vccedge quarterly deal update q3 cy2016 -...

VCCEdge Quarterly Deal UpdateQ3 CY2016

2

Summary

Number of Deals

Equity Capital Market

PE Exits

Our Quarterly Deal Report presents a data-driven overview of private equity, mergers & acquisitions and equity capital market deals in India.

Our findings reiterate the slowing pace of PE investments this year after a landmark performance in 2015. Some of the key trends are:

• Angel/Seed funds were a beacon of hope amid a complete slump (low fund raising, tepid exits and a moribund/declining deal market).

• PE exits saw a marginal decline. M&A was the preferred exit route.

• Domestic M&A was the strongest, dominated by few large ticket deals.

• The Equity Capital Market saw IPOs make a stellar comeback, replacing QIPs and Rights Issues as the preferred means to raise capital.

Private Equity Investments

Private Equity Mergers & Acquisitions Equity Capital Markets

3

4

Copyright 2016 Property of Mosaic Media Ventures Pvt. Ltd.

Private Equity Investments – Is this yet another slump?


4,4

25

1,94

3 2,76

8

1,42

6

2,34

0

3,91

2

2,38

0

2,2

48

2,53

7

3,00

7

3,44

6 4,15

8

4,59

1

5,84

9

6,28

8

5,01

9

4,17

5

2,27

9

2,34

4

276

177 164

210

241

186

210

270 273251

277301

381395

469444

396

291

258

0

100

200

300

400

500

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2012 2013 2014 2015 2016

Value of Deals ($ mn) Number of Deals

Private equity investments dipped significantly by 63% to $2.3 billion in the Q3 CY16 as compared to $6.3 billion (a peak) a year ago and 3% higher than the already dismal previous quarter.

Deal making activity declined by 45% to 258 deals as compared to 469 for the same period last year, and 11% lower than the previous quarter.

5

Copyright 2016 Property of Mosaic Media Ventures Pvt. Ltd. Private Equity Mergers & Acquisitions Equity Capital Markets

Private Equity – Angel/Seed drive activity and PEs drive value

52

76

101

245

152

40

57

111

151

69

5241

49 51

29

1 0 2 3 0

19

36

14 198

0

50

100

150

200

250

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

Angel/Seed Venture Capital Private Equity Funds Pre-IPO Placements

Number of Deals Value of Deals ($ mn)

Note (NA) : Deal Value not available

21 34 44 121

49

200

570

607

1,87

8

80

3

2,23

7

728

2,43

3

3,44

6

1,20

4

NA

0

110

74

0

309

1,04

8

252

77

0

287

$0

$1,000

$2,000

$3,000

$4,000

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

While investment has declined significantly across all investor types, smaller (and numerous) bets by angels and seed funds seem to hold out hope.

6


Private Equity – Angel/Seed funds keep activity alive



37

1

99

267

541

53

4

157

441

590

0 200 400 600 800

Placements

Pre-IPO

Private EquityFunds

Venture Capital

Angel/Seed

9M 2015 9M 2016

2,044

43

4,545

1,988

179

2,540

90

9,108

4,716

273

$0 $2,000 $4,000 $6,000 $8,000 $10,000

Placements

Pre-IPO

Private EquityFunds

Venture Capital

Angel/Seed


VC & PE fund investment has declined by 39% & 37% respectively by number of deals and 58% & 50% respectively by value. Activity (number of deals) by angel/seed funds has seen a dip of ~8%.

7


0

100

200

300

400

500


2012 2013 2014 2015 2016

Angel/Seed Venture Capital Private Equity Funds Pre-IPO Placements


Private Equity – Deal activity lowest since Q3 2013

$0

$2,000

$4,000

$6,000

$8,000


2012 2013 2014 2015 2016

Private Equity Breakdown – Number of Deals

Private Equity Breakdown – Value of Deals ($ mn)

8


Deal Size – Smaller bets, cautious investors

1.9

3.5 3.31.9

2.8 3.01.9

0.81.6 2.2

1.1 1.0 1.0 1.60.8 0.8 0.6 1.0 1.0

18.4

12.8

19.8

8.1

11.8

25.6

13.3

10.010.7

14.3 14.515.9

13.4

17.215.8

14.1 13.512.0

13.9

$0

$5

$10

$15

$20

$25

$30


2012 2013 2014 2015 2016

Median ($ mn) Mean ($ mn)

The trends in the mean and median deal value clearly suggests that investors have started writing smaller cheques. Hence not only raising capital was difficult this year, the amount raised was also small.

