INDIA MARKET UPDATES - knavcpa.com update March... · DEALS SNAPSHOT Dear Clients and Associates:...
Transcript of INDIA MARKET UPDATES - knavcpa.com update March... · DEALS SNAPSHOT Dear Clients and Associates:...
DEALS SNAPSHOT
Dear Clients and Associates:
Welcome to the KNAV India Market Updates for the quarter ended March 2017.
This update includes an analysis of private equity/venture capital investments and the key M&A deals in the quarterended March 31, 2017.
Key highlights:
• The quarter had around 253 private equity/venture capital investments rounding up to a value of USD~7.95 bn. Some notable deals include:o Bharti Airtel’s sale of 10.3% stake in Bharti Infratel to KKR and Canada Pension Plan Investment Board (‘CPPIB’); &o Flipkart’s successful fund-raising of USD 1 bn from E-bay, Tencent Holdings and others, leading to a possible
merger between E-bay India and Flipkart.• The quarter had around 89 M&A transactions rounding up to USD~4.67 bn. The prominent deals are:o Vedanta’s acquisition of a USD 2.45 bn stake in Anglo American; &o Merger between Vodafone India and Aditya Birla Group-owned Idea Cellular.
• An insight into the evolution of Indian startup ecosystem is presented over the last 10 years.• A detailed analysis and a selected listing of a few notable deals are presented in this update.
Do share your comments and/or feedback on [email protected].
Thank you.
Vaibhav ManekPartner - Advisory services
Suparna DuaPartner - Investment banking
DEALS SNAPSHOT
Of the total 193 deals in this quarter, the highest number
of deals were in the technology sector (48 deals), followed
by e-tail (20 deals) and education (14 deals).
Of the total USD 2.45 bn invested in this quarter, the
highest amount of funds were invested in the e-tail (USD
1.3 bn), followed by travel (USD 511 mn) and logistics
(USD 119 mn).
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Consumer internet | PE/VC dealsThe following charts provide a sector-wise analysis of private equity/venture capital investments in theconsumer internet space in terms of number of deals and transaction value for the quarter.
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DEALS SNAPSHOT
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Of the total 1022 deals in this financial year, the highest
number of deals were in the technology sector (197
deals), followed by e-tail (107 deals) and healthcare (83
deals).
Of the total USD~8.5 bn invested in this financial year,
the highest amount of funds were invested in the
technology (USD 1.86 bn), followed by e-tail (USD 1.83
bn) and finance (USD 1.12 bn).
Consumer internet | PE/VC deals FY16-17 SnapshotThe following charts provide a sector-wise analysis of private equity/venture capital investments in theconsumer internet space in terms of number of deals and transaction value.
DEALS SNAPSHOT
Brick and mortar| PE/VC deals These charts provide a sector-wise analysis of private equity/venture capital investments in the brickand mortar area in terms of number of deals and transaction value for the quarter.
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Of the total 60 deals in the quarter, the highest number
of investments were in the finance sector (16), followed
by healthcare and real estate(7 each) and logistics (6).
Of the total USD 5.5 bn invested in the quarter, the
highest amount of funds were invested in the power
sector (USD 1.56 bn) followed by technology (USD
1.5 bn) and telecom (USD 952 mn).
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DEALS SNAPSHOT
Investee Sector InvestorInvestment value
(USD mn)
Technology Apax Partners 1500
E-tailMicrosoft, eBay, Tencent
Holdings1000
Telecom KKR, CPPIB 952
PowerBrookfield Asset
Management787
PowerBrookfield Asset
Management622
Top private equity/venture capital deals
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DEALS SNAPSHOT
Investee Sector InvestorInvestment value
(USD mn)
Travel SoftBank Group 330
Finance Qatar Holding LLC 250
E-tail Alibaba 200
Healthcare True North 200
Power GIC, ADIA 155
Top private equity/venture capital deals
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DEALS SNAPSHOT
Company
Founders Sachin Bansal & Binny Bansal Ashish KashyapNaveen Tewari , Mohit Saxena, Amit Gupta, Abhay Singhal
Business segment Online retailer Online travel group Global mobile ad network
Prominent investorsTiger Global, Accel Partners, Naspers, Morgan Stanley, E-bay, DST Global
Naspers, TencentSoftBank, Mumbai Angels, Kleiner Perkins Caufield & Byers (KPCB), Sherpalo
Total funding till date
USD 4.15 bn USD 250 mnUSD 220.6 mn + USD 100 mn in debt capital
Valuation USD 10 bnUSD 720 mn (transaction value)
USD 2.5 bn (Peak valuation)
AcquisitionMyntra, Phonepe, Lets Buy, Jabong (via Myntra), FX Mart
Redbus, Yourbus, Gaadi WebOverlay Media, Metaflow, Sproutinc, Appgalleries, Appstores, Appbistro
Current scenario
Striving to achieve profitability and retaining its market leadership while facing stiff competition.
