arc privateequityinindiajune09

8/9/2019 Arc Privateequityinindiajune09

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Markets see revivalPrivate Equity industry gets a breathing spacePrivate Equity in India

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2009 ARC Financial Services (P) Ltd July09 Volume 2 Private Equity Update

Despite Rally in Markets, Slowdown Hurts Private Equity

In Q2 Jun09, FII have poured net $6.2bn into Indian equity marked as compared to $1.3bn net outflow in Q1 Mar09. Of the total $6.2bn, 66%

investment came during the month of May alone

Indian equity market witnessed exit by several private equity firms and venture capital companies since the rally in equities gathered momentum

Private equity players have sold more than INR 7.6bn worth of equities since Mar 09

Companies such as Techno Electric, Mundra Port and SEZ, Shriram Transport Finance, Lupin and Titagarh Wagons reported selling by privateequity firms

PE firms are looking to leverage opportunities to downsize their portfolios

Private equity investments in listed firms are still suffering loss close to $0.45bn so far this year, even though there has been a strong rally in the

capital markets

The total investments through PIPE deals in the year 2008 was of $1.67bn and despite the recent rally in the capital market their current mark tomarket (MTM) value stood at around $1.20bn

Wealth erosion was across the board, retail suffered the maximum erosion of 77.2%, followed by infrastructure (60.6%), pharmaceutical(59.3%), engineering (49.3 %), education (48.7%) and media (41.7%)

However, there has been a considerable improvement in the average ticket size of private equity investment as comparedto last quarter Average ticket size for the completed deals for quarter ending (Apr09-Jun09) has been $30.2MM as compared to $18.97MM for the quarter

ending (Jan09-Mar 09)

1

1

Despite this


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Q1 Mar'09 Q2 Jun'09

749

793

Q1 Mar'09 Q2 Jun'09

39

34

PE Deals in India (Volume) PE Deals in India ($MM)

The value of Indian PE deals in Q2 Jun09 stood at $793MM, up 6%

QoQ as compared to $749MM in Q1 Mar09. The total number of

deals however declined to 34 in Q1 Mar09 from 39 in the previous

quarter In terms of deal value, industrial sector attracted highest

investments with 30.5% of total PE investments, followed closely

by real estate & infrastructure sectorwith 29.1% investments

The largest PE deal in Q2 Jun09 was $90MM investment in KS Oils

by the consortium of PE investors (New Silk Route, Citi Venture

Capital International (CVCI), Baring Private Equity Asia)

30.5%29.1%

18.3%

11.3%

6.3%4.0%

0.4%

TMT2REI1 Consumer

& RetailHealthcare3 BFS4 HospitalityIndustrials

1Real Estate & Infrastructure 2Telecom, Media and Technology 3Includes healthcare, pharmaceuticals, hospitals and life sciences 4Banking & financial services

PE Deals breakdown by value (in %) out of total deal value of $793MM

PE Activity in India Sector wise break up (1/2)

2


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PE Activity Sector wise break up (2/2)

6

3

2

0 0 0 0

2

3 3 3

2

0

1

2 2 2

0

1

2

0

Apr'09 May'09 Jun'09

Sector Breakup

(Nos.)

TMT1 REI2 Consumer

& Retail

Healthcare3 BFS4HospitalityIndustrials

Number of deals increased to 14 in May 09 from 11 in Apr09 and then again

witnessed a decline to 9 in Jun09

In the quarter ended Jun09, TMT sector attracted maximum number of deals

(i.e. 29% of total numbers of deals happened in the quarter ). However, deals

in industrial sector saw a major turnaround with an increase in share to 21%

of the total deals as compared to 8% in the quarter ended Mar09

Interesting, one of the most focused sector these days by PEs , Education did

not feature in a single deal

Healthcare sector, another sector being the favorite of PE players was a silent

spectator in Apr09, however 3 deals were closed in this sector in May09 and

Jun09

Month-wise comparison of PE deals

(Nos.)

Apr'09 May'09 Jun'09

11

14

9

3

1Telecom, Media and Technology 2Real Estate & Infrastructure 3Includes healthcare, pharmaceuticals, hospitals and life sciences 4Banking & financial services

Traditional sectors as TMT, Industrials and

REI accounted for more than 74% of the

total deals


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Sectoral Break Up: Comparative analysis of Deals

Sector No. of deals Trend

Q1 Mar09 Q2 Jun09

Telecom, Media &Technology 15 10

Real Estate & Infrastructure 8 8

Industrials 3 7

Consumer & retail 4 3

Healthcare & life sciences3 3

Hospitality 1 2

Banking & Financial services 3 1

Education 2 0

Total 39 34

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Sector: TMT (Telecom, Media & Technology)

Date Investor Target Amount Stake

06 Apr'09 Banyan Tree Trimax NA 10%

07 Apr'09 DAX Partners LP Selectica India $4MM 100%

09 Apr'09 IFC Lifetree Convergence Ltd. NA NA

16 Apr'09 Oman Investment Fund (OIF) and 3i Sports Media Neo Sports Broadcasting Pvt. Ltd. $50MM NA

27 Apr'09 Navis Capital Partners Edutech $30MM 55-80%

30 Apr'09 Pangea Capital Cobol Technologies $30MM NA

01 May'09 Sequoia Capital India and Silicon Valley Bank Ideacts Innovations NA NA

11 May'09 Nexus India Capital OLX $5MM NA

03 Jun'09 SAIF Partners Network 18 $26MM 11%

16 Jun'09 Accel Partners enStage, Inc. NA NA

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7/13 2009 ARC Financial Services (P) Ltd July09 Volume 2 Private Equity Update

