the brazilian case - iegc.ec of the report with the main findings: november 5th creation of a...

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Small and medium-sized

enterprises and their access to

Latin American equity markets

The Brazilian Case

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Agenda

Brazilian Context

International Assessment

Working Group Developments

New Market Developments

Next steps

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Agenda

Brazilian Context




Next steps

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4,3 8,5 15,1 14,5 26,8

22,2

63,2

10,8 9,2 2,3 4,5 5,4

15,4

55,6

7,5 23,7

11,2

7,2 3,9 14,7

2004 2005 2006 2007 2008 2009 2010 2011 2012 may-13

Follow-On IPO Parcel related to the onerous cession of Petrobras offering

30,4

70,1

8,813,9

34,3

45,9

149,2

74,81

18,0 13,117,0

18,0 13,117,0

6%

42%

29%

23%

Less than U$ 100 MM Between U$ 100 - 300 MM

Between U$ 300 - 500 MM More than U$ 500 MM

Recent IPOs were concentrated on Novo Mercado, with relevant foreign participation…

IPOs by segment - 2004 until May/13

IPO: 7

F-on: 8

IPO: 9

F-on: 10

IPO: 26

F-on: 16

IPO: 64

F-on: 12

IPO: 4

F-on: 8

IPO: 6

F-on: 18

IPO: 11

F-on: 11

IPO: 11

F-on: 11 IPO: 3

F-on: 5

Capital raising and number of IPOs /follow-ons – USD billion

Access to local and foreign investors Size of capital raised – Jan/10 until May/13

Novo Mercado

73%

Nível 214%

Nível 15%

BDR5%

BOVESPA MAIS

3%

70%62%

73% 72%66%

72% 70% 69%64%

58%

18%

18%

17% 16%

8%

12% 14% 20,11%20%

23%

11%

7%

7% 8%

8%

8% 3%

9,3%9%

15%

2%

13%

3% 3%

18%8% 12%

2%

7%20%

0%

20%

40%

60%

80%

100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 may/13

IPO: 6

F-on: 4

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IPO of Companies Invested by Private Equity (BRL million)

….with an important impact in the PE&VC industry

892 8421.903

7.842 6.861

4.624

2.607

1641.904

1.012 1.069

3.006

1.855

6.861

1.348

775

2.133

109

207

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Secondary issue

Primary issue9.697

1.904 1.911

4.909

1.622

5.3994.741

273

2.111

2004 2005 2006 2007 2008 2009 2010 2011 2012 May-2013 TOTAL

Total IPO 7 9 26 64 4 6 11 11 3 6 147

Invested companies 3 4 9 16 2 3 5 8 1 4 55

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Average size of IPOs in Brazil is one of the largest in the world...

Source: WFE (2011; 2012; may/2013)

2012 US$ MM

1º BM&FBOVESPA 691,4

2º Deutsche Börse 501,3

3º Tokyo SE Group 490,3

4º Bursa Malaysia 431,3

5º NASDAQ OMX 318,0

6º NYSE Euronext (US) 287,5

7º Singapore Exchange 278,1

8º Shanghai SE 210,8

9º Hong Kong Exchanges 199,7

10º Australian SE 153,9

11º National Stock Exch. India 99,3

12º Shenzhen SE 85,9

13º Indonesia SE 46,5

14º Korea Exchange 37,4

15º TMX Group 26,1

2011 US$ MM

1º BM&FBOVESPA 414,4







2º Shanghai SE 413,7




9º Shenzhen SE 115,0



15º TMX Group n/a

May-2013 US$ MM

1º BM&FBOVESPA 1.380,5







14º Shanghai SE n/a




15º Shenzhen SE n/a



9º TMX Group 48,6

7

456

954

1.061

1.164

1.537

1.563

1.673

1.763

2.050

2.321

2.330

2.579

2.736

3.207

3.971

5.230

0 1000 2000 3000 4000 5000 6000

BM&FBOVESPA

Shanghai SE

NYSE Euronext (Europe)

Japan Exchange Group - Osaka

Shenzhen SE

Hong Kong Exchanges

National Stock Exchange India

Korea Exchange

Australian SE

Japan Exchange Group - Tokyo

NYSE Euronext (US)

NASDAQ OMX

London SE Group

BME Spanish Exchanges

TMX Group

BSE India

…resulting in a very restricted number of listed companies

Source: World Federation of Exchange (WFE). ¹ Membros do Comitê de Mercados Emergentes da IOSCO.

