:: the knav deal watcher - knavcpa.com update quarter... · we are pleased to present to you the...

India Market Update for the quarter ended December 2017

:: THE KNAV DEAL WATCHER ::

Dear Clients and Associates:

Happy new year 2018.

We are pleased to present to you the KNAV Deal Watcher providing the India market update for the quarter ended December 2017. This update includes an analysis of private equity/venture capital investments and the key M&A deals in this quarter.

Key highlights/updates

• The quarter had over 214 private equity/venture capital investments rounding up to a value of USD 5.3 bn. Some notable deals include:o Axis Bank’s fund raising of USD 1.8 bn from Bain Capital, LIC and Capital Group &o Ola’s fund raising of USD 1.1 bn from Tencent Holdings Ltd. & Softbank Group Corp.

• The quarter had over 80 M&A transactions rounding up to USD 5.67 bn. The prominent deals are:o Adani Transmission Ltd. acquiring the Mumbai power business of Reliance Infrastructure Ltd. for USD 1.9 bn &o American Tower Corporation’s acquisition of the tower assets of Idea Cellular Ltd. and Vodafone Group Plc. for

1.2 bn.

A detailed analysis and a selected listing of a few notable deals are provided in this update.

Do share your comments and/or feedback on [email protected]

Vaibhav Manek

Vaibhav ManekPartner- Advisory services

Suparna Dua

Suparna DuaPartner - Investment banking

mailto:[email protected]

© 2018 KNAV All rights reserved

Private equity/venture capital investments

Analysis of a few transactions

Mergers & acquisitions

1

3

2

The structure of this document

3

Sectors gaining momentum4


Private equity/venture capital investments

4


Of the total USD 2.22 bn invested in this quarter, the highest amount of funds were invested in the travel sector (USD 1.10 bn), followed by telecom (USD 350 mn) and finance (USD 201 mn).

The following charts provide an analysis of the prominent sectors which have witnessed private equity/venture capital

investments in the consumer internet space in terms of number of deals and transaction value for the quarter.

Consumer internet | PE/VC deals

5

17 3289

201

41 76 56 49 44106

350

1101

0

400

800

1200Transaction value in USD mn

6

1113

1923

69 9

5

11

34

7

0

10

20

30

40

Number of deals

Of the total deals in this quarter, the highest number of deals were witnessed in the technology sector (34 deals), followed by finance (23 deals) and e-tail (19 deals).


These charts provide an analysis of the prominent sectors which have witnessed private equity/venture capitalinvestments in the brick and mortar space in terms of number of deals and transaction value for the quarter.

Brick and mortar | PE/VC deals

Of the total USD 3.08 bn invested in the quarter, thehighest amount of funds were invested in financesector (USD 1.89 bn) followed by food & beverages(USD 685 mn) and real estate (USD 305 mn).

6

9 9

23 3

11

2

0

2

4

6

8

10

12

Number of deals

1,886

685

22 76 65

305

220

400

800

1,200

1,600

2,000

Of the total deals in the quarter, the highest number ofinvestments were in the real estate (11 deals), followedby finance and food & beverages (9 deals each) andpower & energy and professional services (3 deals each).

Transaction value in USD mn


City wise analysis

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4

6 6

4 4 4

7

13

4

0

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4

6

8

10

12

14

5 54

11

45

34

6

0

2

4

6

8

10

12

4

10

8

43

8

0

2

4

6

8

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12

Bengaluru Delhi NCR Mumbai

Number of deals 62 56 49

Value of Deal (in USD mn)

1,445.23 218.86 1,291.22

Hereunder we have illustrated top 3 cities that have attracted majority of the PE/ VC deals and respective sectors in each city that were funded.

Bengaluru attracted the largest share of PE/ VC deals in this quarter, followed by Delhi NCR and Mumbai.


Investee Sector InvestorInvestment value

(USD mn)

FinanceBain Capital, LIC, Capital

Group1800

TravelTencent Holdings Ltd., Softbank Group Corp

1100

Food & Beverages

Devonshire Capital 620

Telecom Warburg Pincus 350

Real Estate Altico Capital 195

Top private equity / venture capital deals

8


Investee Sector InvestorInvestment value

(USD mn)

FinanceWellington Management, DG Ventures India, True

North77

Professional services

The Carlyle Group 62.5

Power & EnergyApis Partner, Eight Roads

Ventures, Bamboo Capital Partners

60

Media & Entertainment

IIFL Special Opportunities Fund

51

Marketplace UC-RNT Fund 50

Top private equity / venture capital deals (cont…)

9


Mergers & acquisitions

10


Technology and finance sectors bagged the highestnumber of deals (9 deals each) followed bymanufacturing and food & beverages (8 deals each) andpharmaceutical (7 deals).

In the quarter, the total transaction value of all the dealsamounted to USD 5.67 bn compared to USD 5 bn in theprevious quarter. In terms of value, the highest M&A dealswere witnessed by power and energy (USD 2.09 bn) followedby telecom (USD 1.7 bn) and pharmaceutical (USD 0.79 bn).

