PE Deals remains hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013
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PE Deals remains hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013

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PE Deals remains Hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013

PE Deals remains Hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013

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PE Deals remains hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013 PE Deals remains hot in the Indian Kitchens with upsurge of 17.7% during June Quarter 2013 Document Transcript

  • 1 shagunmadan@ article -06/07/2013. Shagun Madan FCS & LLB. Partner- INDEL Advisors LLP New Delhi shagunmadan@gmail.com . With the global economic downturn, the Indian PE Industry continues to operate in a changing environment. PE Investments have been a part of India’s growth story. - a fact that has remained constant over the ups and downs in PE Investments in India over the last few years. After witnessing a tough 2012, the first quarter of 2013 also got off to a slow start with just 80 PE deals whereas the deal value dropping at its lowest level compared to the past recent quarters. Fortunately, the second quarter gush of PE Investments was almost 2.3 times higher than that invested during the immediate previous quarter. With 17.7% upswing in the PE transaction value during the second quarter of 2013 as compared to the PE transaction value in the same period last year, the PE transaction value in 2013 June Quarter clocking up to US$2.3bn. as against US$1.98bn. in June Quarter of 2012 And 2.3 times than that invested during the immediate previous March quarter of 2013, which was US$1.021bn. However the number of deals reduces marginally with just 82 deals during the quarter ended June 2013 as against 114 deals in the June quarter of 2012. The numbers remain almost the same with the previous march quarter of 2013 with just 80 deals in the first quarter of 2013. We can clearly make out that the size of PE transactions is on the rise, while the number of PE transactions is declining. Please Note that the above figures do not include PE investments in Real Estate. (There is special section below for data on PE-RE investments). Also the $1,260mn. investment by Qatar Foundation in publicly listed Bharti Airtel has been excluded for the purpose of this analysis. The latest numbers take PE investments in the first six months of 2013 to $3,351mn. across 163 transaction which is down by 19.1% compared to the corresponding period of 2012 which was $4,143mn. across 238 transaction. Private Equity Deals remains hot in the Indian Kitchens with upsurge of 17.7% during June quarter of 2013.
  • 2 shagunmadan@ article -06/07/2013. Top Three PE deals: Q2 2013 Top Three PE deals: Q1 2013 As shown in the table above, the top three PE transactions during the second quarter of 2013 are :- 1. The buyout of existing PE investors by new ones: American PE Fund Kohlberg Kravis Roberts - KKR’s $460 mn. acquisition of a controlling stake in specialized off- highway tires focused Alliance Tire Group(ATG) from fellow PE investor Warburg Pincus and the promoter Yogesh Kumar Mahansaria. 2. The buyout of existing PE investors by new ones: Partners Group’s $270 mn. acquisition of a majority stake in specialized technological IT outsourcing services provider CSS Corp. from the exiting fellow PE Investors SAIF Partners, Goldman Sachs and Sierra Ventures. 3. PE fund Barings Private Equity Asia’s $257 mn. investment for 14% stake in cement-maker Lafarge India, the Indian subsidiary of French cement giant, Lafarge SA. Investor Investee Sector US $ million Kohlberg Kravis Roberts (KKR) Alliance Tire Group Airlines/ Autos 460.00 Partners Group CSS Corp. IT Services 270.00 Baring Private Equity Lafarge India Cement 257.00 Investor Investee Sector US $ million Govt. of Singapore Investment Corp. Greenko Group Power & Energy 150.00 Blackstone SreeJayajothi Cements Ltd Cement 100.00 Oppenheimer Funds Apollo Hospitals Enterprise Pharma, Healthcare & Biotech 95.09
  • 3 shagunmadan@ article -06/07/2013. The PE arm of global investment banking firm Goldman Sachs was also particularly active on the investing side during June quarter. Goldman invested:- 1. $135 mn. in existing portfolio company ReNew Wind Power; 2. $110 million in listed cable TV firm Den Networks and 3. $20 million in medical devices firm BPL Medical Technologies. Second quarter of 2013 witnesses manufacturing companies grabbing over a third of PE investments by value, followed by IT & ITES Companies and than by Energy Companies. 1. Manufacturing sector attracted $796 mn. across 6 investments. 2. IT & ITES sector attracted $453 mn. across 31 investments. 