Your Eye to Indian Private Equity

Transcription

1 Four-S Private Equity Track Issue: 31 st October 6th November, 2011 Your Eye to Indian Private Equity PE activity for the week During the week ended 6 th November, 2011 there were 8 PE/VC deals worth $111.9mn compared to 2 deals worth $32.2mn in the previous week. Out of the total, 3 deals each were stuck each at PIPE and growth stage, and rest 2 were early stage deals The largest transaction during the week was by US based investment firm Equity International Ltd. which invested $75mn 30th October 6th Novermber in hospitality company, SAMHI Hotels. PE Investments No. of Deals Private Equity: Investment Summary during the week Investor (s) Equity International Target Stake (%) SAMHI Hotels NA 75.0 Services Carlye Group Edelweiss Capital Services BFSI Fortisure Ventures, Opus Capital Hellion Ventures Jivox NA 8.2 Services Value ($mn) Sector Industry Segment Stage Travel & Tourism Media & Entertainment Nalanda Capital AIA Engineering Ltd Manufacturing Capital Goods Hotel & Tourism Securities & Stock Traders Video Advertising Non Electrical Machinery IDG Ventures Valyoo Technologies NA 4.0 Services Retail Internet Retail Early Growth PIPE Growth PIPE Xplorer Capital Tyroo Media 35.0 NA Services Media & Entertainment Digital Media Growth Helion Venture Hoopos.com NA NA Services Retail Internet Retail Early Baring PE Manappuram Finance 1.4 NA Services BFSI NBFC PIPE Source: Four-S PE Database SAMHI Hotels raises $75mn from Equity International Gurgaon based newly formed hospitality property company SAMHI Hotels Ltd has raised about $75mn (~Rs.3.7bn) from US based Equity International Ltd. to build or acquire economy and mid-market hotels in India. The company also has commitments worth $30mn from Marriott International Inc., with which it has a JV for developing the US hotel operator s Fairfield network in India, and another $25mn from the US based PE firm GTI Capital Group. Already, it has started hotel property development in Bangalore, Chennai and Gurgaon, which will include 4 hotels and 630 keys with brands such as Courtyard, Fairfield by Marriott and Hyatt Place. SAMHI is also looking at

2 opportunities in Delhi, Mumbai, Hyderabad, Pune and Kolkata. of its interactive video advertising technology platform across Asian countries. Four-S Comment: This is a significant investment in domestic hospitality industry, indicating that the market might be opening for investors yet again. The hotspot seems to be the mid-market hotels due to sheer supply coming our way. Of the 102,000 hotel rooms to come up in India in five years, 52-53% will be in the mid-market and budget categories. Also, investors are drawn to budget and mid-market hotels because of quicker returns because they have smaller gestation period and by the time PE plans to exits, they are operational and cash-rich. Carlyle Group buys 3.85% in Edelweiss Capital Buyout fund Carlyle Group has bought 3.85% stake in renowned brokerage firm Edelweiss Capital Ltd. through secondary market transaction, for Rs 859mn. Carlyle acquired the shares held by Reliance Growth Fund for Rs per unit, a 7-8% premium to Edelweiss s current closing price of Rs With this, now Carlyle joins the elite list of PE investors in Edelweiss which includes Singapore s GIC (8.23%), Greater Pacific Capital (5.15%), Argonaut Ventures (1.54%) and Sequoia Capital India (1.03%) Four-S Comment: Carlye Group, off late, has been favoring Indian brokerage space as recently in early October this year, it raised its exposure in another brokerage and financial services major firm India Infoline Ltd. to 9% through secondary market purchase. This is interesting strategy, given that the stock markets sentiments are poor at present due to weak global fundamentals resulting in low volumes for brokerage firms. However, there is nothing wrong in companies fundamentals and seems to be a good bet for long term. Video Ad tech firm Jivox raises $8.2mn Jivox, an interactive video advertising technology company, has raised $8.2mn (Rs 406mn) growth capital from Fortisure Ventures, Opus Capital and Hellion Ventures. The funds would be used in strengthening company s rapid adoption Four-S Comment: Jivox is yet another online services provider, doing well in India. Advertisers and agencies run video ads on the premium Jivox Online Video Ad Network, which reaches to around 160mn unique visitors monthly. Jivox currently delivers more than 1,000 interactive video ad campaigns a month and enables interactive video ads to run on multiple screens with an ad serving infrastructure. The company has an exclusive partnership with Komli Media for video advertising in the Asia-Pacific region. Nalanda Capital acquires stake in AIA Engineering Nalanda Capital Ltd, a Singapore-based PE fund focused on secondary markets, has upped its stake to 6.3% in AIA Engineering Ltd, an engineering components manufacturer. The PE fund has acquired the additional 1.2mn shares or 1.27% stake for a total consideration of Rs 372mn. Four-S Comment: With this, the total commitment by Nalanda Capital into AIA Engineering stands at around Rs 2bn or $40mn, making it one of its largest investments. AIA Engineering is setting up additional 1 lakh metric tone capacity to produce high crome mill internals, to be used in mining industry, at capex of Rs 2.5bn. Besides mining, the company manufactures and designs engineering components for cement, thermal power generation and steel industries. According to its website, AIA is the second largest hi-chrome casting producer in the world. Baring PE picks up stake in Manappuram Finance Baring PE Partners India has picked up 14% stake in publicly listed gold finance company, Manappuram Finance Ltd., through secondary market transactions. The stake has been acquired in several small transactions over the past 3-4 months for around Rs mn. Besides Baring India, India Equity Partners and Sequoia Capital India hold a minority stake in the company. Four-S Comment: Interestingly, Baring PE also happens to be the largest institutional shareholder in Muthoot Finance,

