PE Deals remains hot in the Indian Kitchens

7/28/2019 PE Deals remains hot in the Indian Kitchens

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1shagunmadan@ article -06/07/2013.

Shagun MadanFCS & LLB.Partner- INDEL Advisors LLPNew Delhi

[email protected]

.

With the global economic downturn, the

Indian PE Industry continues to operate in achanging environment. PE Investments have

been a part of Indias 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 JuneQuarter 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 wasUS$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 notinclude 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

thefirst 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.

across238 transaction.

Private Equity Deals remains hot in the Indian Kitchens

with upsurge of 17.7% during June quarter of 2013.


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Top Three PE deals: Q2 2013

Top Three PE deals: Q1 2013

As shown in the table above, the top three PEtransactions during the second quarter of

2013 are :-

1.The buyout of existing PE investors by newones: American PE Fund Kohlberg Kravis

Roberts - KKRs $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 YogeshKumar Mahansaria.

2.The buyout of existing PE investors by newones:

Partners Groups $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

Asias $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 &

Biotech95.09


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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 companyReNew Wind Power;

2. $110 million in listed cable TV firm DenNetworks and

3. $20 million in medical devices firm BPLMedical 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. across4 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 withdisclosed 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 22investments).


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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 immediateprevious 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 amoderate 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 Indias legislativeframework 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'sAcquisition of 2 million sqft of office space in

Hyderabad from Phoenix Group110.00

Xander's Supertech's 125 acre township project in Gurgaon 52.00

Clearwater Capitals &Ajay

Piramal Group NBFC- PHL

Finance

financing VGN Developers acquisition of a land

parcel for a gated community project in Chennai.50.20


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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. Peopleand 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 ExitPerformance.With the Indian Government

recognizing the PE industrys 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.

Indias growth story remains the thesis on

investment attractiveness. But for the storyto 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 industryconsolidates. 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.

PE Deals remains hot in the Indian Kitchens

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