Merged with MakeMyTrip in October 2016.
Successful Chinese market entry, dealing with the challenge of exodus of talent.
Startups - 10 year snapshot
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DEALS SNAPSHOT
Company
FoundersMukesh Bansal, Ashutosh Lawania, Vineet Saxena, Raveen Sastry
Ashish Hemrajani, Rajesh Balpande, Parikshit Dar
Vinod Bhat, Rishi Malhotra, Paramdeep Singh, Anjali Naik, Anurag Gupta
Business segment Online fashion retail store Online entertainment ticket portal
Music and Radio streaming service
Prominent investors
Flipkart, Tiger Global, IDG Ventures Naspers, Accel Partners, Kalaari Capital,NEA
Accel Partners, SAIF Partners, Network18, Stripes Group
Tiger Global, India Internet Group, Steadview Capital, Bertelsmann
Total funding till date
USD 158.75 mn USD 127.7 mn USD 126 mn
ValuationUSD 330 mn (transaction value)
USD 444 mn USD~400 mn
AcquisitionNative5, Jabong, Exclusively, Fitiquette, Cubeit, HRX Brand
Mastitickets, Townscript, Fantain, Eventifier
ZAPR (as strategic investment)
Current scenario
Acquired by Flipkart in May 2014. Through Myntra, Flipkart acquired Jabong for USD 70 mn.
Already a market leader in this space, BMS acquired Townscript for an undisclosed sum.
Currently a leading market player, but with the entry of new players expected to face a challenging road ahead.
Startups - 10 year snapshot
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DEALS SNAPSHOT
Company
Founders Neeraj GuptaPranay Chulet and Jiby Thomas
Deepinder Goyal and Pankaj Chaddah
Business segment Radio taxi aggregator Classified ads portalPlatform for food discovery and online ordering
Prominent investors
India Value Fund Advisors/ True North, Brand Capital
Brand Capital, Tiger Global Management, Kinnevik AB, NVP, Warburg Pincus
Vy Capital, Info Edge, Temasek Holdings,
Total funding till date
USD 75 mn USD 370.15 mn USD 225 mn
Valuation NA USD 1.5 bn USD 500 mn- USD 1 bn
Acquisition -Grabhouse, Stayglad, Stepni.com, CommonFloor, Realty Compass, Hiree
Sparse Labs, Mekanist, Urbanspoon, NexTable, MapleGraph Solutions Pvt. Ltd.
Current scenario
Although being one of the pioneers in radio taxi service, it has seen the likes of Ola & Uber disrupt the market, thus losing significant market share.
Has successfully diversified into car, real estate and jobs platforms. In competition with firms like OLX.
Processes 2 mn online orders in a month. Has presence in 23 countries like USA, UAE and Brazil.
Startups - 10 year snapshot
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DEALS SNAPSHOT
Company
Promoter Shashank ND, Abhinav Lal Byju Raveendran Amit Jain
Business segmentPractice management tool for doctors and a directory to search doctors
Hybrid test preparation & learning platform
Auto portal for car research and buying/selling deals
Prominent investors
Tencent Holdings, Sequoia Capital, Altimeter, CapitalG, INRI Fund
Chan Zuckerberg Initiative, Sequoia Capital, Aarin Capital, Times Internet
CapitalG, Sequoia Capital, HDFC Bank, Hillhouse Capital Group, RNT Associates
Total funding till date
USD 179.5 mn USD 204 mn USD 65 mn
Valuation USD 600-650 mn USD 500 mn USD 380 mn (May 2016)
AcquisitionEnlightiks, Instahealth, Fitho, Qikwell Technologies, Geni Technologies
Vidyartha (SPAN Thoughtworks Pvt. Ltd.)
Zigwheels, Gaadi Web, Zolob Technologies
Current scenario
Focus on global expansion. Aims to enter the health insurance segment through partnerships with existing service providers.
Competing with US based edtech companies like Cousera, Udacity, Udemy. Focussing on acquisitions for content delivery.