While a few large transactions skew the average deal size upwards, about

half are typically $1mn and below

Median deal values have dropped by more than 70% over the last 5 years

9


Sectors – Secular decline in deal activity all across


156

44

17

14

13

8

5

1

258

97

27

24

36

17

5

4

0 50 100 150 200 250 300

Information Technology

Consumer Discretionary

Healthcare

Financials

Industrials

Consumer Staples

Materials

Utilities

Q3 2015 Q3 2016


603

456

180

642

178

51

202

31

2,015

2,133

257

753

570

102

56

403

$0 $1,000 $2,000 $3,000



Healthcare

Financials

Industrials

Consumer Staples

Materials

Utilities

Information Technology still rules the roost, others like Consumer Discretionary, Healthcare, and Financials are significant contributors. The decline across all sectors remains secular and worrying.

10


Private Equity – Key Deals

Date Target Buyer Deal Type Deal Value ($ mn)

Sep-2016 Kotak Mahindra Bank Ltd Canada Pension Plan Investment Board Public Equity 190

Aug-2016 Hike Ltd Bharti SoftBank Holdings Pte. Ltd, Tiger Global Private Investment Partners VIII L.P., Tencent Holdings Ltd, Hon Hai Precision Industry Co. Ltd

Venture Capital 175

Jul-2016 India Infoline Finance Ltd CDC Group Plc Private Equity 149

Aug-2016 TCNS Clothing Company Pvt. Ltd TA Associates Advisory Pvt. Ltd Private Equity 140

Jul-2016 Stellar Value Chain Solutions Pvt. Ltd Warburg Pincus India Pvt. Ltd Private Equity 125

Aug-2016 One 97 Communications Ltd Alibaba Group Holding Ltd, MediaTek Inc. Private Equity 120

Sep-2016 Hero FinCorp Ltd ChrysCapital Investment Advisors India Pvt. Ltd, Credit Suisse Group Private Equity 105

Jul-2016 Tata Steel Minerals Canada Ltd Capital Mines Hydrocarbons Fund Private Equity 95

Jul-2016 Oravel Stays Pvt. Ltd VentureNursery, DSG Consumer Partners, Lightspeed Venture Partners IX LP, Sequoia Capital India IV Ltd, Greenoaks Capital Partners LLC, SoftBank Corp.

Venture Capital 90

Sep-2016 Utkarsh Micro Finance Ltd RBL Bank Ltd., Shriram Life Insurance Co. Ltd, ICICI Prudential Life Insurance Company Ltd, HDFC ERGO General Insurance Company Ltd, HDFC Standard Life Insurance Co. Ltd, Small Industries Development Bank of India, Faering Capital Pvt. Ltd, ArpwoodCapital Pvt. Ltd

Venture Capital 59


11


Regional Analysis, Top 5 Cities Q3 2016



67 774

Mumbai

Bengaluru

ChennaiPune

14 141

37

2611

7

2 1



Healthcare

Financials

Others*

507

47 221

17 12

Delhi NCR

101

6

7

12

2

2

4315

24 3

16

92

4

6

Note (*) : Others include, Materials, Industrials & Consumer Staples

While Information Technology dominates all deal markets, consumer discretionary is another dominant sector in Delhi NCR, Mumbai and Bengaluru (the 3 biggest markets)

12


Fund Raising – Is dry powder for the future drying up?


