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    IL IL Presentation Transcript

    • IL&FS Investment Managers Ltd January 2009 1
    • Structure of Presentation ! Section A : Overview ! Section B : Investment Environment ! Section C : Funds Under Management ! Section D : Future Strategy 2
    • Section A : Overview 3
    • IL&FS Group Business Canvas Financial Services Investment Banking Asset Management Structured / Asset Finance Private Equity Project & Corporate Advisory Private Capital Mobilization Mergers and Acquisitions Infrastructure Infrastructure Social Infrastructure Environment & Social Project Development Management Training Project Sponsorship Advisory SEZ / Industrial Parks Education Training Power Advisory Property Management Waste & Water Management Surface Transport & Maritime Composite Service Platform 4
    • IL&FS Investment Managers ! Acquired by IL&FS in 1996 – Early recognition of establishing PE practice – Structured as a pure asset management play – Strong linkages forged with domestic and international investors ! Maturity through exposure – Seen the PE world expand from < US$ 20 mn to > US$ 15 bn – Investment spectrum spanning VC to PE; Buy-outs to PIPEs – Cross sectoral presence ! Strong support of local partners / investees – Over 60% of deal flow proprietary in nature – Largely off-market deals, resulting from relationships; leads to better control on entry pricing/terms ! Team experience straddles fund and economic cycles – 96 investments since 1998 – 47 exits / liquidity events – Realized gross US$ IRR > 27% Over US$ 1.9 bn under management 5
    • Shareholding Publicly Held 43% IL&FS • IL&FS = “Infrastructure Leasing & Financial Services” IIML • Founded 1987 52% • IIML = “IL&FS Investment 5% IIML • Over US$ 2.96 bn of assets • Shareholders include ORIX, Managers Limited” • Focused solely on Employees ADIA, LIC, SBI, HDFC alternative asset • 1,500 employees in 60 management offices • Acquired IIML in 1996 Note: Shareholding is as on March 31, 2008 6
    • Key Persons PE Experience Name Designation Experience Qualification (Yrs) (Yrs) Shahzaad Dalal Vice Chairman 27 11 B.Com, MBA Dr Archana Hingorani CEO & Executive 22 12 B.A. (Economics), Director MBA, Ph.D Alok Bhargava Executive Director 22 6 B. Tech, MBA Mark Silgardo Chief Operating 26 2 B.A, MBA, PGDBA Officer Manoj Borkar Chief Financial 20 12 B.Com, ACA Officer Sanjay Mitra Company 12 6 M.Com, ICWA, CS Secretary 7
    • Business Model Management Fee: - Typically 1.5-2% of AUM for the fund life - Highly visible, annuity revenue stream over 6-10 years Revenue Carry: Stream - Performance upside through profit share - Hurdle rate ranges between 8-11% p.a. - Carry is 20% of profits from investments - A upside component as Fund size / Asset under Management increases - Long-term investment horizon of 3-5 years Investment - Majority investments in unlisted companies Model - Active investors with clear focus on value creation - Mitigates risk of stock market volatility 8
    • Uniquely Placed Business The uniquely placed business model offers the following ! Retail participation in an otherwise exclusive institutional domain ! Indirect exposure to growth potential of large unlisted companies ! Stable predictable revenue stream (through management fees) with defined performance upsides ! Manager (IIML) better positioned to create upsides vs managers of other asset classes ! Documented advantages of PE participation in the value of unlisted companies ! Higher degree of value add and relatively early stage of investment provides significant upside at exit ! This upside captured through the Carry Structure 9
    • Edge over other Classes PE Fund Management Mutual Funds ! Long term committed investors; ! Fund AUM subject to market predictable AUM, Fees conditions ! High level of investor ‘stickiness’ with ! Varying investor interest depending on the Manager, with investor ‘reups’ in extraneous factors such as distribution follow-on funds reach, marketing, sentiment ! Proprietary deals result in entry at ! Entry at market prices lower than market comparables ! No redemption pressure and need to ! Investment strategy hostage to NAV ‘manage’ NAVs fluctuations and redemptions ! Significant ability to guide investee ! Inability to exercise any control companies and control outcomes ! Carry structure captures upside ! No such profit sharing structure ! Limited regulation / compliance issues ! Higher degree of compliance/risks 10
    • AUM Growth 2,000 1,713 GR CA 9% 1,500 13 at en s ris ha $ mn M 1,000 AU 871 500 301 - FY2006 FY2007 FY2008 11
