Rich Indians looking to invest in Facebook IPO

After signing up in millions to join the social networking site's account, Indians now want a pie of Facebook's coveted IPO as well. Several rich Indian investors, wanting to be a part of the Facebook dream, are readying plans to invest in the $13.5-billion Facebook public issue, the roadshows for which kicked off in the US on Monday.

Though Indian investors may not grab the limelight when the post-issue shareholders' lists are drawn, there may be several Indians who will end up owning a small number of FB shares at issue close. According to international wealth managers, several ultra high-net worth Indians are looking to make "token investments" in the FB issue.

"HNIs in India may subscribe to the Facebook issue in tranches. It'll be more like a token investment in the IPO stage and they will look at increasing exposure after there's a better understanding of earnings growth in the next few quarters," said Prateek Pant, head - products & services, RBS Private Banking India.Facebook is offering about 337.4 million shares for $28 to $35 each, according to a regulatory filing on Friday. At the upper end of the price band, the IPO would raise $13.5 billion, pegging net valuation of Facebook at $95 billion. The social networking website will launch its issue on May 18 on the US bourses. Facebook added 46 million MAUs (monthly active users) in India as of December 31, 2011, an increase of 132% from the previous year, as per the company SEC filings.

According to wealth managers, rich investors are looking to invest in small lots, mostly for 800 to 1,000 shares. At $35 per share, Indian investors will require over 18 lakh to apply for 1,000 FB shares.

"Indian investors wanting to invest in the FB issue will have to take a measured call. They will have to fund their share purchase through liberalised remittances scheme (LRS) route, which allows every Indian to invest up to $200,000 in overseas asset classes," said Satya Narayan Bansal, chief executive of Barclays Wealth.

"Indians may invest in the FB issue if they find valuations attractive. They may only make token investments as rich investors may not want to exhaust their entire LRS allowance on this issue," Bansal said.

Wealth managers say it's the FB fad that's prompting rich Indians to invest in the issue. A good number of these investors are entrepreneurs and professionals who are familiar with the workings of US stock markets and many of them already have companies like Apple, Google and Microsoft in their portfolios. These investors park their money in global blue-chip companies to diversify their stock portfolios. Their investments in FB is seen more as a fad, wealth managers said.

Indian investors can invest in the FB IPO only if they have an international bank and an overseas trading account. Usually, foreign banks in India refer local clients to their offices (or partners) in Singapore or Dubai to participate in such high profile public issues. Almost all foreign wealth managers are pitching FB to their Indian clients.

The final share allocation will depend on the overall demand for the issue among global investors. Rich investors from China and Gulf countries have already given large mandates to their banks and brokerages to subscribe to the FB issue, wealth managers said. "Facebook is a breakthrough internet company which has managed to capture the fancy of 900 million users all around the world. Indian investors, however, are apprehensive to commit large sums of money (to the FB issue) simply because several e-commerce companies, which recently floated IPOs at rich valuations, are trading at significant discounts in the US markets," Pant said.

Another worry among Indian investors is the conflicting reports about FB's valuation. Many analysts have voiced concerns over Facebook's 80-85 times price-to-earnings multiple, when an established player like Apple Inc commands a P/E multiple of just over 14 times. According to wealth managers, listing gains is an important factor in US markets, but e-commerce companies like Facebook may need longer holding period for better capital gains. The weak rupee is another factor that's prompting rich Indian investors to put in smaller sums of money to the FB issue.

"Family offices that managed to put out money (overseas markets) when the rupee was at 45-47 levels may consider investing in the FB issue. These investors will not be hurt if rupee gains in strength," said Richa Karpe, director - investments, Altamount Capital, which manages several Indian family offices.

"It is not advisable for investors to convert their LRS allowance at current rates. They may log losses in the event of rupee gaining strength. Price appreciation in FB shares may take time to come," Karpe said.

Source: timesofindia.indiatimes

Norway warns India of 'political implications' if Telenor fails

Telenor's $3 billion investment in India will have political implications. "Telenor is not just any company. 54% of the shares are owned by Norwegian people through state and thus, it has even further political implications that such a company will be harmed. If this investment fails, it will be probably the biggest loss a Norwegian company has in foreign investments ever. I think also it will be fair to say that it will influence the view of India as an investment country," Norwegian trade and industry minister, Trond Giske, told reporters. 

Giske is the representative of Norwegian government on the board of Telenor, which holds 67.25% stake in the telecom operator, Uninor. The balance is held by realty major Unitech.As many as 22 licences of Uninor were among the 122 licences cancelled by the Supreme Court on February 2, issued during the tenure of the then telecom minister A Raja. Uninor has been permitted to operate till September 7. 


Giske added that Norway and India share good bilateral relations and expressed hope that the issues will be resolved soon. "Bilateral relations between India and Norway are strong and they can handle any challenges. It might have effect on investors but government to government cooperation continues throughout all problems," Giske said. 

"This situation after the Supreme Court ruling with the withdrawal of licences and proposals from Trai for new auction, have created obstacles to our future engagement," he said. To continue its telecom operation, Telenor needs to acquire new licences and win spectrum through the upcoming auction. However, the company has expressed concern over the auction proposals of telecom regulator, Trai. 

The Trai had suggested a base price of Rs 3,622 crore for one megahertz (MHz) for pan-India spectrum. This is around 10 times higher than the price at which 2G licences bundled with 4.4 MHz spectrum were allocated in 2008 during Raja's tenure. According to Trai's recommendations, a minimum of 5 Mhz spectrum should be allotted, which means that pan-India airwaves in 1800 MHz band will cost Rs 18,100 crore. 

Telenor has objected to the high base price recommended by Trai along with network roll-out obligations and the quantum of spectrum proposed for auction. Giske said the Norwegian government fully respects the rights of Indian institutions' to take decisions but have "innocently harmed" the interests of Telenor and Uninor. 

"I think it is truly possible to strike a balance and find a common ground where both Supreme Court decisions are fully respected, revenues to the Indian government is secure and competition and good service are provided to customers through participation of Telenor," Giske said. 

Via: timesofindia.indiatimes