1,04

5

1,34

5

493 65

0

831

475

1,51

7

412

1,01

7

1,02

4

581

1,3

44

1,71

1

1,38

5

1,13

0

1,16

0

2,23

4

767

396

17

20

1112

7

11

13

11

1314

11

15

912

10

13

15

11

4

0

5

10

15

20

25

$0

$500

$1,000

$1,500

$2,000

$2,500


2012 2013 2014 2015 2016


Fund raising has seen a steep decline in Q3 CY16 both on Y-o-Y and Q-o-Q basis. Private Equity funds raised a total of $396 million in Q3 CY16, as compared to $1.13 billion a year ago. A single fund closed ~85% of all funds raised this quarter.

13


Top Funds Raised

Fund Name Fund Status Fund Size ($ mn)

Amount Raised ($ mn)

Asset Manager Launch Date

HDFC Capital Affordable Real Estate Fund-1 Final Close 748 344 HDFC Capital Advisors Ltd Jan-2016

Amplus Realty Fund II First Close 48 32 Amplus Capital Advisors Pvt. Ltd Mar-2015

CapAleph Indian Millennium Fund Pte. Ltd First Close 25 16 CapAleph Advisors India Pvt. Ltd Feb-2012

Excedo Realty Fund-I First Close 90 4 Athamus Venture Management Pvt. Ltd

Oct-2011


14


Exits – Fewer exits, larger ticket size


1,77

8

387

1,96

6

1,90

7

1,43

6

1,36

0 1,57

9

1,10

1

850

1,88

6

1,20

5

1,08

0

1,66

2

2,02

8

1,23

8

829

567

1,33

0

2,08

2

76

54

53

65

79

55

6467

62

80 79 78

99

61

59

78

59 58

55

0

20

40

60

80

100

120

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2012 2013 2014 2015 2016


Exit activity declined marginally, 7% down from 59 deals in Q3 last year and 5% from 58 deals in Q2 2016. A few large ticket deals (mainly M&A acquisitions) increased the value.

15


Exits – Being acquired finds favour

15 1519

2326

15 4

2321

36

17 17

9

20

12

6

1

68

118 7

0

10

20

30

40

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

Merger and Acquisition Equity Capital Market Open Market Buyback Secondary Sales

Exits Breakdown – Number of Deals

Exits Breakdown – Value of Deals ($ mn)



NA

478

13311

1,673

NA NA 36 72 94

717571

810 858

294118

286

69 69 NA

1,132

244157 229

20$0

$600

$1,200

$1,800

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

Being acquired by a larger entity seems to be the favored exit route of late

16


Exits – Big-ticket exits via M&A picks up



23

6

58

11

74

31

24

96

9

59

0 25 50 75 100

Secondary Sales

Buyback

Open Market


Merger and Acquisition

9M 2015 9M 2016

90

70

1,062

621

2,136

1,164

479

2,979

205

101

$0 $1,000 $2,000 $3,000 $4,000

Secondary Sales

Buyback

Open Market


Merger and Acquisition

Open market transactions declined by ~40% (down from 96 deals in 2015 to 58 this year); the value of transactions have dropped by 64%. M&As have increased significantly driven by a few large deals.

17


Exits – “Open market” loses ground to M&A

Private Equity Exits Breakdown – Number of Deals

Private Equity Exits Breakdown – Value of Deals ($ mn)

0

40

80

120


2012 2013 2014 2015 2016

Merger and Acquisition Equity Capital Market Open Market Buyback Secondary Sales

$0

$1,000

$2,000

$3,000


2012 2013 2014 2015 2016

18


Exits – Information technology & healthcare lead value creation


13

11

10

8

8

4

1

10

12

5

6

13

7

2

0 5 10 15


Financials


Healthcare

Industrials

Consumer Staples

Materials

Q3 2015 Q3 2016


1,077

168

48

612

160

10

8

2

239

149

42

257

229

47

$0 $300 $600 $900 $1,200


Financials


Healthcare

Industrials

Consumer Staples

Materials

Information technology and healthcare lead value creation with financials, consumer discretionary and industrials chipping in.