3 the biggest competitor of Manappuram Group with a 3.04% stake. In July 2010, Baring PE had invested Rs 780mn in Muthoot Finance and has also invested as anchor investor earlier in May 2011 when the company floated its IPO. Baring seems to be betting big on gold financing market in India as it is growing fairly. The factors like large stock of gold stored with consumers due to cultural factors and lower risks of consumers defaulting on loans. Besides, the rising gold prices on the backdrop of global uncertainty are also helping the industry s growth course. At present, India has an estimated 18,000 tons of gold, amounting to about 10% of the world stock worth over $800bn. Sequoia which invested $14mn in Manappuram in 2007 exited in April 2010, making 5x in the process. Xplorer Capital buys out Yahoo s stake in Tyroo US Based growth stage VC firm Xplorer Capital has bought out Yahoo s 35% stake in India focused digital media advertising platform, Tyroo Media Ltd. The company operates 2 types of business including Tyroo Direct which is a largest advertising network and Tyroo Audience which is a rich media advertising network that creates unique online advertising solutions for its clients. It reaches over 20mn visitors in India every month. Tyroo s major client base includes prominent names such as Airtel, General Motors and Aircel. The company in the near future plans to strengthen its India presence besides foraying into other Asian markets. Valyoo Technologies raises $4mn from IDG Ventures India Delhi based Valyoo Technologies Ltd which owns e- commerce sites like Lenskart.com, Watchkart.com and Bagskart.com has raised $4mn from VC firm IDG Ventures India. Valyoo will use the funds for adding more brands, marketing and training its customer service representatives to make online shopping easy and attractive. About the e-commerce portals, Lenskart.com showcases over 30 brands and sells prescription eyewear, branded contact lenses and sunglasses, while Watchkart.com is a vertical site selling designer and exclusive watches by major brands such as Timex, Fossil, Fastrack, Esprit and Citizen. Bagkart.com retails handbags, belts, laptop bags and backpacks from 4-5 global brands like Hi Design and Wrangler. Helion Venture invests in baby products site Hoopos.Com Mother care, baby care and kids products e-commerce site hoopos.com has raised an undisclosed sum from early-stage venture capital firm Helion Ventures Partners. The proceeds will be used for ramping up the team, upgrading technology, developing fulfillment infrastructure including warehouse and logistics, marketing and building customer support infrastructure.bangalore-based hoopos.com offers products across 12 categories such as baby essentials, clothes, toys, travel, books and nursery furniture, among others. Four-S Comment: E-commerce firms offering consumer products is the order of the day. The latest deal marks the third such funding deal in the specialized online retail domain this year including Pune-based BrainBees Solutions Ltd, owner of the online baby products shop Firstcry.com, which raised $4mn from SAIF Partners. The deal was followed by babyoye.com, another online retailer of baby products, which raised $2.5mn from Accel Partners and Tiger Global. Fund Raising & Liquidity Events Renuka Ramnath s Multiple Assets raises Rs 20bn Former ICICI Venture chief Renuka Ramnath has raised $405mn (about Rs 20bn) for its own PE firm Multiples Alternate Asset Management. The firm would primarily look for mid-sized firms across sectors looking for growth capital

