mds-iii brochure 221210

34
MILESTONE DOMESTIC SCHEME III (MDS III) A Real Estate Fund with Equity like Returns & Debt like Security

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Page 1: MDS-III Brochure 221210

MILESTONE DOMESTIC SCHEME III (MDS III)A Real Estate Fund with Equity like Returns & Debt like Security

Page 2: MDS-III Brochure 221210
Page 3: MDS-III Brochure 221210

PAGE NO.

FUND SUMMARY 1-3

MILESTONE CAPITAL - OVERVIEW & PAST PERFORMANCE 4-6

STRUCTURED / MEZZANINE FUNDING - OVERVIEW & RATIONALE 7-10

FUND - STRUCTURE, INVESTMENT PROCESS, INVESTMENT PHILOSOPHY & TEAM 11-14

RISK, MITIGANTS & INVESTOR PROTECTION 15-16

APPENDIX 17-23

DISCLAIMER: THIS PRESENTATION IS INTENDED ONLY FOR THE BENEFIT OF POTENTIAL INVESTORS TO WHOM THE PRESENTATION IS MADE OR DELIVERED FOR THE PURPOSE OF CONSIDERING A POSSIBLE INVESTMENT IN THE MILESTONE DOMESTIC SCHEME III (’The Fund’). THE PRESENTATION IS NOT AND SHOULD NOT BE DEEMED TO

CONSTITUTE AN OFFER TO INVEST OR A SOLICITATION OF AN OFFER TO INVEST, TO OR FROM THE PUBLIC IN GENERAL OR TO OR FROM ANY PERSON OTHER THAN THE PERSON TO WHOM THE SAME IS ADDRESSED.

ANY REPRODUCTION HEREOF IN WHOLE OR IN PART, OR THE DISCLOSURE OF ITS CONTENTS OR THE DISTRIBUTION OF THE PRESENTATION, WITHOUT THE PRIOR WRITTEN CONSENT OF MILESTONE CAPITAL ADVISORS LIMITED, IS PROHIBITED.

THE CONTENTS OF THE PRESENTATION ARE PROVISIONAL AND MAY BE SUBJECT TO CHANGE. THE PRESENTATION IS NEITHER A PROSPECTUS NOR AN OFFER OR INVITATION TO APPLY FOR UNITS OF FUND. THE INFORMATION CONTAINED HEREIN IS NOT EXHAUSTIVE AND MUST BE READ IN CONJUNCTION WITH THE INFORMATION MEMORANDUM

AND OTHER DOCUMENTS.

WHILE REASONABLE CARE HAS BEEN TAKEN TO ENSURE THAT THE INFORMATION INCLUDED HEREIN IS CORRECTLY AND FAIRLY REPRESENTED, MILESTONE AND OTHER PARTIES INVOLVED IN THE PREPARATION HEREOF ASSUME NO LIABILITY FOR THE RELEVANCE, ACCURACY OR COMPLETENESS OF THE CONTENTS HEREIN.

CERTAIN INFORMATION CONTAINED IN THIS PRESENTATION CONSTITUTES FORWARD-LOOKING STATEMENTS, OPINIONS OR BELIEFS. DUE TO VARIOUS RISKS AND UNCERTAINTIES, ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS, OPINIONS OR BELIEFS. CERTAIN INFORMATION CONTAINED

IN THIS PRESENTATION (INCLUDING MARKET DATA) HAS BEEN OBTAINED FORM THIRD PARTY SOURCES. WHILE SUCH INFORMATION IS BELIEVED TO BE RELIABLE FOR THE PURPOSES USED HEREIN, NO REPRESENTATIONS ARE MADE AS TO ACCURACY OR COMPLETENESS THEREOF AND MILESTONE DOES NOT TAKE ANY RESPONSIBILITY FOR

SUCH INFORMATION

IN MAKING AN INVESTMENT DECISION, POTENTIAL INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE FUND DOCUMENTS AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. BEFORE MAKING AN INVESTMENT, EACH POTENTIAL INVESTOR SHOULD MAKE ITS INDEPENDENT ASSESSMENT AND INQUIRIES

AND CONSULT ITS OWN ADVISORS AS TO LEGAL, BUSINESS, TAX AND RELATED MATTERS CONCERNING AN INVESTMENT IN FUND.

THE FUND AND ITS PORTFOLIO COMPANIES ARE SUBJECT TO SEVERAL RISK FACTORS THAT MAY AFFECT THE FUND PERFORMANCE.

Page 4: MDS-III Brochure 221210

FUND SUMMARY

Page 5: MDS-III Brochure 221210

FUND SUMMARY

FUND OVERVIEW

STRUCTURED/MEZZANINE FINANCING OPPORTUNITIESIN REAL ESTATE

INVESTMENT STRATEGY

INVESTMENT ADVISOR

1

Page 6: MDS-III Brochure 221210

FUND SUMMARY

UNIQUEINVESTMENT OPPORTUNITY

LOW COSTS ANDADVISOR SHARE LINKEDTO PERFORMANCE

2

PROVEN TRACK RECORD OFINVESTMENT ADVISOR

The Advisors’ proven investment strategy of applying the rigor of private equity evaluation approach to real estate opportunities ensures attractive returns on capital

