pe activity in india_2010

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Strategies for your SuccessARC

Indian Private Equity Market

Markets see revival…

Private Equity Deals back with a bang…

The Year 2010





Strategies for your SuccessARCWhat is Private Equity…

Raising equity for companies from Private Equity (PE) players is one of the most importantaspects of the investment banking services. PE funds concentrate their investments normally inunlisted companies that cannot or do not want to raise equity in public market (via IPO route).

There are many a reasons why a company looks for private equity investment, but the two keyreasons could be -

The company has grown by itself so much that it requires a fresh injection of funds fromoutside (i.e. other than promoters) to grow further and reach higher economies of scale

The management has plans to go public at some later stage (say after 5-7 years).Bringing the PE investment is considered one of the ways for companies to go public.

People normally take private equity and venture capital as one and same thing. Thoughidentical, the two industries are quite different.

Venture capital involves minority investments in firms at early stages of development

(seed, start-up and development capital), whereas private-equity funds make majorityinvestments in mature companies.





Dec’10Jan’01Jan’05 Jan’08

1 Jan’01

3,955

31 Dec’10

20,509

GlobalRecession

era in 2008

BSE Sensex

31 December 2000 3,972

31 December 2010 20,509

Change (%) 416%

BSE Sensex

Closing High (05 Nov’10) 21,005

Closing Low (21 Sep’01) 2,600

BSE Sensex outperformed the world indices in the first decade; Sensex jumped by a whopping 416% compared to Hang Seng(53%), SSE Composite (35.4%), Dow Jones (7.3%), NASDAQ (7.4%), S&P (-4.7%), FTSE (-5.2%) and Nikkei (-25.8%)

BSE Sensex ended the 1st decade of 21st century at 20,509 with a gain of 416% or 3,044 points on its closing of 31 Dec’00.

Just two years (2001 and 2008) witness the fall in Sensex on Y-o-Y basis when itlost 17.87% and 52.45% respectively. The fall of 2008 was the worst in thedecade driven by global recession, which lead to financial turbulence through outthe world.

The biggest yearly gain came in 2009 when Sensex recovered 7,817 points or81.03% over closing of 9,647 at the end of 2008.

The total market capitalisation of BSE topped the decade (2000-2010) at INR72.96 trillion, up 953% compared with INR 6.93 trillion in 2000. Indian companiesadded m-cap of INR 66 trillion during last ten years, with the newly listed

companies contributing almost 40% of the addition. Global funds bought a net of $90.17 billion since 2001, taking net flows into

equities to $101.97 billion, according to data on the SEBI website

Jan’03

BSE Sensex: The Decade 2001 – 2010





2010 was a fabulous year for the Indian markets; bulls completely charged upin 2010 and pushed the benchmark indices near all-time highs, led by hugeinflow of foreign money. India’s growth story attracted big foreign money flow inthe year despite scams like telecom, bribe-for-loans and commonwealth

games. The benchmark indices rose for a 2nd consecutive year, making the benchmark

index the best performer among the world's best indices as economic growthlured record foreign funds. The BSE benchmark index Sensex rallied 17% inlast year, extended previous year's biggest rally in 18 years.

• The 30-share BSE Sensex closed at 20,509, up 3,044 points or 17.43%

2010 was also the best year for Indian primary market; 65 Indian companiesraised more than INR 710 billion through public offers (both IPOs and FPOs).

• Coal India, NTPC, NMDC, Power Grid and Shipping Corporation werethe largest public offers in 2010, which collected more than 50% of totalmoney.

FIIs were net buyers to the tune of $29 billion in Indian equities – highest everin history while mutual funds were net sellers of $6 billion – highest everoutflows in history.

-14.31% -3.01%

5.32% 9.00%

11.02% 12.78%16.91% 17.43%

SSEComposite

Nikkei Hang sang FTSE Dow Jones S&P NASDAQ BSE

BSE Sensex in 2010

4 Jan’10

17,559

31 Dec’10

20,509

Closing High (05 Nov’10) 21,005

Closing Low (05 Feb’10) 15,791

78.3292.25 17.8%

Crude Oil ($ per barrel)

Gold (INR per 10gm)

16,690

20,58523.3%

Dec’09

Dec’10

Financial Markets: The Year 2010





Private equity investment in India rebounded in 2010 after a lull due to global financial meltdown withenergy sector being the biggest draw. This revival has seen deal value doubling in 2010 as opposed to

2009 when it slipped to its lowest levels.

In calendar year 2010, private equity and venture capital firms invested USD 8.62 billion in 406 deals asagainst USD 4.4 billion in 287 deals during the previous year. This represents a 96% increase in dealvalue and a 41% increase in deal volumes.

However, the deal value is still way behind compared to 502 deals with a total disclosed value of USD11.98 billion in 2008 and 488 deals with an announced value of USD 15.61 billion in 2007 when deal-

making peaked.