    • Income & PAT Growth 900.00 300.00 800.00 R 250.00 CAG 700.00 9% t7 na Income (Rs mn) 600.00 ow 200.00 gr PAT (Rs mn) has 500.00 AT LP IIM 150.00 400.00 300.00 100.00 200.00 50.00 100.00 0.00 0.00 FY2005 FY2006 FY2007 FY2008 Income (Rs mn) PAT (Rs mn) FY2008 Consolidated Income & PAT of Rs 1.06 bn & Rs 319.6 mn 12
    • Financials Rs mn FY2008 FY2007 FY2006 FY2005 FY2004 FY2003 Total Income 825.54 502.93 253.41 180.83 150.08 155.96 Total Operating Costs 398.31 211.12 121.55 76.63 58.38 77.03 PBT 423.73 267.23 107.61 83.71 66.99 50.09 PBT Margin (%) 51.33 53.13 42.46 46.29 44.64 32.12 PAT 280.35 173.01 71.51 52.21 47.67 31.79 PAT Margin (%) 33.96 34.40 28.22 28.87 31.76 20.38 * EPS (Basic) 10.82 7.11 4.63 3.48 3.19 2.17 Networth 594.26 398.39 261.42 229.88 223.84 217.03 Dividend 55% 40% 35% 30% 25% 17% * Post Bonus Issuance 13
    • Cerebral Business = Higher Returns 120% 106% 100% 80% 67% 60% 71% 45% 67% 34% 40% 41% 35% 20% 0% FY2005 FY2006 FY2007 FY2008 ROCE ROE 14
    • Section B : Investment Environment 15
    • India : Emerging PE Destination ! India – increasing attractiveness as a PE destination – Strong economic growth leading to a majority of Indian companies looking for growth capital – PE has fast emerged as an alternate source of funds for companies to support expansion plans – Large Global PE investors are either setting up dedicated Indian funds or increasing allocations for Indian investments in their global portfolios 18,000 17,129 400 ! Growing Private Equity space in India 16,000 339 350 – In 2007, India was the largest recipient of PE in 14,000 280 300 Value of Deals (US$ mn) 276 Asia, ahead of Australia (US$ 14.6 bn), Japan 12,000 250 (US$ 14.4 bn) and China (US$ 11.5 bn) No of Deals 10,000 200 – About US$ 3.3 bn invested in Jan-Mar 2008 and 8,000 146 6,700 150 US$ 17 bn invested in 2007 6,000 110 78 56 71 100 – Fund sizes have increased from US$ 25 – 100 4,000 2,200 1,650 mn, to about US$ 400 – 1,000 mn 2,000 1,160 937 591 470 50 0 0 – Increasing deal sizes: average investment size 2000 2001 2002 2003 2004 2005 2006 2007 up from US$ 4 mn in 2000 to US$ 50 mn Value of Deals (US$ mn) Number of Deals Source : Grant Thornton, IVCJ, AVCJ, Venture Intelligence ! Huge scope for catch-up to global levels – Indian PE is approx. 1% of GDP; Mature markets like US and UK have a PE to GDP ratio of 1.5-2% – PE investment in US, for instance, was $ 191 billion last year – This indicates the tremendous scope for growth, not just on account of the underlying GDP growth but also on account of catch-up to global levels 16
    • PE: Competitive Landscape IIML Experience ! Three PE funds managed since inception IIML Warburg 10 Govt Funds Chrys Cap Actis ICICI Venture SIDBI ! US$ 190 mn invested in Citibank 45 companies Barings – Retail, Media : 23% No of years in market – Life Sciences : 13% Temasek – Manufacturing : 40% GW Capital – IT & ITES : 24% UTI Ventures 5 StanChart New Vernon ! No losses till date Sequoia Blackstone Kotak Carlyle ! First investors in Retail, Newbridge Shipyard, Media 3i Helion Blue River New Silk Route ! Signature deals : Aureos Tano Shoppers Stop, IBN18, 0 ABG Shipyard, JBF 10 30 50 Approx. Deal Size ! IRR on exited Experienced an entire fund cycle in India investments : ~27% Not experienced an entire fund cycle in India 17
    • PE Opportunity – Infrastructure ! Infrastructure investments to rise from 4.5% to 8% of GDP by 2012 – Imperative for a 10% GDP growth – Translates into $495 bn investments in the next 5 years – Opportunities across sectors ! Private players – Well entrenched in Roads, Telecom, Power, Ports, Airports – Opportunities in Urban Infrastructure, Railways and pipelines – Sector wise independent regulators Source : SSKI ! Key drivers in place – Regulations : Investments not permitted in areas like power distribution, airports, railways etc – now history – Independent regulators add to investor comfort – Government driven “packaged” mega projects like NHDP and UMPPs – Funds Availability • Government contribution : Viability Gap funding, project specific cess • Cost efficient borrowing with sufficient depth possible • Growing size of project executors of comfort to international lenders – Attitude : Willingness to pay commercial user charges – Growth Story : Sheer demand turning hitherto unviable opportunities into doable business plans ! Outcome : A mix of public private participation expected, increasingly skewed towards private contribution – Private players to invest over $ 200 bn 18
