MC Insider: Rs 40-crore retention bonus, cement turf wars, CEO exit, banks on the block and more

Let’s begin this edition of MC Insider with a juicy titbit from the world of asset management companies (AMCs) that has witnessed big-bang M&As as well as a war for top talent in recent years. The latest buzz that we are picking up is that the dynamic young leader of an AMC who was believed to be in talks to enter the big leagues as the head of a top-tier AMC has been retained by the present employer with a retention bonus … wait for it … of Rs 40 crore! At least someone is laughing all the way to the bank. But some would say it seems a small price to pay if you consider the other angle to this story — that the employer that held the honcho back is rumoured to be on the block. So the exit of a CEO at this time could have been really inopportune and stalled a potential sale.

Block deals seem to be gradually back in vogue. Invesco sold stake in Zee Entertainment, KKR shed more holdings in Max Healthcare after an earlier sale in September 2021, pension fund CPPIB diluted its stake in Kotak Mahindra Bank and Carlyle pocketed some returns from its investment in SBI Cards. D-Street chatter suggests that another big block deal may be in the works in a cement firm, with the seller toying with the idea of exiting and selling the residual stake. We will bring more of this soon.

More on cement. The industry is abuzz with a mega transaction in the works – a global giant is preparing to exit India and sell stake in both its Indian entities. It wants to focus on other markets with better margins and less competition. We hear two Indian conglomerates are sniffing around the lucrative assets but in a possible twist to the tale, a little birdie tells us that a third suitor — a diversified group — may be also weighing an entry into the high-profile race. Now there is a bit of 90’s history to be kept in mind here. A firm backed by this group was one of the several companies that were combined to form one of the two target entities belonging to the MNC looking to exit. The said group exited the target entity eventually. In any case, whoever wins would be a force to reckon with in the cement sector considering the oodles of capacity on the block. We are wondering will the domestic market leader make a move or is being held back because of fair trade regulator’s concerns? Watch this space for more!

When was the last time you saw the stock of a listed firm plunging in trade immediately after the announcement of the exit of the man in the corner office? Well, that’s exactly what transpired at this firm that owns the franchise for some leading fast-food brands. The CEO resigned despite the firm approving his re-appointment until 2025. Reports indicate he is headed to a consumer brand that is a household name and is backed by a PE. But switching focus back to the gossip we picked up, there is a lot of excitement in market circles regarding the new spearhead at the firm which lost out. We hear that a replacement will be announced soon. There have been some whispers that a former executive from a leading startup that made its D-Street debut last year may be making an entry.

We heard that an urgent high-profile meeting of bank managing directors and finance ministry officials was called in Delhi. During the meeting, babus gave verbal instructions to public sector bank chiefs to aggressively push small loans to micro, small and medium enterprises and poorer sections including farmers. The finance minister was not present in the meeting. Some bank chiefs who attended the meeting are worried that this diktat, at a time when the economy isn't doing well at the ground level, will lead to additional stress over the next few years. But no one raised this point in the meeting. A little birdie in Delhi tells us the instructions to banks to go big on small loans are likely to be passed on to the lower level branch officers soon. The fear is more bad loan troubles are in the making for sarkari banks.

The much-hyped public sector bank (PSB) privatisation plan of the government seems to have hit a dead end, at least for now. Reason? There are no genuine takers for these institutions which are still fighting legacy issues including a huge stock of bad loans, trade union problems, and staff liabilities. The government is hoping that the Bad Bank, which is currently in the process of absorbing bad assets from PSBs, will help a great deal in clearing up the NPAs of banks. But even after that, high pension liabilities and trade unions woes are key factors that repel potential buyers. Even those showing interest in these banks are pitching proposals at dirt cheap valuations which the government is not keen to encourage fearing future allegations. A kind of deadlock, shall we say?

There is a lull in the FMCG industry as companies struggle to keep up with rising inflation. The Indian unit of a US-based food processing company, known for its sauces and condiments range, has suddenly gone quiet. Insiders say the company has ‘hit a rough patch’ and is in crisis control mode. The company's premium food offerings did not find many takers during the pandemic and now inflation has proved to be a nail in the coffin. The company we hear is hanging by a thread only thanks to its sauces portfolio and has lost considerable market share in the ‘olive oil’ segment owing to intense competition from edible oil companies that have entered the category.

A series of governance lapses and audits at various well-funded startups has many in the ecosystem worried. One investor said this is only the tip of the iceberg, implying that more skeletons will tumble in the coming months, including some bad news at some unicorns. All this talk made one banker suggest that it's perhaps time for a "bad startup" that can absorb all the financial liabilities of failed startups just like a bad bank absorbs bad loans of other financial institutions. The billion dollar question of course is who would lead this kind of a setup.

This startup entrepreneur, originally based in Bengaluru, is spending more time these days shuttling between the US and Dubai. After closing a funding round recently, we hear he is now preparing to list his startup via the SPAC (special purpose acquisition company) route. With tech stocks facing a rout across the board in recent months, both in India and the US, it remains to be seen if he will succeed in his SPAC mission.

A foreign investment major is mulling expansion of its footprint in the NCR market after increasing interest in the Noida commercial market. Historically, Gurugram has been the singular focus for corporate real estate developers and investors. A large transaction for acquisition of an IT Park portfolio in the NCR, which was to be closed pre-COVID but had fallen through, is now back in the market. While one of the assets continues to find favour among potential investors, the second unfortunately continues to face challenges.