Sector: Real Estate & Infrastructure


03 Apr'09 Standard Chartered PE Man Infraconstruction NA NA

27 Apr'09 IDFC Project Equity Ashoka Buildcon Ltd. $50MM 49%

29 Apr'09 Axious Investments Quippo Telecom Infrastructure Ltd. $40MM 3.8%

8 May'09 SUN Apollo Ventures Keystone Realtors $61MM 15%

12 May'09 IDFC PE GMR Infrastructure NA 0.7%

27 May'09 Purna Partners Sobha Developers $47MM NA

11 Jun'09 Red Fort Capital Parsvnath Developers Ltd. $19MM 18%

15 Jun'09 Fire Capital Fund JV with Arcor Group $14MM 75%

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Sector: Industrials


03 Apr'09 ADG Fund RKKR Steels $27MM NA

15 Apr'09IFCI VC Fund, UTI India Infrastructure DevelopmentSeed Asset Ltd and IDFC Project Equity Sabarmati Gas $16MM 50%

05 May'09 India Value Fund (IVF) Innovative B2B Logistic Solutions NA NA

19 May'09

New Silk Route, Citi Venture Capital International

(CVCI), Baring Private Equity Asia KS Oils $90MM NA

28 May'09 IDFC GMR Energy $48MM 20%

4 Jun'09

Standard Chartered IL&FS Asia Infrastructure Growth

Fund Ramky Enviro Engineers Ltd (REEL) $43MM



Sector: Banking and Financial Services

Sector: Hospitality


15 Jun'09 Banyan Fund Management Asiana Hotels and Resorts $32MM NA

15 Jun'09 Nadathur Holdings BMC Management Corp NA NA


28 May'09 IFC & others Share Microfinance Ltd $50MM NA

8

Sector: Healthcare & life sciences


13 May'09 IFC Max India $30MM 4.4%

20 May'09 Global Technology Investment Group (GTI) Nova Medical Centers $50-60MM NA

10 Jun'09 Evolvence India Life Sciences Fund (EILSF) Anjan Drugs Pvt. Ltd. $5MM NA



Buzzing Hot Sectors for Private Equity

With an estimated $40bn market for private institutions, education sector will be one of the mostfavourite sector for Private Equity and Venture Capitalists in coming years

A Venture Intelligence survey revealed that more than 80% investors are planning to make an investmentof around $800MM in educationsectorover the next 12 months

Within education, vocational training, tutoring and test preparation would draw significant PE and VCinterest

Since 2006, $300 MM has been invested in Indian education ventures

9

Opportunity is being seen mainly in diagnostic services, medical devices, hospital chains and wellness

products

India has a huge competitive advantage in clinical research. Hospitals are yet another area where a lot ofinvestment to be seen in near future as the average number of beds is the lowest in India

During the last 18 months, PE players have invested $686MM in the healthcare sector

PEs and VCs are likely to invest about $3.5bn in clean technology in next few years

Regulations in India (where 10% power is generated from renewable sources) are very positive for thesector

Powersector needs significant investments and there are a number of projects on the anvil

Education Sector

Healthcare Sector

Cleantech or

renewable energy


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Compulsory contribution: With a view to get parity between Indian and overseas venture capital funds, SEBI has made it compulsory for foreignventure capital investors (FVCIs) to attain firm commitment from investors to contribute at least INR 50MM before the start of operations by theventure capital fund

Till May09, there are around 129 foreign venture capital firms registered with SEBI and 132 domestic venture capital funds

Independent Regulator: Regulators is working towards forming an association similar to the Association of Mutual Funds of India (AMFI) forcollating all data pertaining to PE investments in the country

Currently, most of the information on PE flows are sourced from private aggregators

Tax clause change: Government is considering a proposal to extend the benefit of tax pass-through to domestic venture capital (VC) funds oninvestments across all sectors

At present, this benefit is restricted to investments in only nine sectors biotechnology, nanotechnology, IT hardware and software, R&D fornew chemical entities, seed research, dairy, poultry, bio-fuels and large hotel-cum-convention centers

Regulatory Changes for Private Equity Players

10 2009 ARC Financial Services (P) Ltd July09 Volume 2 Private Equity Update



ARC Financial Services Private Limited provides Financial Research & Analytics, Business & Corporate Intelligence, Management & Strategic

Consultancy and Content Management services to its clients across the Globe. We offer a full range of services and transactions expertise including

Private Equity placements, Capital Raising services in public markets (IPOs and QIPs), FCCBs, Capital Restructuring, Mergers & Acquisition, Spin

offs, and Corporate Restructuring Advisory services. We also act as an advisor on various corporate, financial and commercial matters and provides

content management services including Investors Relations Consulting to the organisations based on in-depth industry study and company research. We

cover the key sectors including Agriculture and Agro Processing, TMT, Consumers Products and Retail, Banking and Financial Services, Healthcare and

Life Sciences, Oil and Gas, Power, Pharmaceuticals, Infrastructure, Real Estate, Auto & Auto Ancillary and Manufacturing & Distribution amongst others.

For further information please visit us www.arc-fs.com and /or email us at [email protected]

About ARC Financial Services (P) Ltd

The information contained herein has been obtained form various public sources. The above information is believed to be correct but is not necessarily

complete and its accuracy cannot be guaranteed.

ARC Financial Services is not responsible for any error or any decision taken by the reader based on this information. It should not be relied upon as a

substitute for detailed advice and the company does not accept responsibility for any loss as a result of relying on material contained herein. ARC

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Samir Agarwals.agarwal @arc-fs.com+91 11 4560 1622
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