3. Energy sector attracted $235 mn. across 4 investments. Boom to the manufacturing sector this quarter was the result of Alliance Tire and Lafarge India deals. Apart the CSS Corp buyout, the top PE investments in IT & ITES companies include :-(i) $50 million follow-on round raised by e-commerce firm Snapdeal.com from a consortium of investors (led by strategic investor eBay and including new investors Intel Capital and Russia based RuNet Holdings); and (ii) $25 million investment by TA Associates in Fractal Analytics. Among Energy deals, the ReNew Power deal was followed by the $90 million raised by NSL Renewable Power from a consortium including IFC, DEG, FE Clean Energy, ADB, Asia Clean Energy and Proparco. PE-Real estate sector : PE-Real Estate firms made 13 investments during the quarter ended June 2013 (amounting to $318 million across 12 deals with disclosed values). The volume of investments perked up significantly from the 7 investments in the same period in the previous year (which witnessed $172 million being invested across six transactions with disclosed values) and also the 8 investments (worth $569 million) during the January-Mar 2013 quarter. However, PE-RE investments in the first six months of 2013 at 21 transactions ($887 million across 20 deals with disclosed values) are still down 16% compared to the 25 investments in the corresponding period in 2012 ($659 million across 22 investments). View slide
  • 4 shagunmadan@ article -06/07/2013. Top Three PE –RE Deals in Q2 2013. While the preceding quarter, i.e., March 2013 shows a changing trend of PE Investment from deal making to successful exits by PE players, the second quarter was still promising with a remarkable increase of 2.3 times in the PE Investments compared to the immediate previous quarter. However with the current Indian investment climate, where there are several unforeseen challenges, the PE investors continue to go slow in deploying capital, and remain “cautiously optimistic” about investing in India. According to a survey conducted by Bain & Co. and IVCA, Private equity players expect a moderate rise in deal activity in India during 2013 with healthcare emerging as a hot cake. Last year, there was a mere 4% rise in the number of PE deals. As per their PE Report : “Expectations about deal activity in 2013 remain cautious but still positive on the whole. Our interviews suggest that deal activity will see moderate growth in 2013 throughout the industry. The steps taken towards improving India’s legislative framework have made investors a bit more upbeat, and general partners suggest that more deals will close in 2013.” The Economic Times recent July article has a different story to tell. It says that : “The PE industry, which has backed the biggest names in telecom, banking and technology, is now facing its most serious crisis of confidence — funds are beginning to struggle, if not completely buckle —3i ended its India focus and Investor Investee & Nature of Investment US $ million Ascendas Trust's Acquisition of 2 million sqft of office space in Hyderabad from Phoenix Group 110.00 Xander's Supertech's 125 acre township project in Gurgaon 52.00 Clearwater Capital’s &Ajay Piramal Group NBFC- PHL Finance financing VGN Developers’ acquisition of a land parcel for a gated community project in Chennai. 50.20 View slide
  • 5 shagunmadan@ article -06/07/2013. Disclaimer: Please be informed that this article is based on the data gathered from publicly available websites and other information mediums. I have not independently verified such information , do not represent it as accurate, true or complete, make no warranty, express or implied regarding it and shall not be liable for any losses, damages, costs or expenses relating to its adequacy, accuracy, truth, completeness or use. Actis reportedly cut its fund size to a billion dollars from over $3 billion previously and Starwood Capital shuttered its realty-focused unit too. At least a dozen funds are estimated to have closed in the past two years. People and funds which entered India because it was fashionable have now realised their folly." Besides all the above concerns and apprehensions PE Industry in India, still remains an attractive destination for global investors. For a PE investor, the main challenges with India have been the uncertain Regulatory Environment and Lusterless Exit Performance.With the Indian Government recognizing the PE industry’s importance, to India, few positive steps have been taken to overcome the first concern. However, Exits remain a greater issue for the Indian PE Industry which hindered fund-raising plans of a number of India-focused funds. India’s growth story remains the thesis on investment attractiveness. But for the story to be realized, clarity is required with respect to the regulatory framework with the role of the Government to include favorable policy development aimed at welcoming investments into the country. Therefore, the role of PE and Government led initiatives need to go hand in hand. We expect this phase to continue over the reckonable future as the industry consolidates. However, from a long-term perspective, we remain vigorous on India PE and expect the industry to come out much stronger from the current situation.