Date Target Seller Exit Type Exit Value ($ mn)

Aug-2016 Bharti Telecom Ltd Temasek Holdings Advisors India Pvt. Ltd M&A 657

Jul-2016 Gland Pharma Ltd KKR India Advisors Pvt. Ltd M&A 577

Jul-2016 Minacs Pvt. Ltd Capital Square Partners Pte. Ltd, CX Capital Management Ltd M&A 420

Sep-2016 Cholamandalam Investment and Finance Company Ltd

Apax Partners LLP,Apax VIII- A L.P. Open Market 93

Aug-2016 RBL Bank Ltd Elephant Capital Fund, Beacon India Private Equity Fund, GajaCapital Fund I Ltd, Capvent India Private Equity Fund II

Initial Public Offering 58

Jul-2016 NCC Ltd Blackstone Advisors India Pvt. Ltd Open Market 41

Aug-2016 Aegis Logistics Ltd Infrastructure India Holdings Fund LLC Open Market 35

Aug-2016 Dilip Buildcon Ltd BanyanTree Growth Capital Initial Public Offering 26

Jul-2016 VRL Logistics Ltd New Silk Route PE Asia Fund LP Open Market 22

Jul-2016 UFO Moviez India Ltd 3i Group Plc Open Market 21

19


Exits – Key Deals


Mergers & Acquisitions


17

21


M&A – Activity stays as usual, a mega deal busts charts

4,78

3

2,76

0

3,83

0

9,82

3

6,33

4

5,61

8

6,50

3

5,72

1

5,21

5

9,42

1

6,72

7

11,6

10

4,71

0

3,58

8 7,20

6

7,67

4 9,87

6

5,78

2

24,6

73227

178 180

212

256

180

239

188

214 220

257

210

260

200

254266 265

239

232

0

50

100

150

200

250

300

$0

$4,000

$8,000

$12,000

$16,000

$20,000

$24,000

$28,000


2012 2013 2014 2015 2016


M&A deals spiked in value, rising 242% (y-o-y) to $25 bn on the back of HDFC Life’s acquisition of Max Life Insurance. Activity has largely kept up with the past quarters and shows no specific departure from the sideways trend.

22


Deal Sub-Type Split – Domestic deal value spiked


3647 47 48

3341

33 35 3327

81

131

153 151 154

2228

22 22 18

0

30

60

90

120

150

180

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

Inbound Outbound Domestic Others

797 1,04

2

1,04

2

2,13

5

2,73

8

1,87

9

2,90

5

307

2,88

5

1,2

01

1,03

8 2,47

5 4,23

0

1,54

0

20,4

37

116

81

1,14

8

646

297

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

M&A Breakdown – Number of Deals M&A Breakdown – Value of Deals ($ mn)

Deal value picked up for domestic M&As from $ 1.5 billion to more than $ 20 billion, while outbound deal value slipped by 58% during the quarter. However, deal activity has declined across all the categories except for domestic M&As.

23


M&A Breakdown – Increased consolidation in domestic market



77

472

91

97

73

425

99

117

0 100 200 300 400 500

Others

Domestic

Outbound

Inbound

9M 2015 9M 2016

2,344

29,041

4,273

4,673

1,089

5,782

4,353

4,281

$0 $10,000 $20,000 $30,000

Others

Domestic

Outbound

Inbound

In 2016 so far, domestic M&As have attracted close to $ 29 billion as against ~$ 6 billion in 2015. The two large domestic deals have contributed more than $ 17 billion, driving the overall share of domestic M&As.

24


M&A Breakdown – Domestic market rules M&A

M&As Breakdown – Number of Deals

M&As Breakdown – Value of Deals ($ mn)

0

100

200

300


2012 2013 2014 2015 2016

Inbound Outbound Domestic Others

$0

$5,000

$10,000

$15,000

$20,000

$25,000


2012 2013 2014 2015 2016

25


Deal size – Few giants, many midgets

A huge spike in the average deal value clearly indicates the impact of standout deals in Q3 2016.