Sector-wise analysis | M&A deals

11

84198

387

32 105

792

2093

100 74

1716

0

400

800

1200

1600

2000

2400


Rise in the transaction value and fall in the number of transactions illustrates a considerable increase in the averageticket size of each transaction vis-a-vis the previous quarters.

3 3

98 8

5

3

7

34

9

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0

2

4

6

8

10

Number of deals

The following charts provide an analysis of the prominent sectors which have witnessed M&A transactions in terms ofnumber of deals and transaction value for the quarter.


• Some notable deals citing competitive advantage as the major reason were: - Future Retail Ltd.'s acquisition of Hypercity Retail Ltd; - Zee Entertainment Enterprises Ltd.'s acquisition of 9X Media Pvt. Ltd.

• Deals citing strategic entry were:- Lotte Confectionery Co. Ltd.'s acquisition of Havmor Ice Cream Ltd; - PVR Ltd. acquiring minority stake in iPic Gold Class Entertainment LLC.

Reasons for various M&A deals

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3

25

3

28

7

9

0 5 10 15 20 25 30

Backward/ forward integration

Competitive advantage

Merely as an investment

Product/ service portfolio enhancement

Restructuring strategy

Strategic entry

Reasons for M&A deals

• There are several reasons for companies to venture into inorganic growth strategies. We have analysed the major reasons cited by thecompanies for having an M&A transaction and the same are graphically illustrated above.

• Product/ service portfolio enhancement was the most cited reason, with 28 out of 80 deals (i.e. 35% of the deals) justifying the same.Some notable deals citing this reason were :- Lupin Ltd.'s acquisition of Symbiomix Therapeutics LLC ; &- Emami Ltd. acquiring 30% stake in Helios Lifestyle Pvt. Ltd. (which owns the male grooming brand The Man Company)

• Competitive advantage (25 deals) and strategic entry (9 deals each) were the second and third most frequently used justificationsrespectively for the deals:


Target Acquirer SectorTransaction value

(USD mn)

Mumbai power business

Power & Energy 1,900

Tower assets

Telecom 1,200

Branded formulation business in India & Nepal

Pharmaceuticals 558

4.49% stake in telecom infrastructure

Global investors and fund managers

Telecom 510

Top M&A deals for the quarter

13



(USD mn)

Manufacturing 158

Power & Energy 153

Food & Beverages 152

Pharmaceuticals 150

Payments 105

Top M&A deals for the quarter (cont…)

14

Wind power assets



(USD mn)

Reno Chemicals Pharmaceutical & Cosmetics Pvt. Ltd

Manufacturing 24.70

Technology 17.28

Technology 8.60

Technology Not disclosed

Food & Beverage Not disclosed

Other prominent M&A deals

15


Analysis of a few transactions

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• South Korean LOTTE Confectionery, well known for its ‘ChocoPie’ brand has fully acquired Havmor Ice Creams for a dealvalue of USD 152 mn.

• Havmor ranks among the top three ice-cream makers inGujarat, enjoying a 3.5-4% share of the USD 1 bn Indian icecream market.

• This deal will help LOTTE in expanding its presence in theNorth-West region of India which is slated to be the world’sfastest growing ice-cream consumption market.

• Havmor will continue to independently operate its chain ofrestaurants across Gujarat as well as run its signature brandand concept café Huber & Holly.

Deal analysis | Lotte acquires Havmor ice cream

17

Source: Mintel


• Future Retail announced its acquisition of Hypercityfrom Shoppers Stop for USD 100 mn in a cash and stockdeal.

• The deal gives Future Retail access to an established19-store network of high-end grocery and merchandiseretail, in line with the Group’s plan to expand its chainof hypermarket stores to 350 in a span of 3 to 5 years.

• It also strengthens the presence of Future Group in thehypermarket segment which currently operates itsstores under the brands of Big Bazaar, Foodhall andEasyDay.

Deal analysis | Future Retail’s acquisition of Hypercity

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• For Shoppers Stop, this transaction removes Hypercity’s debt burden from its own plate making iteasier for them to grow and focus on their traditional strengths in fashion and apparel.

• The deal shows a continued interest in the brick-and-mortar retail segment, which promises ampleopportunities of growth and efficiency through consolidation and strategic deal making.


Deal analysis | Ola’s dramatic re-entry into food delivery

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• After more than a year of closing down its pilot projects Ola Storeand Ola Café, Ola has announced its re-entry into the fooddelivery space by acquiring Foodpanda India from Delivery HeroGroup.

• By acquiring the third largest player in this business, Ola isdetermined to establish a strong market presence.

• It has also planned an infusion of USD 200 mn in Foodpanda inorder to compete with UberEats and Zomato and further expandFoodpanda’s existing business.

• The company has been considering aggressive expansion after itclosed a USD 1.1 bn funding round led by Tencent and SoftBank inOctober 2017, seeking ways to differentiate itself from Uber’sIndian business.

• With this deal, the cab-hailing platform is expected to broaden itsrange of services and offer the benefit of its scale and efficienciesas a platform besides learning from Delivery Hero’s global bestpractices.