    • Infra : Competitive Landscape 10 IIML IIML Experience AMP AIG ! US$ 270 mn invested in 27 companies IDFC Chrys Ancillary No of years in market 19% Capital Cable / IT linked Citibank Construction, CDC Infra Water, SEZ 38% 5 8% Port 5% Power / Gas Telecom Roads / Rail 6% ICICI 9% 15% Blackstone Macquarie ! Early investors in Infra, 3i Telecom, Roads, City 0 Gas, Rail 10 20 30 40 No of Deals ! Signature Deals : Indraprastha Gas, Max Telecom, Noida Toll Bridge, Gujarat Pipavav Proposed Standard Chartered IL&FS Asia Infrastructure Port, Ramky Infra Fund with a corpus of US$ 800 mn ! IRR on exited investments : ~28% 19
    • PE Opportunity – Real Estate Expected size of Real Estate market in India : Real Estate PE Investment by Asset Class About US$ 90 – 150 bn by 2015 ! This growth is expected due to the following factors : – Strong economic fundamentals – Large and Growing middle class; changing socio-economic trends – Increasing demand for good quality office space driven by IT and KPO companies – Increasing investment in Infrastructure FDI in Real Estate as a 16.5 % – New investment platforms emerging : REIT, % of Total FDI in India* REMF 9.2 % ! Opportunities in Real Estate exist in : – Integrated Townships 3.4 % – Organized Retail – Adaptive Re-use of Industrial Land – Urban Site Rehabilitation 2005-06 2006-07 2007-08 – SEZs – IT / ITeS Sector RE expected to capture 20-25% of FDI inflows *Source: Commerce and Industry Dept, GoI. FDI has gone up from $ 5.5 bn to $ 20.1 bn in the same period 20
    • RE : Competitive Landscape IIML Experience IL&FS India Realty Fund-I & II ! Two active funds under management with total Fund size ~ US$ 1.4 bn Total Fund Size (US$ Mn) ! Pioneer in India : First RE fund 900 launched in 2005 / 2006 Tata Infra & HDFC Realty Real estate Fund ! US$ 557 mn already deployed in Fund 19 transactions Sun-Apollo Urban ICICI – Mumbai : 32% Infra REF Venture – Multi City : 21% – NCR : 19% 450 Infinite India – Bangalore : 8% Red Fort Real Estate Trikona-Trinity Capital – Pune : 7% Fund – Others : 13% ! Early investors in SRA, Competitors: comparatively slower Industrial Parks, 100% asset pace of deployment buyouts ! Signature Deals : QVC, Ansal, 0 100% Mantri, IRPPL, Akruti City, ETL, Rate of Deployment (% of Total Corpus) DB Realty, MK Malls Note: Analysis covers Existing FDI FDI Real Estate Funds Funds managed by real estate dedicated funds (fund ! US$ 663 mn committed in 24 Raised between 2005-07 IIML size>US$ 300mn; and does not transactions include Global Proprietary Funds 21
    • Section C : Funds Under Management 22
    • Fund – Across Spectrum Private Equity Real Estate Infrastructure • Two active funds • Established 2005 • Proposed SCI Asia aggregating US$ 378 mn Infrastructure • Two funds aggregating Growth Fund • First fund fully divested – US$ 1.4 bn distributed carry • Pan Asian focus Private Equity Investment Spectrum 23
    • Milestones 24
    • Diversified Exit Strategy 47 Exits / Liquidity Events Trade Sale Buyback 11% 21% Strategic Sale 26% Listed / IPO 42% Exit Returns of 27% in US$ terms with a multiple of 2.5x 25
    • Existing Funds Fund Vintage Corpus Hurdle No. of No. of Capital Profits Expected (mn) Rate Investments # Exits Refunded Returned End of (mn) (mn) Fund SARA Mar-98 1100 (Rs) 18% 26 15 429 (Rs) 590 (Rs) 2010 PAPDF May-06* 1800 (Rs) 6%** 7 - - - 2012 LIF Apr-05 6713 (Rs) 7% 27 9 2252 (Rs) 484 (Rs) 2011 REF - I Apr-06 525 ($) 11% 17 - - - 2014 REF-II Dec-07 895 ($) 10% 7 - - - 2015 TARA Sep-07 225 ($) 8% 5 - - - 2017 * Singapore Fund in June 2007 # Includes Commitments ** Compounded semi-annually 26
    • Section D : Future Strategy 27
    • PE : Deepening Markets ! From around a billion dollars 3 years ago; projected to grow to $ 20 bn by 2010 ! Cross sectoral investments opportunities to increase – A third of investments in 2007 went into Real Estate – Robust levels in Banking, Financial services, Telecom, IT and manufacturing – Infrastructure set to capture a larger share – Increasing opportunities as sectoral caps are relaxed • Single Brand Retailing • Cargo Aviation ! Tried and tested exit routes provide comfort to foreign capital – Public markets have proved to be preferred choice – Trade sales to increase as capital with different risk / return profile flows in ! Outcome : PE activity levels will accelerate – Key to success : Global sources ; Local partners 28
    • Into the Future… ! IIML has a successful business model built assiduously over the last decade – Fund Manager of repute – A port of first call for investees ! Business model to be replicated resulting in enhanced AUM / revenues through – Larger follow on funds – New emerging opportunities – Extending Geographies ! Substantial increase in activity levels on all counts in the next 2-3 years – Enhanced Fund raising – High level of investment deal flow – More investments to reach liquidity / exit stage • Carry in the medium term 29