July 21, 2010
The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on volume of PE and M&A transactions advised by Transaction and Legal Advisory firms.
Private Equity Deals
Among PE transactions, AZB advised 25 deals worth over $1.5 billion during the period including Olympus Capital's $300 million investment in Tata Power's coal mine SPVs in Indonesia, the $217 million investment by Standard Chartered PE, KKR and New Silk Route in Coffee Day Resorts and the $175 million investment by Temasek into National Stock Exchange. Other legal advisors who advised a significant number of PE transactions during H1’10 include ALMT Legal and J Sagar Associates with 7 deals each.
Ernst & Young advised 5 PE deals worth $276 million during the period, including Bain Capital and TPG Growth's $86 million investment in Lilliput Kidswear, Warburg Pincus’ $85 million investment in Metropolis Healthcare and Actis' $78 million investment in Tata Realty and Infrastructure's road project SPV. Other transaction advisors who advised a significant number of PE deals during H1’10 include Intellecap (3), Veda Corporate Advisors (3) and Edelweiss (2).
Among M&A transactions, AZB advised 25 deals worth almost $13 billion during the period, including the Bharti’s acquisition of Zain’s African operations, Jindal Steel’s acquisition of Oman’s Shadeed Iron & Steel and American Tower Corp’s acquisition of Essar Telecom Infrastructure. Other legal advisors who advised a significant number of M&A transactions during H1’10 include Tatva Legal (11 deals) and Trilegal (8).
Ernst & Young advised 12 M&A deals worth almost $14 billion during the period, including GTL’s acquisition of Aircel’s tower business, Kalanidhi Maran’s bid for SpiceJet and Bharti’s acquisition of Zain’s African operations. Other transaction advisors who had advised a significant number of M&A deals during H1 ‘10 include Kotak (6 deals), Standard Chartered (5) and Deloitte (6).
The full league tables can be viewed online at http://ventureintelligence.in/league.htm
July 15, 2010
At Venture Intelligence, we recently did a podcast with K.V. Ramani, Founder of Future Software and Co-Founder of Hughes Software Systems - both of which were acquired by Flextronics in 2004. KVR’s story is a fascinating account of the tribulations and success of an early mover in the Indian software industry, who chose - in the mid-1980s - to tread a different path than the common “body shopping” route.
Some highlights from the podcast:
# KVR’s story emphasizes how the founding idea - especially for an IT product company - should be based on something that is likely to become popular 3-5 years ahead. He believes the founders should focus on the vision for the company in the next 5 and leave the job of managing the next few quarters to the operational managers.
# The podcast has an interesting account of how KVR converted the huge problem of its largest customer, Hughes (which accounted for 30% of the business), wanting to set up its own shop in India, into an opportunity.
# KVR also highlights how Flextronics acquired and stitched together what is today Aricent by acquiring 5 Indian communications software companies (including Future Software)
You can view more highlights and download the full podcast from http://www.entrevista.in
Venture Intelligence recently spoke to Anita George, Director Infrastructure of International Financial Corporation (IFC) regarding the institution’s latest views on investing in India. The full version of this interview appeared in the latest Venture Intelligence quarterly Private Equity Roundup report.
IFC, a member of the World Bank Group, has been making PE-type investments in India since the 1980s. Even now, when India is choc-a-bloc with PE investors, IFC remains among the most active investors year-after-year. In 2010, IFC has already consummated/announced about 15 investments, across various sectors including healthcare (Max Healthcare), Financial Services (Cholamandalam Investment & Finance, AU Financiers, Aadhar Housing Finance) and Clean Energy (Azure Power, AD Hydro Power, Bhilwara Energy, Auro Mira Energy, Applied Solar Tech and Husk Power).
IFC is also a very sought after investor (or “Limited Partner”) among India-dedicated PE/VC funds. More recently IFC has set up an Asset Management Company (AMC) which has been mobilizing funds from governments, other donors and sovereign wealth funds.
