Warburg Pincus Bharti

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Mergers & Acquistions

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Warburg Pincus Bharti

  1. 1. Warburg Pincus & Bharti TeleVentures The Dawn of PE In India
  2. 2. The Deal……………………
  3. 3. <ul><li>One of the most reputed PE firms of US </li></ul><ul><li>Investments worth more than $ 26 billion </li></ul><ul><li>In more than 100 Companies </li></ul><ul><li>Presence in US, Europe & Asia </li></ul><ul><li>One of the first PE investors in India </li></ul>
  4. 4. <ul><li>Real Interest Rates too high to sustain </li></ul><ul><li>Large Market – Double edged sword </li></ul><ul><li>Increasing GDP growth </li></ul><ul><li>Democratic Government </li></ul><ul><li>Growing Middle class consumers </li></ul><ul><li>Majority of population in between 18 – 25 yrs of age </li></ul><ul><li>Strong Education System </li></ul><ul><li>IT Boom </li></ul>Macro Factors – India
  5. 5. Positive Macro Factors – Sector <ul><li>National Telecom Policy encouraging </li></ul><ul><li>Domestic Private Investment </li></ul><ul><li>Foreign Direct Investment </li></ul><ul><li>Competition to Fixed Line Service Providers </li></ul><ul><li>High Installation Fees </li></ul><ul><li>Order Backlog </li></ul><ul><li>Mobile Telephony considered as a status symbol </li></ul><ul><li>Markets were Price Elastic </li></ul><ul><li>No Player having Pan-India presence </li></ul><ul><li>Telecommunication is a pre-requisite for Growth </li></ul>
  6. 6. Negative Macro Factors – Sector <ul><li>Lack of Regulatory Clarity </li></ul><ul><li>Economic viability of Telecommunication Project </li></ul><ul><li>Restriction on Licenses </li></ul><ul><li>Monthly Fixed License fee to government </li></ul><ul><li>No investor interest – No clarity on Exit route </li></ul><ul><li>Bharti having presence only in North India </li></ul>
  7. 7. Difference INDIA <ul><li>Leverage buyouts </li></ul><ul><li>Control </li></ul><ul><li>Layoff’s </li></ul><ul><li>Management changes </li></ul><ul><li>Part of Strategic plan </li></ul><ul><li>Reduce competition </li></ul><ul><li>Banking on Growth Story </li></ul><ul><li>Long Term Investment </li></ul><ul><li>Financial & Operational efficiency </li></ul><ul><li>Working with Management </li></ul><ul><li>Strategic Investor </li></ul><ul><li>Accelerated growth & competitiveness </li></ul><ul><li>Enhancing Shareholder Value </li></ul>
  8. 8. Landmark Transaction <ul><li>The Deal equaled one – third of total PE investments in India till date </li></ul><ul><li>PE investments in India were only 0.2% of total GDP </li></ul><ul><li>FDI was only about 1% of GDP </li></ul><ul><li>First Investment done banking upon the “India Growth Story” </li></ul><ul><li>Foreign Exchange fluctuation was a matter of concern </li></ul><ul><li>Investment in Unorganized Sector </li></ul><ul><li>Investment in a privately owned company </li></ul>
  9. 9. WP – Information Gaps <ul><li>Bet on forecasts </li></ul><ul><li>Loss making business </li></ul><ul><li>Entering as a minority stakeholder </li></ul><ul><li>Ambiguity in Government Policies </li></ul><ul><li>Fragmented Sector – Cost efficiency </li></ul><ul><li>Mobile telephony was still a Luxury among Indians </li></ul><ul><li>Business model based on Cost-Volume-Pricing </li></ul>
  10. 10. Contrarian Call <ul><li>Business Growth Opportunities </li></ul><ul><li>High Interest Costs </li></ul><ul><li>Confidence on Management </li></ul><ul><li>India’s Demographic Pattern </li></ul><ul><li>Open Economy </li></ul><ul><li>Global Presence </li></ul>
  11. 11. Mittal’s Approach - Valuations <ul><li>Valuation not to be done on the conventional method of ARPU </li></ul><ul><li>New Methods focus on efficiency </li></ul><ul><li>Gross Revenue </li></ul><ul><li>Operating Efficiency </li></ul><ul><li>Capital Efficiency </li></ul>
  12. 12. Our take on Valuations Method <ul><li>Optimum Utilization of Resources </li></ul><ul><li>Gross revenue is the major CSF </li></ul><ul><li>Business model is based on increasing Subscriber base to cost efficiency </li></ul><ul><li>Price Elastic market </li></ul>
  13. 13. Shareholder Value & Corp Governance <ul><li>Think Big !!! </li></ul><ul><li>BT- Initial Suboptimal Strategy – Bell North </li></ul><ul><li>WP -Change in Plans – Pan India Presence </li></ul><ul><li>Growth Plans !!! </li></ul><ul><li>BT - Management Approach to build business from scratch </li></ul><ul><li>WP - Time sensitive: Growth by Acquisition </li></ul><ul><li>Restructuring the corporate structure </li></ul><ul><li>BT- Adhoc structure </li></ul><ul><li>WP – Buy back stakes to reduce to conflicts of interest </li></ul><ul><li>Inclusion of Strategic Partners - SINGTEL </li></ul>
  14. 14. Exit………………………..
  15. 15. The Road ahead……………..

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