ING sells Indian stake as foreign banks review market

ING on Thursday became the second foreign financial group this week to exit a minority holding in India as international banks review their position in the fast-growing but tightly regulated market.

The Dutch banking and insurance group raised $175m from the sale of a 3.1 per cent stake in India’s domestically owned Kotak Mahindra Bank through block share trades.

“ING remains confident about India and Asia’s long-term financial and economic prospects and potential,” the bank said.

The sale follows the divestment by another Dutch institution, Rabobank, of an 11 per cent holding in Yes Bank, another small Indian lender.

International banks are jostling for position in India, which has one of the world’s fastest-growing financial industries, fuelled by growth in retail and corporate lending.

Standard Chartered, the UK-based emerging markets bank, said India became its second-largest source of profit last year, after Hong Kong.

This month, the bank became the first foreign company to list in Mumbai through the issue of Indian depository receipts in a bid to demonstrate its commitment to India.

But the central bank, the Reserve Bank of India, limits the number of branch licences issued each year to two or three per company, putting a brake on the ability of HSBC, Citi, StanChart and other foreign operators to increase their presence.

A number of foreign banks had bought stakes in Indian institutions earlier this decade amid expectations that the government would review this policy by 2009.

But the Finance Ministry and the RBI put such reforms on the back burner after the global financial crisis in 2008 and early 2009 led to concerns over the health of global banks.

“The financial crisis happened and it was all put on hold,” said Ashvin Parekh, partner at Ernst & Young in Mumbai.

These tight restrictions have led to market speculation that ING might also exit its other venture in the country, ING Vysya Bank, a small domestic lender in which the Dutch group holds a 44 per cent stake.

“ING is committed to ING Vysya Bank,” ING said.

ING, which had to be bailed out during the financial crisis by the Dutch government, said the sale of the Kotak stake was part of its “back to basics” restructuring plan, under which it will cumulatively shed €8bn ($10bn) in assets over the next few years.

Rabobank said it had reduced its stake in Yes Bank, headed by Indian businessman Rana Kapoor, to 4.9 per cent from 15.9 per cent, raising $213m.

Rabobank said it was obliged to sell the stake to satisfy regulations ahead of the potential approval of its application for a full banking licence in India.

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Gilde raises €800m for new buy-out fund

Gilde, one of continental Europe’s oldest private equity investors, has raised about €800m ($990m) for its new buy-out fund, writes Martin Arnold in London.

The Dutch private equity group, created in 1982, managed to shrug off the tough fundraising climate thanks to support from new US and Asian investors and its former parent, Rabobank.

Gilde will next week announce that more than half of the money for its fourth fundraising came from new investors. It has surpassed its previous €600m fund by a third.

Rabobank, from which Gilde spun out in 2003, has committed about 10-15 per cent of the new fund, while US state pension funds have committed 40 per cent. Other investors include Asian and European sovereign wealth funds.

“Many of our existing investors had liquidity constraints, or had simply left the asset class since the last fundraising,” said Paul Bekx, head of Gilde’s Paris office. “We knew that even to raise the same amount as the last fund we had to go further afield.”

Gilde, which focuses on buy-outs of companies worth €100m-€500m in the Benelux countries, France, Switzerland, Germany and Austria, achieved 30 per cent annual returns in its first two funds. Its mostly unrealised third fund is valued above cost.

The Utrecht-based firm has focused recently on defensive sectors of food and pharmaceuticals, acquiring Plukon Royale, the Dutch poultry processor, and Novaset, the French life sciences firm.

One setback was the loss of its investment in Stankiewicz, the German maker of sound insulation material, which went bankrupt in 2008.