tiw private equity - wcms

TIW PRIVATE EQUITY

Investor Presentation

Fund I 1998 Fund II 2005 Fund III 2008

1Strictly Private & Confidential

900

Alp

ha 1

7%

p.a

.B

SE

500 R

etu

rn

9%

p.a

.

7

Strictly Private & Confidential2

KEY PEOPLE

Punyashlok is a seasoned Private Equity investmentprofessional, with c. 18 years of experience across investing,building and scaling consumption-based businesses acrossindustries. . He has served blue chip companies such as Asianpaints and L’Oreal in leadership roles. Punyashlok serves onthe Board of several companies in the consumer goods, valuechain and digital sectors, and has mentored them tosignificant growth. He holds a Master’s degree inManagement Studies, and is a graduate in Statistics andOperations Research

Punyashlok Bhakta, Investment & Operating Partner

Mr. Kamlesh Gandhi has extensive experience spanning over35 years in the field of Capital and Financial markets in India.He has been a member of BSE for over 14 years. He has beenon the Board of Directors of Kirloskar Electric Company Ltd.,Sundaram-Clayton Ltd. and NCL Industries Ltd. During hiscareer so far he was involved in raising funds in over 320capital issues and involved in placement of equities of severalcompanies with retail, high networth and InstitutionalInvestors, both domestic and overseas

Kamlesh Gandhi, Investment Committee Member

Anurag is an Investment & operating Professional with thefund and has previously worked in the Investment Bankingdivision of HSBC in London, U.K. As an investmentprofessional, he helps source and evaluate opportunities andhelps execute transactions. He is also actively involved insome of the existing investments and serves on boards ofcompanies to drive operational excellence

Anurag Joshi, Investment & Operating Professional

Ranjith has c.15 years of experience in distribution & scalingof companies. He is actively involved in margin expansion forour portfolio companies

Ranjith Kumar, Operating Professional

Uday has the experience of heading strategy and technologyin real estate solutions industry. He holds an MBA degreefrom FMS, Delhi

Uday Uddanti, Operating Professional


Mr. S. Sathyamoorthy is Former Deputy CAG and alsothe first CEO of the Anti-Corruption Academy. He hasworked across public administration, Audit andCompliances across various ministries with theGovernment of India. Post Retirement he has workedin consulting assignments for USAID, World Bank,European Union for various projects.

S. Sathyamoorthy, AdvisorChandan Kumar, Principal

Chandan is an Investment & Operating professionalwith the fund and has previously worked with BaringPrivate Equity Partners (India) Private Ltd. He hassignificant experience of evaluating investmentopportunities across sectors including informationtechnology (IT), specialty chemicals, infrastructure,logistics and auto. He also plays a major role in theoperating management of portfolio companies postinvestments. He has 10+ years of industry experience.He has done his MBA from IIM Calcutta andmechanical engineering from IIT Kharagpur

TIW PRIVATE EQUITY: 4 PILLARS OF TIW FUND STRATEGY

Milestone Based Investment

Milestone financing essentially reduces operating risk premium, fundhas rights and not obligation to put money across quarter essentiallyleading to low beta

Consumption Driven (RoE positive) Sectors

Focuses on consumption driven sectors and domestic demographicdividend to drive superior alpha returns (FMCG, ManufacturingConsumption, Digital Consumption, Financial Services, SpecialtyChemicals, Pharma, Food & Agri and Real Estate Ancillary Services likeHousing Finance)

Buyouts Across time frames and geographies, buyouts have delivered better

return across asset classes with less volatility

Margin Expansion Looks at margin expansion/improving RoE of companies through

operating interventions along with growth as superior driver of return


TIW FUND STRATEGY: EXIT – FOCUS ON MARGIN EXPANSION COUPLED WITH GROWTH

Multiple liquidity aspects of TIW strategy

SHORT-TERM LIQUIDITY :

DIVIDENDS/INTEREST1 The Fund tends to

invest in cashpositive sectors withdefined paths toprofitability

High RoE businessesupon scaling up, areable to grow atsustainable rateswith plough back,leaving room fordividends

Coupled with highcash generationresults in growingliquidity viadividends

INTERMEDIATE -TERM LIQUIDITY :

BUYBACKS2 Surplus cash on

balance sheet can bedeployed to provideliquidity viabuybacks.