11.7 11.4 10.9 13.7 8.3 10.7 8.0 13.1 10.0 10.7 8.015.0

6.5 10.5 14.7 13.05.3 7.0 6.2

49.3

32.545.6

107.9

52.8 57.9 63.1 65.852.2 57.9 63.1

122.2

44.0 41.2

63.2 64.078.4

54.0

265.3

$0

$50

$100

$150

$200

$250

$300


2012 2013 2014 2015 2016

Median ($ mn) Mean ($ mn)

26


Sectors – Similar levels of activity, increased value


74

44

28

25

20

17

12

9

3

1

78

45

37

21

23

16

14

7

9

4

0 20 40 60 80 100



Industrials

Financials

Healthcare

Materials

Consumer Staples

Utilities

Energy

Telecommunication Services

Q3 2015 Q3 2016


1,618

791

68

9,921

1,337

2,002

209

462

966

7,300

688

946

115

1,006

2,066

578

184

67

1,511

46

$0 $2,500 $5,000 $7,500 $10,000



Industrials

Financials

Healthcare

Materials

Consumer Staples

Utilities

Energy

Telecommunication Services

While a few large deals always skew the number across sectors in M&A, activity has remained largely unchanged across sectors with significant increase in value within financials, telecommunication services, information technology and materials.

27


M&A – Key Deals

Date Target Buyer M&A Type Deal Value ($ mn)

Aug-2016 Max Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd Domestic 9,730

Sep-2016 Reliance Communications Ltd, Wireless Telecom Business

Aircel Ltd, Dishnet Wireless Ltd Domestic 7,300

Jul-2016 Lafarge India Pvt. Ltd Nirma Ltd Domestic 1,400

Jul-2016 Gland Pharma Ltd Shanghai Fosun Pharmaceutical Group Co. Ltd

Inbound 1,261

Sep-2016 JSC Vankorneft ONGC Videsh Ltd, ONGC VideshVankerneft Pte. Ltd

Outbound 930

Aug-2016 Bharti Telecom Ltd Singapore Telecommunications Ltd Inbound 657

Jul-2016 Minacs Pvt. Ltd Synnex Corporation Inbound 420

Jul-2016 Bina Power Supply Ltd JSW Energy Ltd Domestic 402

Aug-2016 Tata Chemicals Ltd, Urea Business Yara Fertilisers India Pvt. Ltd Domestic 399

Aug-2016 Taj Television India Pvt. Ltd Sony Pictures Networks India Pvt. Ltd Domestic 385


28

Equity Capital Market Deals


29


Equity Capital Market – IPO drives the market

561

99

1,66

1

1,82

0

1,95

3

988

556

1,19

7 1,46

5

1,41

7

2,64

6

661

1,44

9

1,55

3

1,06

5

2,10

6

51

1

841

1,97

4

16

8

20

14

25

1624

9

23 16

37

22

31

22

30

15

29

19

44

0

5

10

15

20

25

30

35

40

45

50

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000


2012 2013 2014 2015 2016

Capital Raised ($ mn) Number of Deals

The up-down trend continues in the equity markets. However in Q3 2016, the number of deals grew significantly, 44 companies raised ~$ 2 billion during Q3 CY16, as compared to 19 companies that raised $841 million in the previous quarter, and 30 companies that raised ~1.1 billion in an year ago period.

30


Deal Sub-Type Split – QIP shrinks & IPO rises by value

Equity Capital Market Breakdown – Number of Deals Equity Capital Market Breakdown – Value of Deals ($ mn)

8

1418

24 36

7

7

5

414

1

14

27

1 2

0%

20%

40%

60%

80%

100%

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016

Initial Public Offering Rights Issue Qualified Institutional Placement Institutional Placement Programme

22 24 121

421

1,7621,337

320

342

33

6237

147

2,184

611

2066665

0%

20%

40%

60%

80%

100%

Q3 2012 Q3 2013 Q3 2014 Q3 2015 Q3 2016


The flavor seems to change every 2 years as we moved from Rights Issues (2012) to QIPs (2014) to IPOs (2016) ruling the roost in their respective years.

