDLF divested Adone Hotels & Hospitality and is looking to sell Aman Hotels & Resorts  tDebt-laden infra cos want to divest completed projects (roads worth about $10bn ) to raise capital for new and ongoing ones tApollo Hospitals close to selling its healthcare BPO  tSales have attracted PEs and sovereign wealth funds alike