Has branched out to provide new car services after it acquired Gaadi Web. Revenue generation from advertisements.
Startups- 10 year snapshot
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DEALS SNAPSHOT
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• Technology is placed at #1 position with 18 dealsSome of the highlights in the technology sector deals were: Tech Mahindra acquired CJS Solutions, Zensar acquiredKeystone Logic, Freshdesk Inc. acquired Pipemonk and WNS Ltd acquired Denali Sourcing Services.
• Finance is placed at #2 position with 8 dealsSome of the prime deals in the finance sector were: IDFC Bank acquired stake in IIFL Holdings from JP Morgan,Anand Rathi acquired Religare's wealth management business, KredX acquired HummingBill and IndusInd Bankacquired IL&FS Securities Services Ltd.
• Pharmaceuticals is placed at #3 position with 7 dealsSome of the deals in pharmaceutical sector were: Zydus Cadila acquired Sentynl Therapeutics, Ascendis Health Ltd acquired Cipla Agrimed Proprietary Ltd and Cipla Vet Proprietary Ltd, Sun Pharma acquired Thallion Pharmaceuticals and Aurobindo Pharma acquired Portugal's Generis Farmaceutica from Magnum Capital.
Top M&A sectors
FinancePharmaceuticals
Technology
DEALS SNAPSHOT
Sector-wise analysis | M&A deals
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The ensuing charts provide an analysis of the M&A transactions in the quarter of the number of deals and the transaction value.
There were 89 M&A deals in the this quarter. Thetechnology sector bagged the highest number of deals (18deals) followed by finance (8 deals) and pharmaceutical (7deals). The deals in technology were in data analytics, ITservices and cloud.
In the quarter, the total transaction value of all dealsamounted to USD 4.6 bn compared to USD 5.2 bn in theprevious quarter. In terms of the transaction value, thehighest M&A deals were witnessed by mining sector(USD 2.45 bn) followed by pharmaceutical (USD 515 mn)and telecom (USD 244 mn).
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DEALS SNAPSHOT
Top M&A deals for the quarter
Target Acquirer SectorTransaction value
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Manufacturing 2450
(4G Business)
Telecom 244
(White goods and electronics business)
Consumer 230
Power 200
Pharmaceuticals 171
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DEALS SNAPSHOT
Target Acquirer SectorTransaction value
(USD mn)
(Select portfolio drugs)
Pharmaceuticals 171
(Wealth management)
Finance 160
Pharmaceuticals 142
(UK business)
Infrastructure 125.6
(CJS Solutions Group LLC)
Technology 89.5
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Top M&A deals for the quarter
DEALS SNAPSHOT
• The confluence of Vodafone (India's # 2 telecom operator) and Idea,
(India’s # 3 telecom operator), lays the foundation of an entity with a
value of INR 1.55 lakh crore (USD 23.5 bn)*, making it India's largest
telecom company that will surpass Bharti Airtel and the global #2 after
China Mobile.
• Initially, Aditya Birla Group backed – Idea will acquire 4.9% from
Vodafone for INR 3,874 crore (USD 586 mn), or INR 108 a share, to take
its stake to 26%, with Vodafone holding 45.1%.
• Mr. Kumar Mangalam Birla shall be the Chairman of the merged
enterprise, while the CFO shall be appointed by Vodafone. The CEO and
COO shall be jointly appointed before the closure of the merger.
• Prior to completion of the transaction, Vodafone and Idea intend to sell
their standalone tower assets and Idea’s 11.15% stake in Indus Towers to
reduce leverage in the combined company.
• The merger is likely to create cost and capex synergies for the merged
entity.
• The new entity may also face some regulatory hurdles, mainly on account
of liberalising administratively allocated airwaves and exceeding
spectrum holding.
*(Source: Economic Times and KNAV Internal Research)20
• Combined entity with a value
of INR 1.55 lakh crore;
• India's largest telecom
company; &
• Global #2 after China Mobile.
Vodafone-Idea merger
Deal analysis
DEALS SNAPSHOT
• Post the Vodafone-Idea merger, Airtel lost its market leadership position
maintained for over 15 years to the merged entity.
• With the aggressive strategy adopted by Jio for subscriber aggregation,
domination over 'data' oriented subscriber base will define the market
leadership.
• In this quarter, Bharti Airtel has successfully acquired Telenor India
operations for USD 300 mn and Tikona 4G Business for USD 244 mn to
counter the competition and maintain its domination.