488 502

287

406

2007 2008 2009 2010

No. of PE & VC Deals in India Money Raised via PE & VC deals in India (USD Billion)

15.61

11.98

4.4

8.62

2007 2008 2009 2010

PE Deals Back with Bang… Followed the Sensex Path

(Note: Analysis here in this document includes only announced deal values. If the deal value is not known, that will not reflect.




Strategies for your SuccessARCTop Five Most Active Private Equity Firms In 2010

Year 2010 saw revival in private equity investments in India after two years of slowdown as thestory of growth in the country was a rare combination of believable and sustainable at the sametime.

It also witnessed top bracket global PE firms take the front bench as the biggest dealmakers byvalue even pushing down the most prolific investors such as International FinanceCorporation, the private lending arm of the World Bank, and Sequoia down the ranks.

So much so that none of the top five PE investors of 2009 managed to maintain their position this year

VC Firm No. of Deals Announced DealValue (USD Million)

Macquarie-SBI Infrastructure Fund 3 531

Temasek Holdings Advisors 5 462

Blackstone Advisors 4 431

Olympus Capital Holdings Asia 2 308

Kohlberg Kravis Roberts & Co (KKR) 3 289


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Strategies for your SuccessARCVenture Capital Deals Too See Pickup

While the private equity deal volumes certainly increased this year, there was also a pick up inventure capital deals.

Out of the total USD 8.62 billion invested in 2010, USD 7.55 billion was accounted for by deals byPE firms and around USD 481 million by venture capital investments. The rest constitutes angelinvestments and other PE type deals.

The VC funding shows an increase of 55% over 2009. VC investments in India halved in 2009when value fell from USD 660 million in 2008 to USD 310 million in 2009. The year also severalfirms doing their growth capital rounds as valuations stabilised.

7550

481

589

PE Deals VC Funding Angel Investments

Break up Money Rasied 2010 (USD Million) Money Raised via VC deals in India (USD Million)

660

310

481

2008 2009 2010



Strategies for your SuccessARCTop Five Most Active Venture Capital Firms In 2010

Venture capital transactions (early stage transactions as opposed to late stage or growth privateequity) revived in line with the improved investment climate in the country.

Although VC firms continued to be risk averse with not a single venture capitalist matching USD50million investment that the top two VC firms brought in the previous year, they struck moredeals and a number of firms invested USD 20-25 million each.

Helion Advisors managed to be the only VC firm to retain a place in the top VC firms for thesecond successive year.

VC Firm No. of Deals Announced DealValue (USD Million)

Sequoia Capital India 7 41

Tata Capital Private Equity 3 29.5

Helion Advisors Pvt. Ltd. 8 26.4

Canaan Advisors Pvt. Ltd. 4 25

International Finance Corp 5 24.4



Strategies for your SuccessARCComeback of Blockbusters

2010 also saw mega-deals coming back ascapital-intensive infrastructure plays continued

to be favourite among PE firms.

There were 20 deals over USD 100 million in2010 as compared to 9 deals in the similarrange in 2009.

But these still have to match the highs of2008 when there were 25 deals overUSD 100 million.

25

9

20

2008 2009 2010

No. of Deals Above USD 100 million in Size

There were a total 41 deals over a sizeUSD 50 million in 2010, aggregating to asignificant majority of deal making interms of value at USD 4.9 billion.



Strategies for your SuccessARC2010 Hottest Sectors

2010 literally saw power-packed dealmaking in terms of deal values, with 20% or deals worth $1.72

billion in the power utility sector.

The segment also saw the largest PE deal of year when a consortium led by Morgan StanleyInfrastructure Partners invested $425 million in Asian Genco

As PE firms continued to chase the domestic consumption theme, consumer discretionary sectornaturally saw frenetic activity with 73 deals worth USD 1.21 billion.

These included investments speciality retail outfits in areas like kidsweear (Lilliput), coffeechains (Coffe Day Holdings), salons (Enrich), among others.

Real estate sector saw a revival in dealmaking as compared to 2009 but PE firms remained cautiousabout investing as the sector still has to show returns.

It saw 42 deals worth USD 1.31 billion dominated by investments in residential realty.

Financial services sector also saw deals 54 deals worth USD 972 million in areas like

microfinance, credit rating, commodity and energy exchanges, insurance firms and housing financecompanies.



Strategies for your SuccessARCSector Wise Breakup of Deals

73

54

42

34

342319

127

Consumer Discretionary Financial Real Estate

Energy Healthcare Education

Consumer Staples Others

1210

972

1310

1720481190

328

2409

Consumer Discretionary Financial Real Estate

Energy Healthcare Education

Consumer Staples Others

Number of Deals Value Raised (USD Million)

Sectors that kept dealmakers busy were consumer discretionary, financial services, real estate and healthcare.


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For More Information Contact:

CA. Tapan Jindal

[email protected]

+91 11 4562 2128

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