Sectors gaining momentum

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Sector trends | FinTech

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• Continuous innovations in Fintech such as blockchain and digital

currencies are forcing established players to evaluate their business

models to better serve the evolving consumers.

• Payment and trade processing are gaining interest from investors with

46% of Indian FinTech startups engaging in the same.

• Conventional institutions are either trying to integrate new technological

solutions offered by FinTech companies or are developing their own

solutions in partnership with innovative startups.

• The Indian FinTech market is expected to reach *USD 2.4 bn by 2020.

Some of the key enablers are:

o Increasing internet penetration- surged from 18% in 2014 to 31% in

2016.

o Government initiatives- Demonetization, “Digital India”, “Jan Dhan

Yojana” and UPI.

o Evolving start up ecosystem.

• Some of the notable deals in this quarter include Bank Bazaar raising

USD 30 mn from Experian and KrazyBee’s USD 8 mn infusion

from Xiaomi Technologies and Shunwei Capital.*Source: FICCI Financial Foresights

8

29

13

23

0

5

10

15

20

25

30

35

FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3

Number of deals

36

71

42

201

-

50

100

150

200

250

FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3



Sector trends | Content

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• The Indian consumer is increasingly consuming content on digital platforms

covering news (text), music (audio) and video.

• The consumer-creator model has broken down the barriers to the creation

and distribution of content, allowing consumers to increasingly participate in

infotainment and video content creation through forums, blogs, and social

media platforms.

• Factors providing impetus to the growth of content platforms include-

o Increase in the number of devices capable of supporting digital media;

o Shift to ‘personal escapism’ (watching content individually) from ‘group

escapism’ (watching TV in the living room), and

o Rollout of 4G broadband services.

• 2 most popular monetisation models being adopted by digital on-demand

content markets are subscription model and advertisement based model.

• Some significant deals in this quarter include- Inshorts raising USD 5 mn from

Tiger Global and YourQuote raising USD 1 mn from Axilor ventures and other

investors.

54

3

11

0

2

4

6

8

10

12

FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3

Number of deals

3.75

0.50 0.46

17.31

-

5

10

15

20

FY17 Q4 FY18 Q1 FY18 Q2 FY18 Q3



Contact us

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Mumbai

Vaibhav Manek

E: [email protected]

Tel: +91 22 6164 4800

New Delhi

Monish Chatrath


Tel: +91 11 4106 9400

Atlanta

Atul Deshmukh


Tel: +1 678 584 1200

Amsterdam

Dr Henk Burke


Tel: +312 066 44 054

Geneva

Claude Rey


Tel: +41 24 466 77 27

London

Amanjit Singh


Tel: +44 20 3617 6200

Lyon

Martine Chabert


Tel: +33 478 182 694

Singapore

Wayne Soo


Tel: +65 6846 8376

Toronto

Harshad Parekh


Tel: +1 416 229 1411

Hyderabad

Dayaniwas Sharma


Tel: +91 40 2324 0700

Bangalore

Shrenik Kataria


Tel: +91 80 4113 1896

Contact us

24


About KNAV

KNAV refers to one or more of KNAV International Limited (KNAV International); a not-for profit, non-practicing, non-trading corporation incorporated in Georgia; USA and its association of member firms, each of which is a legally separate and independent entity.

KNAV International is a charter umbrella organization that does not provide services to clients. Services of audit, tax, valuation, risk and business advisory are delivered by KNAV's independent member firms in respective global jurisdictions. All member firms of KNAV in India and North America are member firms of Allinial Global.

Website - www.knavcpa.com

Reach us

If you want to know more about KNAV or its services please contact Mr. Vaibhav Manek at [email protected]. We will be glad to hear from you.

Suggestions/Feedback

For suggestions/feedback on this newsletter please contact Ms. Suparna Dua at: [email protected]

Editorial credits

Deals Snapshot Editorial Board Vishishta Goyal and Hardik Adenwala–– KNAV Mumbai

The source of our data is our market research, publicly available reports and press items, and independent databases. While KNAV has made reasonable endeavors to ensure that the information provided in this newsletter is accurate and up to date as at the time of issue, KNAV shall not be liable for any errors, inaccuracies or delays in the information, nor for any actions taken in reliance thereon, nor does it endorse any views or opinions. KNAV disclaims all warranty, express or implied, as to the accuracy or completeness of any of the content provided, or as to the fitness of the content for any purpose to the extent permitted by law. The content herein is not appropriate for the purposes of making a decision to carry out a transaction or trade and does not provide any form of advice (investment, tax, legal) amounting to investment advice, nor make any recommendations or solicitations regarding particular financial instruments, investments or products, including the buying or selling of securities. KNAV has not undertaken any liability or obligation relating to the purchase or sale of securities for or by any person in connection with this document.

This newsletter is intended only for the individuals addressed. The information contained in this newsletter is privileged, confidential, and may beprotected from disclosure; please be aware that any other use, printing, copying, disclosure or dissemination of this communication may be subject tolegal restriction or sanction. Copyright and any other intellectual property rights in its contents are the sole property of KNAV.

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About KNAV & credits

25



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