4 ranging Rs 2-2.5bn. As part of the investment strategy, Multiples plans to look at innovative deal structures, those involving generational transformations and buyout of promoter stakes.the firm is looking to build a portfolio of companies over the next 3 years. The fund raised assume significant value for the proven track record for Renuka as fresh fund raising still continues to be tough, given tight global liquidity at present. GE Capital partially exits R Systems GE Capital's PE arm has partially exited it s decade old investment in R Systems International Ltd., a Noida-based IT firm, selling 1.7% stake in the company for Rs 25.3mn through open market transactions. Another arm of GE, GE Strategic Investment India, also sold its 1.32% stake during the last quarter. The PE firm was allotted 2.98mn share of Rs 2 each at Rs , when R Systems merged with Indus Software Ltd. in Afterwards, GE Strategic Investment India, also picked up 445,000 warrants in the company convertible into one equity share of Rs 2 each Trinity Capital exits township project in Mumbai London based listed PE firm Trinity Capital Plc. has sold its entire 23% stake in a residential township in Mumbai s Virar suburb for Rs 475mn (~$9.6mn). The PE firm had invested Rs 451mn ($9.1mn) in the project in October 2008, meaning a modest return in over 3 years time. The project, with a saleable area of 12.5mn sq. ft., is being developed and majority-owned by Keystone Realtors, also known as the Rustomjee Group. The transaction means that Trinity Capital has exited all 3 realty projects of the Rustomjee Group where it invested during The real estate investment firm had sold its stake in a 127 acre integrated township in Thane (Maharashtra) in July, followed by another exit from a Bandra residential project in August. Private Equity and M&A News Everstone Capital to invest Rs 1.5bn in Crystal Crop Protection Mid-market PE firm Everstone Capital is close to investing around Rs 1.5bn in Crystal Crop Protection Ltd., a Delhi based mid-sized manufacturer of crop protection chemicals. The company is expected to utilise the funding to further consolidate its position in the Indian market, and explore inorganic growth opportunities in the agri- space in India and abroad. At present, the company is engaged in the business of products like fungicides, insecticides, herbicides besides agri equipment such as spray pumps among other categories. Liberty Shoes to raise Rs 5bn over the next 3 years Prominent footwear company, Liberty Shoes Ltd. plans to raise Rs 5bn for expansion projects over the next 3 years for expansion purposes which includes large expansion of their retail stores and modernisingdistribution and warehousing infrastructure. Though, the company hasn t zeroed in any particular mode of funding, it is open to private equity to raise the capital in tranches. Ackruti City in talks to raise Rs 1.5bn Bangalore based Realty developer Ackruti City is in advanced talks with several PE players to raise around Rs 1.5bn by selling around 25% in its proposed redevelopment project in Chembur, north eastern suburb of Mumbai. Under the project, Ackruti is expected to redevelop the existing government housing colony and handover the same to the government authority in lieu of free sale component. In return, Ackruti is estimated get around 9 acres to develop over 1mn sq ft of free sale component. Once completed, the project is estmated to generate revenue worth Rs 20bn. At present, local PE firm, Red Fort Capital is believed to be the frontrunner for the structured deal that is expected to be signed soon