Allows for targetedliquidity for certainshareholders and ona larger scale thandividends

As promoterownership increases,so does potential forlong term valuecreation, increasespromoter alignment

LONG-TERM LIQUIDITY : SALE

AND IPOS3 Traditional approach

but suitable for larger exits via IPO, selling to strategic Investor or to sponsors


RETURNS OF VARIOUS ASSET CLASSES OVER TIME

Note: India specific data for Bank FD, Gold, Property, Equities

As we can see above, irrespective of the investment horizon (ranging from 1 year to 20 years), buyout funds

have given significantly higher returns as compared to the public market equivalents of each of the three

major continents of the world

If we look more specifically at the Asia-Pacific region, which includes India, the returns have been three to four

times as high as the returns of the public markets

This region essentially consists of emerging markets like China and India where funds use the

operational, active investor approach as against the financial leverage in order to drive returns

Source: Bain Capital – Global Private Equity Report 2017; Cambridge Associates

US, Europe and Asia Pacific – Buyout funds vs. Public Market Returns


Buyouts have demonstrated superior returns Across asset classes;

Across geographies (essentially across developing and developed economies);

ANDAcross time frames (essentially bull and bear runs in economies)


Traditional criteria

High Growth

Strong Management Team

Strong Product and Processes

Profitability / Healthy Revenues

Investment Style

Driving margin enhancements

BOT (Build-Operate-Transfer)

Sustainable growth to drive cash yield

Value addition

Improve Capital Efficiency

Improve Labor Productivity

Strong Governance and Processes

Valuation drivers

High Cash Yield

Increased Return on Equity (RoE)

Reduced Operating Risk Premium

TIW FUND STRATEGY: CREATING MARGIN EXPANSION

Margin enhancement is driven through improvement in ICOR / cost leadership, enhancement inlabor productivity and capital efficiency

Pre Acquisition Post Acquisition

Very few assets meet all criteria, quality has dropped with growing no’s

Good assets are chased by all, auctioned & expensive

Traditional PE model is broken

Focusing on driving margins alongside growth helps creating better and sustainable businesses

“Growth Capital” alone doesn’t work

Significant value can be unlocked through operational involvement and introduction of better management practices

Passive Style offers low returns

Market may not pay premium for growth potential alone

Needs cash yield / RoE edge to assign value

No Premium for growth dreams


TIW FUND STRATEGY : RETURN DRIVERS

DRIVING PRODUCTIVITY ENHANCEMENT

• Identifying & removing non-productive operations

• Developing organization structures that promote effective communication

• Incentive plans to reduce attrition

DRIVING CAPITAL EFFICIENCY

• Through effective working capital management

• Improving Reaction time to start/shut Initiatives

PROCESS IMPROVEMENT

• Streamlining operating processes and outsourcing non core activities

Margin Enhancement

+Growth

Milestone based financing

Results in superior riskadjusted returns

High RoI

Deep domain understanding and operational efficiency has delivered superior RoI


TIW FUND VALUE ADDITION – OPERATING INTERVENTIONS

BGYR based performancemanagement system

Improved Financial Controland overall governancestructure

Creating robust processes

Assistance in Product Strategy / Revenue enhancement

mechanisms

Faster access to clients through own network. Helps in building

scale faster


% Allocation

IRR Expected 256% 30% 30% 35% 30%

16%Realised annualized return on debentures

16%Realised annualized return on debentures

Ensuring Short to Medium Term Liquidity – Prior to Exit

TIW PE: PORTFOLIO RETURN

Quarterly Yield to

investors2% 2% 2% 3% 4% 4%

13%

Q1 Q2 Q3 Q4 Q5 Q6 Q7

23%

Unrealised IRR basis recent investment in Company

16%Expected annualized return on debentures FY19

16%Expected annualized return on debentures FY19

Medium Term Liquidity to be also created via partial stake sales intermittently, prior to final exit


TIW PE: INVESTMENT PROCESS

Initial Deal Sourcing

Initial dialogue with bankers

and other intermediaries. Seek

information teasers on assets.

All team members and

Sourcing team to manage

Sourcing information

Obtain teaser, sign NDA if

needed and obtain IM. Deal

Sourcer conveys deal to

Managing Partner (on shared

drive).

All team members and

Sourcing team to manage

Deal Allocation

Managing Partner allocates

deal to Deal Owner

Managing Partner to allocate

Call with intermediary

Understand Business in greater

details. Seek financial model

and share call note with

Managing Partner with Go / No

Go Recommendation (within 7

days)

Deal owner to manage

Discussion with Promoter

Deal owner should hold

discussion(s) with Promoter

Group through a call. Follow

up meeting if needed.

Detailed business discussion

on competition, rivalry and

financial review

Reject Note

Send polite reject note to

banker, send call note to

Managing Partner, save it on

the drive, and update deal log

Preparation of Greenlight note

Prepare financial model and

Greenlight note and share it

with the Managing Partner

Criticism Meeting

Managing Partner invites

team for Criticism Meeting.

