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Rediff.com  » Business » Citi lists firms ideal for buys

Citi lists firms ideal for buys

By BS Reporter in Mumbai
March 15, 2007 12:12 IST
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Global financial services giant Citigroup has identified Jet Airways, Indraprastha Gas, Gokaldas Exports and Abhishek Industries as potential targets for leveraged buyouts by smaller companies looking for a presence in India, while acknowledging that none is up for sale.

Under an LBO, a smaller company can fund the purchase of a larger one by leveraging its balance sheet. Tata Steel's acquisition of the Corus group is an example of LBO.

Gokaldas and Abhishek are textile companies and Jet the country's largest airline. Indraprastha Gas, a joint venture between public sector undertakings Bharat Petroleum and Gas Authority of India, holds the licence to distribute compressed natural gas in Delhi.

Speaking on the sidelines of the annual Citigroup investors' conference in Mumbai, Marcus Rosgen, managing director and head, equity strategy, Asia, Citigroup, said: "We feel that these companies are ideal in terms of their financials for investors who are targeting acquisitions in India. A foreign airline one-sixth the size of Jet can fund the acquisition of the Indian company by leveraging Jet's balance sheet."

But if we look at LBOs where the acquisition is more than six times the acquirer's size, the universe of available companies shrinks dramatically, as the risks rise significantly and investors may prefer to stay away."

Rosgen pointed out that all these companies were in sectors that have shown significant growth over the past few years and were likely to interest companies looking for a share of the India growth story.

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BS Reporter in Mumbai
Source: source
 

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