Cristiana Pereira

Feb-9-12

The Brazilian Capital Market: recent developments and trends

The Brazilian exchange has become one of the top capital raising markets…

Souce: BM&FBOVESPA.

17,8

IPO: 7 Follow on: 8

IPO: 9 Follow on: 10

IPO: 26 Follow on: 16

IPO: 64 Follow on: 12

IPO: 4 Follow on: 8

IPO: 6 Follow on: 18

IPO: 11 Follow on: 11

IPO: 11 Follow on: 11

Capital raised by share issues (BRL billion)

2010 – Petrobrás – biggest public offering in the world: in Brazil

4 , 3 8 , 5 15 , 1 14 , 5

26 , 8

22 , 2

63 , 2

10 , 7 4 , 5 5 , 4

15 , 4

55 , 6

7 , 5 23 , 7

11 , 2

7 , 1

2004 2005 2006 2007 2008 2009 2010 2011

Follow - On IPO Parcel related to the onerous cession - Petrobras offer

30 , 4

70 , 1

8 , 8 13 , 9

34 , 3

45 , 9

149 , 2

30 , 4

70 , 1

8 , 8 13 , 9

34 , 3

45 , 9

149 , 2

30 , 4

70 , 1

8 , 8 13 , 9

34 , 3

45 , 9

149 , 2

30 , 4

70 , 1

8 , 8 13 , 9

34 , 3

45 , 9

149 , 2

74 , 81

• Goal: reduce the distance between the regulation and the necessity to

protect investors

• Main requirements of Novo Mercado:

• Requirements of Corporate Governance: shareholders rights, transparency

and supply of mandatory information

• Adhesion to Market Arbitration Chamber to solve corporate conflicts

• Requirement to listing maintenance

... built with a creation of special Corporate Governance segments

• Novo Mercado is a private initiative, based

on the self-regulation power of the

Exchange, in order to improve the quality of

public companies and the credibility of

capital market

• It creates a receptive environment for

public offerings

IPOs by Listing Segment*

Novo Mercado

75%

Nível 213%

Nível 1

6%

BDR6%

*Data from 2004 to July-07-2011.

Corporate Governance Index compared to IBOVESPA

(Base 1.000 - desde 25/06/2001) – fonte: BM&FBOVESPA

Índices IGC IBOV

Jun/2011 -2,32% -3,43%

Em 2011 -7,08% -9,96%

Desde 2001 +608,90% 329,77%

-

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

IGC

Ibovespa

•TelecomSector Index – ITEL

• Electric Power Index – IEE

• I ndustrial Sector Index – INDX

• Consumption Index – ICON

• Real Estate Index – IMOB

• Financial Index – IFNC

Broader range of sectors

% of the market capitalization – January/12

Sector Indexes

New sectors (since 2004): car rental, information technology, toll roads and highways,

pharmaceutical products, agriculture, sugar and alcohol, residential building construction, property

agency, education services, medical services and stock exchange

Financial

26,4%

Oil, Gas and Biofuels16,5%

Consumer Non Cyclical15,1%

Basic Materials15,0%

Public Utilities9,9%

Telecommunications6,3%

Construction and Transportation

4,7%

Consumer Cyclical4,1%

Capital Goods1,7% Information of

Technology0,4%

Growing Private Equity Industry in Brazil

0,1 0,5

1,3

2,9 2 2,3

7,2 32

23

31 33

15

29

68

0

10

20

30

40

50

60

70

80

0

1

2

3

4

5

6

7

8

2004 2005 2006 2007 2008 2009 2010

Volume (US$ Bilhões) Quantidade de Negócios

Submarino,

Localiza,

Tam, Uol

R$1,91 Bilhões

Gol, Dasa, ALL

R$1,90 Bilhões

Vivax, Gafisa,

Equatorial,CSU,

Brasilagro,

Lupatech, Abyara,

Odontoprev,

Dufrybras

R$4,90 Bilhões

PDG, GVT,

Anhanguera, Even,

Br Malls, Fer Heringer,

Metalfrio, Bematech,

Cremer, MRV,

Springs, Providencia,

Multiplan, Satipel,

Laep, Tempo Part

R$9,69 Bilhões Le Lis Blanc

R$0,15 Bilhões

Tivit, Cetip,

Direcional

R$1,62 Bilhões

Aliansce, BR Propert,

Mills, HRT, Raia

R$5,39 Bilhões

Source: Veja and Advent International Notes: 2010: excluding investments out of Brazil (Burger King negotiation) 2007: excluding US$ 2,4 billions from investments on real estate sector and not private equity Negotiations without released value were not considered at volume, but were counted in the number of trades

Vo

lum

e (U

S$ B

illio

ns)

Nu

mb

er o

f tr

ades

Number of trades Volum (US$ Billion)

But we still have a lot of things to be accomplished...

Fonte: World Federation of Exchange (WFE).

Ranking WFE

23º

Number of listed companies in Stock Markets – 2011

466

476

545

593

746

773

773

777

824

931

940

1 112

1 229

1 411

1 496

1 640

2 079

2 220

2 291

2 680

2 886

3 276

3 945

0 1 000 2 000 3 000 4 000 5 000

BM&FBOVESPA

Mexican Exchange

The SE of Thailand

Tel Aviv SE

Deutsche Börse

Singapore Exchange

NASDAQ OMX Nordic Ex

Warsaw SE

Taiwan SE Corp.

Shanghai SE

Bursa Malaysia

NYSE Euronext (Europe)

Osaka SE

Shenzhen SE

Hong Kong Exchanges

National SE India

Australian SE

NYSE Euronext (US)

Tokyo SE Group

NASDAQ OMX

London SE Group

BME Spanish Exchanges

TMX Group

Opportunities in the Brazilian Capital Market...

Number of companies by size

Segment have been developed with a

EDUCATIONAL presence.

3 thousand

From 15 thousand to 20 thousand

More than 3 million

More than 1,000 employees

Annual sales over BRL 400 million

250–1,000 employees

Annual sales between BRL 20m-400m

Up to 250 employees

Annual sales below BRL 20 million

BM&FBOVESPA initiatives with partners promoting lectures on IPOs

in those some Brazilians cities

Salvador – BA

Curitiba – PR

São Paulo – SP

Alternative for a great number of companies, for

all sizes and with gradual strategy in regard to

access to the capital markets

+

Characteristics of companies seeking

gradual access to the market

=

BM&FBOVESPA works to provide access to SME Companies...

BM&FBOVESPA’s Strategy Reach out to companies in all maturity levels

BM&FBOVESPA’s Strategy – examples Highlight small and medium companies

Ranking 2011 2.000 companies with annual revenues between R$ 18 million and R$ 300 million in 2010

Ranking 2010 1.000 companies with annual revenue between R$ 62,3 million and R$ 230 million in 2009.

BM&FBOVESPA’s Strategy – examples Connecting Companies to Investors – Pre-IPO Stage

FINEP* Agreement with BM&FBOVESPA

Meetings among investors and companies that could possibly make an IPO or receive VC / PE investments

Scope of the event: coaching of hired consultant in structuring

the business plan of non listed companies. Executives from those

companies will be trained to make presentation to institutional

investors, banks, brokers and managers of venture capital

Realized in November 8th 2011 with participation of 4 companies

Presence: 55 people

– 18 representing investors

– 29 representing banks and brokers

– 7 others representing (non listed companies and audit firms)

* Research and Project Financing, also known as the Brazilian Innovation Agency, is a publicly owned company subordinated to the Ministry of Science and Technology – MCT

Cristiana Pereira

Fev-9-12

The Brazilian Capital Market: recent developments and trends in Brazil Capital Market