Ranking WFE

25º position

Number of listed companies – May 2013

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BNDES forecast for the level of investments (R$ Billion)

2006-2009 648

Forecast 2012-2015 1.005

Source : BNDES nov/11

Source of funding for investments

Capital raised in the stock market (R$ Billion)

2004-2012 384

Source: BM&FBOVESPA

46,7% 58,5%

41,8% 49,2% 44,7%

30,7% 37,6%

25,2%

19,5%

21,2%

27,8% 30,6%

52,5% 27,6%

14,5% 10%

17%

9% 6,1%

8,9%

15,1%

4,8% 2%

5%

7% 15,6% 3,7%

10%

8,7% 10% 15% 7% 3,1% 4,2%

9,6%

Média 2001/10

2005 2006 2007 2008 2009 2010p

Lucros Retidos BNDES Captações Externas Ações Debêntures

Source: BNDES.

Traditional funding for investments will not meet the economy needs for next years...

Own Profits External Sources Equity Debt

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...while SME access to capital market is limited

IPOs from 2004 to May - 2013...

Market cap at IPO

Number of Companies

listed at Novo Mercado,

BOVESPA MAIS and

Level 2

Bellow R$ 700 MM 12

Between R$ 700 MM and R$ 1 BI 20

Between R$ 1 BI and R$ 5 BI 84

Over R$ 5 Bi 15

Total 131

Source: BM&FBOVESPA / Prospectuses

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New opportunities going ahead

Growth Opportunities

Sustainable growth ahead

Companies looking for funding to invest in new opportunities

Traditional funding sources are not sufficient

Investors’ portfolio allocation

Low interest rates are driving investors to riskier asset classes

Public and Private Sector joint

initiative

Fostering the development of SMEs access to the capital markets

Creation of a Techinical Committee to elaborate proposals by first half of 2013.

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Agenda

Brazilian Context




Next steps

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Working Group Details

Objective: Propose Action Plan to develop a market environment favorable for IPOs below USD 300 MM, in particular, in the range of USD 20 MM and 100 MM

Participants: ABDI (Industrial Development Agency), BNDES (Brazilian Development Bank), BM&FBOVESPA, CVM (Securities and Exchange Commission), FINEP (Innovation Agency)

International Assessment: from May 26th to June 7th, visiting UK, Poland, Spain, Australia, Canada, China and South Korea. Total of 65 meetings with exchanges, regulators, brokers, investment banks, investors, issuers, lawyers, auditors and advisors

Presentation of the Report with the Main Findings: November 5th

Creation of a Technical Committee and definition of an Action Plan by early 2013

Working Group to develop Access Market

ENGLISH: http://www.bmfbovespa.com.br/empresas/download/Diagnostico-ingles.pdf

SPANISH: http://www.bmfbovespa.com.br/empresas/download/Diagnostico-espanhol.pdf

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Demand from local investors – Institutional and Retail

Market “niche” for specialized brokers and investment banks

Different types of tax incentives for investors had an importance

Regulatory discounts are more important for very small companies (USD 2

MM capital raising in average)

Fixed costs involved in the IPO were not identified as a barrier, and in fact,

those costs are lower in Brazil

International Assessment - Report’s Main Conclusions

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Agenda

Brazilian Context




Next steps

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Discussions groups

Working Group

Technical Committee

Tax Incentives Vehicle Listing and Offer

Costs Offer Process Education

Alternative Market Entrepreneur Education

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Agenda

Brazilian Context




Next steps

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New listings since beginning of activities of the Working Group

Desenvix

Senior Solution

may/10/12

oct/03/11

Next listings: BIOMM and CAB AMBIENTAL

Nutriplant

feb/13/08

Nortec

may/28/13

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Capital raising by a SME in 2013 – Senior Solution Case

Listing: 10/may/12

Offering size: listing without an offering

Free float: 0%

IPO: 03/mar/13

Stock Pricing: R$ 11,50

Offering size: R$ 62,2 MM

Cost: R$ 2,8 MM (4,5%)

Market Value at IPO: R$ 134 MM

Source: Financial Statements of Senior Solution

Senior Solution is an IT company that

provides products and services to financial

institutions.

R$ Million 2011 2012

Net Income 38.748 46.250

EBITDA 5.870 9.089

EBITDA Margin 15% 20%

Net Profit 2.345 6.021

Main innovative features of the offering

₋ Distribution exclusively in Brazil, with

institutional and retail investors

₋ No prospectus printing

₋ A single deal counsel

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Agenda

Brazilian Context




Next steps

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Market announcement of the proposals

Implementation of main proposals

BM&FBOVESPA to implement some changes in its Access

Market

Supporting other market initiatives and listing new companies

Next Steps

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www.bmfbovespa.com.br

United States 61 Broadway, 26th Floor, Suite 2605 New York, NY 10006-2828 USA Phone: 1-212-750-4197 Fax: 1-212-750-4198

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São Paulo Praça Antonio Prado, 48 Rua XV de Novembro, 275 Centro - São Paulo (SP) Fone: 55 11 2565-4000

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