Deal is examined critically

covering all possible risks

and fail points. Queries are

resolved

Reject Note

Send polite reject note to banker, send call note

to Managing Partner, save it on the drive and

update deal log

Reject Note

Send polite reject note to banker, send call note to

Managing Partner, save it on the drive, and update deal logMove to deal execution phase

NO GO

GO

GO

NO GO

GO


TIW NEW SERIES: FUND STRUCTURE

TIW Fund Advisors LLP

Domestic Investors(HNIs, Corporate, Banks, others),

Foreign Investors

Investments

Distributions

Realizations

InvestmentManager’s service

Contributions(Class A Units)

Vistra ITCL (India) Limited

Portfolio Companies

Trustee

Indus Way Emerging Market Fund Series Alpha


ENSURING STRONG GOVERNANCE

Fund Audited by KPMG One of the Big 4 auditors; KPMG has been appointed as the Auditor for the Fund

SEBI as the Regulatory Body

The Fund is governed by the Securities and Exchange Board of India (SEBI)through AIF Regulations requiring quarterly reporting

Tax Consultancy by BIG 4 Ernst & Young is the official Tax Consultant for the Fund and advised the Fund onall taxation matters pertaining to India and overseas transactions

Follows EVCA Guidelines One of the few Funds in India to follow EVCA guidelines of reporting along witha platform to share investee companies reports


PROPOSED FUND : FUND TERMS

• “Indus Way EmergingMarket Fund SeriesAlpha” Scheme of“Indus Way EmergingMarket Fund Series IIA”

Fund Name

• SEBI Registered Category II Alternative Investment Fund

Fund Structure

• INR 250 Crores + Greenshoe of INR 250 Crores

Target Corpus

• INR 1 Crore

Minimum Commitment

• 6 Years from final close, weighted average holding period is 4 years

Term

• 12% p.a.(Pre-tax Compounded Annually)

Hurdle Rate


TECH PLATFORM FOR DISTRIBUTORS & INVESTORS

Tech Platform

Secure platform, having unique user-id for each investor & Distributor

Information uploaded on monthly basis

Fund Document Portfolio

Company Details

Compliances

Investment Details

Commitment amount

Contribution Amount

Drawdown Capital

Returned

Portfolio Co. Information

Quarterly Update Annual Update Management

Declaration Co.'s Financials in

Schedule VI Format

Compliances

Form 64C Form 16A Statement of

Accounts

The fund has vast network of distribution partners spread across multiple geographies. Logindetails are provided to all Investors/Distributors which help them to see the fund performance ona regular basis. Also, if any secondary transfer is required, a notification is displayed on theplatform to help reach vast network partners and help facilitate hassle free secondary transfer ofinvestor’s unit

One of the India’s few Fund to make disclosures ofall information about the fund & its portfoliocompany’s equivalent to Listed companies


17

TAX TREATMENT FROM VARIOUS SOURCES OF INCOME

Surcharge on Taxes

Individual, Trust, Association of persons (residents & non-residents) Surcharge

Income between INR 50 Lakhs and INR 1 Crore

Income below INR 50 Lakhs 0%

Income exceeds INR 1 Crore 15%

10%

Companies Resident Non-Resident

Income exceeds INR 1 Crore but doesNot exceed INR 10 Crores 7% 2%

Income exceeds INR 10 Crores 12% 5%

Resident Firms Surcharge

Income exceeds INR 1 Crore 12%

+INR 100

Profit from sale of shares in Company

-INR 0

No withholding tax at Company’s level

+INR 100

Amount Received by AIF Trust

-INR 10

10% Withholding tax for resident investors

+INR 90

Amount received as Income by Domestic Investors

LTCG Tax in case of gain on sale of Unlisted Shares

LTCG Tax in case of gain on sale of Unlisted Bonds & Debentures

17

-INR 10

Additional tax @10% after credit of tax held by AIF

+INR 80

Net Income

+INR 100

Interest paid by Company

-INR 0


+INR 100


-INR 10


+INR90

Amount received as Income by Domestic Investor

Taxation onInterest Income

-INR 20


+INR70

Net Income

+INR 100

Profit from sale of bonds & debentures in Company

-INR 0


+INR 100


-INR 10


+INR 90

Amount received as Income by Domestic Investors

-INR 10


+INR 80

Net Income Strictly Private & Confidential


TIW PARTICIPATION IN VARIOUS INDUSTRY EVENTS: Mr. Mohit Ralhan (Managing Partner & CIO) has been invited by numerous institutions to speak on topics of interest to entrepreneurs & PE Industry

DISCLAIMER

This presentation was prepared for information purposes only and does not constitute an offer. Themarket data in the presentation has been taken from sources we believe to be reliable, we do notguarantee its accuracy or completeness. Unless otherwise stated, all statements, figures, graphs andother information included in this presentation are as of the date and are subject to change withoutnotice. The information contained herein shall not form the basis of any contract or invitation.

The presentation does not purport to contain all the information that the recipient may require. Inmaking any decision, the recipient should conduct its own investigation and analyses of informationcontained in this presentation and the recipient must rely on its own examination. Recipients should notconstrue any of the contents herein as advice relating to business, financial, legal, taxation or investmentmatters and are advised to consult their own business, financial, legal, taxation and other advisors. Thispresentation may not be copied, re-distributed or reproduced in whole or in part without the priorwritten approval of the undersigned.

Contact: [email protected]


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