Venture Intelligence: Can you first talk to us about IFC’s macro view on investments in India?
Anita George: We consider India as an attractive destination for private sector investments and we have our own strategic pillars that we follow in this region: climate change (which means investments in Renewable Energy, Energy Efficiency, Cleantech, etc.) and inclusive growth. Recently, we have started to systematically focus on the low income states like Rajasthan, Bihar, Jharkhand, Madhya Pradesh, Orissa, the North Eastern states, etc.
Even from a financial returns perspective, our experience globally has shown that the lesser developed markets and regions, have given us higher returns than investments in bigger projects and in bigger countries. It’s logical because with bigger countries and bigger projects, competition is greater and you tend to pay a higher premium and your entry price had already factored in a lot of the upside. Where as in smaller countries or more riskier markets, the investments are made at a more reasonable price and there is a upside to be had if there is high growth in those sectors and the investments scale up as market demand grows.
VI: What specifically is attracting you to the Financial Services and Clean Energy sectors?
AG: These are part of our development mandate and they are also, in our view, high growth areas and areas of great innovation in India. For example, our investment in FINO (a technology platform for microfinance companies), enables financial services to reach those parts of population that do not have access to normal banking services.
IFC started investing in Cleantech and clean energy much before it became fashionable. We also see models here - such as in distributed generation and innovative use of solar power - that we feel can be replicated in other countries as well.
VI: IFC is different in that you also provide debt financing. How does that work?
AG: We have our own capital for equity investments and then we raise funds for debt investments from the market. IFC has been a pioneer in tapping the global bond markets - we have been doing local currency bonds in different markets and raising resources in a way that also helps develop the local bond markets. In India, IFC can provide long tenor, fixed interest, rupee debt ideally suited to long term financing for infrastructure assets.
VI: IFC’s investment sizes vary quite widely. How do you manage that?
AG: Yes, this year in fact we have done an investment of $350,000 in one firm and we have done equity investments of up to $150 million as well, so the range is very wide. We have to have a right balance since, in addition to return, we need to look at impact. So when we see a model that has the ability for scale and there is innovation, we don’t look at just the size. In fact, there are more challenges in doing due diligence on smaller deals than in doing a big deal with an established company.
The reason why we have done these little deals is that it has worked well for us in the past. We have made early investments in what are today big companies like IDFC, IL&FS, Moser Baer and Bharti. Typically, we start pretty modestly and grow with the companies. We tend to make serial investments as their growth demands.
Of course, we can’t do 80% of our portfolio in small deals, but we have the flexibility to do 10-20% in such deals which make us closer to a VC fund. Specifically, for Cleantech IFC has a dedicated team that focuses on early stage investments.
VI: Some of IFCs investments are in large or even listed companies (like Max Healthcare, Apollo Hospitals, Jain Irrigation, Himadri Chemicals, etc.) which can easily tap other sources of capital. What is the thinking behind such investments?
AG: It depends on which area they operate in – for example, if it has a high development impact and if they are doing something which is touching on some of our strategic priorities. Our involvement with these companies will be to encourage them to innovate more in their knowhow and technology. For instance, we are working closely with companies like Jain Irrigation to help them expand into other developing countries in Africa, Turkey, etc. Similarly, we are working with Atul on water conservation.
Healthcare is a big area of focus for IFC. Partnering with companies like Max Healthcare and Apollo helps us to reach healthcare to the lower income states and the base of the pyramid.
VI: How does IFC view the need for exits?
AG: We have a lot of flexibility and have stayed with companies in certain cases for over 10 years. We use a portfolio approach and exit companies - especially if they are listed - over time. In some cases, we have a put option to the sponsor (promoter) and we can exercise that put.
In general, we don’t have any hard and fast rule that we have to exit in three years, etc., but we try and manage it based on the needs of the company and our own portfolio management needs.