• Telenor deal will help Airtel to gain spectrum and subscriber base and
provide 4G data edge.
• Tikona deal shall give Airtel the access to 4G airwaves in Gujarat, UP (East
and West), Himachal Pradesh and Rajasthan.
• It has also hived off 10.3% stake in Bharti Infratel to Kohlberg Kravis
Roberts (‘KKR’) and CPPIB for INR 6,194 cr (USD 952 mn).
• This hive-off is likely to give Airtel the flexibility to step up capital
expenditure for the Indian wireless business to expand its data network
coverage and capacity.
India Operations
4G network
Sells 10.3%
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Bharti Airtel’s business strategy
Deal analysis
DEALS SNAPSHOT
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• Hailed as a significant development that paves path for
consolidation in the banking sector.
• The five associate banks that are set to merge with SBI are State
Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of
Mysore, State Bank of Hyderabad and State Bank of Patiala; and
Bhartiya Mahila Bank.
• The new entity is expected to manage costs better—the cost-to-
income ratio can reduce by almost 100 basis points (‘bps’).
• It is expected that a combined treasury will perform better and the
lower cost of deposits will boost margins.
• However, one of the biggest challenges for the new entity will
relate to human resources. Also the associate banks will not come
into the SBI fold with clean balance sheets; the five banks have a
higher share of restructured loans than SBI, with their non-
performing assets being at par.
Cabinet clearance for SBI merger
Deal analysis
DEALS SNAPSHOT
• Havells India has acquired white goods and electronics business of
Lloyd Electrical and Engineering Ltd for a value of USD 230 mn.
• Lloyd’s 12% market share in the air conditioners industry
gives Havells a good start into the white goods segment.
• The acquisition comes at a time when Havells’ core business —
switchgears — is facing problems on volume and profitability fronts;
and with the onset of summer, white goods like air conditioners and
refrigerators are expected to drive the sales.
• The manufacturing units along with the low margin Original
Equipment Manufacturer (‘OEM’) and the projects business (AC
supplier to Railways) have been kept out of this deal.
• Lloyds is expected to utilise the net proceeds from sale to partially
bring down the debt and for investments in its other interests.
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White Goods Business
Acq
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Havell’s acquisition of white goods business of Lloyds
Deal analysis
DEALS SNAPSHOT
• Tech Mahindra acquired US-based healthcare software provider CJS
Solutions Group LLC, part of The HCI Group for USD 110 mn.
• Tech Mahindra will pay USD89.5 mn upfront for around 84.7% of CJS'
stake, with the remainder acquisition over the next three years.
• CJS Solutions provides complete implementation of Electronic Health
Record (‘HER’) and Electronic Medical Record (‘EMR’) software.
• The acquisition will not only position Tech Mahindra as a significant
player in the healthcare provider space, but will also provide an
opportunity to go deeper in this space through the EMR
implementation and its related services route.
• This transaction showcases that Indian companies are speeding up
acquisitions of U.S. firms to avoid challenges posed by an expected
tightening of visa rules in their biggest market.
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Acq
uires
CJS Solutions Group LLC
Tech Mahindra’s acquisition of CII Solutions Group LLC
Deal analysis
DEALS SNAPSHOT
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KNAV refers to one or more of the member firms of KNAV International Limited (‘KNAV International’), which itself is a not-for-profit, non-practicing, non-trading corporation incorporated in Georgia, USA.
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Editorial credits
Deals Snapshot Editorial Hardik Adenwala and Akshay Mahalaxmikar–– KNAV Mumbai
The source of our data is our market research, publicly available reports and press items, and independent databases. While KNAV has made reasonable endeavors to ensure that the information provided in this newsletter is accurate and up to date as at the time of issue, KNAV shall not be liable for any errors, inaccuracies or delays in the information, nor for any actions taken in reliance thereon, nor does it endorse any views or opinions. KNAV disclaims all warranty, express or implied, as to the accuracy or completeness of any of the content provided, or as to the fitness of the content for any purpose to the extent permitted by law. The content herein is not appropriate for the purposes of making a decision to carry out a transaction or trade and does not provide any form of advice (investment, tax, legal) amounting to investment advice, nor make any recommendations or solicitations regarding particular financial instruments, investments or products, including the buying or selling of securities. KNAV has not undertaken any liability or obligation relating to the purchase or sale of securities for or by any person in connection with this document.
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DEALS SNAPSHOT
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