31


Equity Capital Market Breakdown – QIPs made way for IPOs



8

7

77

22

9

52

0 50 100

Qualified Institutional Placement

Rights Issue

Initial Public Offering

9M 2015 9M 2016

228

112

2,986

2,581

429

1,058

$0 $2,000 $4,000

Qualified Institutional Placement

Rights Issue

Initial Public Offering

IPOs increased by 182% to ~$ 3 billion in value (over the same period last year) while QIPs lost flavor (declining 91% from $2.6 billion to $ 228 million this year).

32


0

10

20

30

40

50


2012 2013 2014 2015 2016

Initial Public Offering Follow-On Offering Rights Issue Qualified Institutional Placement Institutional Placement Programme

Equity Capital Market Breakdown – IPOs drive Q3 2016

Equity Capital Market Breakdown – Number of Deals

Equity Capital Market Breakdown – Value of Deals ($ mn)

$0

$1,000

$2,000

$3,000


2012 2013 2014 2015 2016

33


Equity Capital Markets – Key Deals

Date Target Offering Type Offering Size ($ mn)

Sep-2016 ICICI Prudential Life Insurance Company Ltd Initial Public Offering 905

Jul-2016 Larsen and Toubro Infotech Ltd Initial Public Offering 187

Aug-2016 RBL Bank Ltd Initial Public Offering 179

Sep-2016 L and T Technology Services Ltd Initial Public Offering 134

Aug-2016 Dilip Buildcon Ltd Initial Public Offering 96


34


Glossary

PlacementsPlacement deals include QIPs, Open Market & Private Investment in Public Equity (PIPE) deals.

MaterialsMaterial sector covers chemicals used in different segments, construction materials, containers & packaging, metals & mining, and paper & forest products.

Consumer DiscretionaryConsumer Discretionary sector includes automobiles & components, consumer durables & apparel, consumer services, media, and retailing.

Consumer StaplesConsumer Staples sector contains food & staples retailing, food, beverage & tobacco, and household & personal products.

HealthcareHealthcare incorporates healthcare equipment & services, and pharmaceuticals, biotechnology & life sciences.

FinancialsFinancial sector includes banks, diversified financials, insurance, and real estate.

Information Technology (IT)IT comprises software & services, technology hardware & equipment, and semiconductors & semiconductor Equipment.

Telecommunication ServicesIt includes both diversified and wireless telecommunication services.

UtilitiesUtility encompasses electric, gas, water & multi-utilities and independent power producers & energy traders as well.

IndustrialsIndustrial sector contains all the capital goods , Commercial & Professional Services, and Transportation (air freight & logistics, airlines, marines, road & rail, infrastructure).

EnergyEnergy sector consists of energy equipment & services, and oil, gas & consumable fuels.


VCCEdge is India’s premier financial research platform providing comprehensive data and information to subscribers for deal origination, deal structuring and valuations, gaining market insights, carrying out due diligence, and tracking competition. The platform has in-depth profiles of private and public companies, including detailed financials, deals including private equity, venture capital, M&A, equity capital market issues and debt offerings, key developments, and detailed data on investors and their portfolios.

VCCEdge is fully hosted solution that users access to follow private equity investments and M&A transactions, industry trends, keep track of companies and markets, generate actionable intelligence, identify targets, originate deals and research on deal multiples and valuations. With the help of its robust search and screening tools and download options, the platform provides information on demand and helps reduce research time, allowing users like strategy managers, investors, bankers and consultants to spend more time on analysis.

Corporate OfficeMosaic Media Ventures Pvt. Ltd.,A-83, Sector 2, Noida-201301, Uttar Pradesh, IndiaPhone: +91-120-4171111, Email: [email protected]

Sales OfficeDow Jones & Co., Unit 93, 9th, Floor, Maker Maxity, Bandra Kurla Complex,Bandra (East), Mumbai, 400051 Maharashtra, IndiaPhone: +91-22-61456100

vccedge quarterly deal update q3 cy2016 -...

Documents