5 DIPP amends foreign investment policy to allow smooth PE exits Much to the delight to the PE investors the government has amended the FDI policy by removing a new clause that did not consider any investment with in-built options such as put options or call options as FDI transaction. Put and call options are the most common route for any PE investor to exit from his portfolio companies. Earlier in September, new FDI policy had classified only equity shares, fully, compulsorily and mandatorily convertible debentures, preference shares, with no in-built options of any type, as eligible instruments for FDI. Indian Angel Network changes funding strategy for start-ups Indian Angel Network (IAN), a community of early-stage seed investors, has recast its strategy for funding and mentoring early stage startups in mobile and Internet space by bringing down the minimum threshold of investment.the network that currently prefers investments of Rs 20-30mn in companies will now invest around Rs 75 lakh each in the early stage firms. IAN has taken the step considering the low requirement shown by start-up firms in mobile, Internet and e-commerce space. IPO, Other offerings SKS Microfinance to raise Rs 9bn through QIP The largest microfinance in India, SKS Microfinance Ltd, is planning to raise Rs 9bn through issuing equity shares to institutional investors. The board also approved raising the authorized capital of the company to Rs 1.35bn from Rs 950mn. The company would use the funding to offer loans in new areas in other states including Karnataka, Bihar, Orissa etc. Rajesh Exports raises $135mn through FCCB Bangalore-based renowned manufacturer of gold jewellery, Rajesh Exports Ltd., has raised $135mn through conversion of 1,349 Foreign Currency Convertible Bonds (FCCB), issued in 2007, into equity shares.there will be no further dilution of equity due to conversion of FCCB and trustees of the remaining 151 bonds have been notified for redemption. Rajesh Exports had, in 2007, issued $ 150 million worth 1,500 Foreign Currency Convertible Bonds (FCCB) of $1,00,000 each Executive Tracking Foundation Capital elevates Ashu Garg to General Partner US based, Foundation Capital has promoted Ashu Garg to the position of General Partner. He till date has looked after VC firm s investments in the education and consumer space, involving companies like Agni Property, Aspire Human Capital Management and TreeHouse. In addition, he deals with early-stage and growth-stage investments across various sectors in India, and also focuses on digital media and online advertising in the USA. Morgan Stanley India Property Fund manager puts in papers Naresh Naik, currently managing director and India Head of Morgan Stanley Real Estate Investing, is joining the league of many PE veterans and stepping down to explore setting up his own fund. Naik had joined Morgan Stanley in 2008 as executive director and head of real estate in India. The fund till date has invested $750mn in India and intends to invest further $250mn by the end of current fiscal year.

6 M&A Activities M&A Activity: Summary during the week Acquirer Target Target business Stake (%) Deal value ($ mn) Aventis Pharma Universal Medicare - branded Pharmaceutical NA 114 nutraceutical formulations business VF Corp VF Arvind Brands Ltd Manufacuring - Apparels Olam International Ltd. Vallabhdas Kanji Ltd. Food & Agri - Spices NA 18 Sesa Goa Ltd Goa Energy Pvt. Ltd. Pig Iron and Coal Manufacturing Briggs & Stratton Corporation During the week ended 6 th Premier Power Equipment Manufacturing - Capital Goods NA 3 WNS Philippines, Inc. - Paxys, Inc BPO Services 35 NA WNS Holdings stake in JV Infotech Enterprises Ltd. Infotech Geospatial (India) IT Services 26 NA Kavveri Telecom Rymsa Telecom Telecom Antenna Maker 100 NA IBS Software Ltd Moveo Systems IT Services NA NA Sinclairs Hotels Ltd Savannah Hotels Hotels NA NA Omnicorp Group Mudra Group M&E - Advertising NA NA SPi Global LaserwordsLtd. Publishing BPO 100 NA Source: Four-S Database, Acquisition price is in $mn November, 2011, there were 12M&A deals worth $198mn (Size of 7 deals were not known). In the largest transaction during the week, Aventis Pharma Ltd, a unit of the pharmaceutical giant Sanofi-Aventis, has completed the acquisition of Universal Medicare Ltd s marketing and distribution business of branded nutraceutical formulations in India for Rs 5.67bn (~ $114mn).

7 Stock Market Updates Key Domestic Indices Indian Market Movements 52 Week Index 28-Oct Nov-11 Change (%) High Low BSE Sensex 17, , % 21, , S&P CNX Nifty 5, , % 6, , CNX Nifty Junior 9, , % 13, , Nifty Mid Cap 50 2, , % 3, , CNX IT 6, , % 7, , Bank Nifty 9, , % 12, , CNX Infrastructure 2, , % 3, , CNX Realty % Source: BSE, NSE Key Global Indices Global Market Movements 52 Week Index 28-Oct Nov-11 Change (%) High Low NASDAQ 2, , % 2, , DJIA 12, , % 12, , S&P 500 1, , % 1, , NIKKEI 225 9, , % 10, , Hang Seng 20, , % 24, , Straits Times Index 2, , % 3, , FTSE 100 5, , % 6, , Source: Yahoo Finance

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