&& &

&

Page 7: MDS-III Brochure 221210

FUND LIFE

MINIMUM COMMITMENT

DRAWDOWN

COMMITMENT PERIOD

HURDLE RATE

TARGET RETURN

CARRIED INTEREST

MANAGEMENT FEE

REDEMPTION AND DISTRIBUTIONS

KEY FUND TERMS

3

Page 8: MDS-III Brochure 221210

MILESTONE CAPITAL – OVERVIEW AND PAST PERFORMANCE

Page 9: MDS-III Brochure 221210

MILESTONE CAPITAL ADVISORS - OVERVIEW

WELL RESOURCED INVESTMENT PLATFORM

CORPORATE GOVERNANCE

& &

&

RAPID BUSINESS GROWTH

PERFORMANCE& & IL&

& &

230

525

425

505

400

MDS I2007

IL&FSMilestone I

2007

MDS II2008

IL&FSMilestone II

2009

MilestoneFund LLC

2009

Real Estate Funds Raised (Rs. Crores) Real Estate Funds Asset Class Mix (Area)

RESIDENTIAL 45%

COMMERCIAL 25%

RETAIL 1%

LOGISTIC PARKS 29%

4

EXPERIENCE IN REAL ESTATE

The team includes professionals with investment, development and management skills who are actively involved and add value at each stage of the investment lifecycle

Page 10: MDS-III Brochure 221210

MILESTONE CAPITAL ADVISORS - DEVELOPMENT FUNDS PERFORMANCE

Since its launch in 2007

DETAILS OF EXITS

Location Fund Development Type Exit Extent Investment Exit Date Investment Multiple Date (Times)

5

Page 11: MDS-III Brochure 221210

DETAILS OF EXITS

MILESTONE CAPITAL ADVISORS - YIELD FUNDS PERFORMANCE

Regular quarterly payouts to investors have been made in the range of 10% -12% from IL&FS Milestone Fund-I & II

Since its launch in 2007, IL&

6

Location Fund Development Type Exit Extent Investment Exit Date Investment Multiple

Date (Times)

&

&

Page 12: MDS-III Brochure 221210

STRUCTURED / MEZZANINE FUNDING – OVERVIEW AND RATIONALE

Page 13: MDS-III Brochure 221210

MARKET SCENARIO AND OPPORTUNITY

– Nature of Funding:

– Attractive Returns:

– Lower Risk:

– Pricing:

– Short Tenure: d

– Origination:

CURRENT MARKET SCENARIO

PROPOSED STRATEGY: MDS III – Investment Horizon of 3½ years [option of extension of two terms of one year each]

7

Page 14: MDS-III Brochure 221210

FEATURES KEY CONSIDERATIONS

ATTRACTIVENESS

CONCEPT OF STRUCTURED / MEZZANINE FINANCING

10

Typi

cal A

nnua

l Ret

urn

(%)

Risk (Volatility)

15

20

25

30

Debt

Mezzanine

Equity

Indicative Capital Structure

DEBT 45%

EQUITY 25%

MEZZANINE STRUCTURE 30%

8

Page 15: MDS-III Brochure 221210

REAL ESTATE FUNDING - COMPARISON

DEVELOPMENT FINANCE COMPLETED PROJECTS FINANCE STRUCTURED/MEZZANINE FINANCE

Investment Strategy

Stake

Evaluation Approach

Investment Term

Security

Return

Periodicity of Returns

Rights at Liquidation

9

Page 16: MDS-III Brochure 221210

The following are select completed investments in existing funds with a similar investment strategy to that of MDS III

COMPLETED SIMILAR INVESTMENTS

Godrej Prakriti

Dheeraj Insignia

Neptune Swarajya

The above investment are structured transactions with adequate security coveragefor investment

10

Page 17: MDS-III Brochure 221210

FUND – STRUCTURE, INVESTMENT PROCESS,INVESTMENT PHILOSOPHY AND TEAM

Page 18: MDS-III Brochure 221210

TAXATION

&

MDS III - FUND STRUCTURE AND TAXATION

ExitProceeds

Investment by way ofEquity & Equity Linked Instruments

ManagementFees

Investment Distribution

Investors

Milestone CapitalAdvisors Limited

Portfolio Company 1 Portfolio Company 2 Portfolio Company 3

Milestone Domestic Scheme - III(A SEBI Registered Venture Capital Fund)

Milestone TrusteeshipServices Private Limited

TrusteeInvestment Advisor

11

Page 19: MDS-III Brochure 221210

MDS III - INVESTMENT PROCESS

12

InvestorReturns

Transaction Sourcing Preliminary Screening Detailed Review Presentation to Investment Committee (IC)

DealClosure

TermSheet

DealMonitoring

ICApproval

Active Management

ExitProceeds

SigningDetailed Due Diligence Negotiation

network of extensive relationships

investment banks, brokers, property agents

opportunity

discussions

including catchment area SWOT analysis

judging construction & project execution capability

term sheet

conducted by the team/third party

conducted by external agencies

and security creationplans and providing valuable inputs to the developers if required at various stages

as well as timing including selection of bankers

capital redemption

the Investment Committee and obtaining their approval

Page 20: MDS-III Brochure 221210

MDS III - Segment Focus

RESIDENTIAL 75%

COMMERCIAL 15%

OTHERS 10%

DERISKING*

MDS III - INVESTMENT PHILOSOPHY

MDS III - Geographical Focus

WEST 60%

SOUTH 25%

OTHERS 15%

Investment Focus

13

Single Company Level Investment Limits

Single Developers/Group Level Investment Limits

Page 21: MDS-III Brochure 221210

MDS III - TEAM PROFILE

Ashish Joshi

Mahesh Payannavar

Bhavya Bagrecha

Nilesh Karkhanis

Rahul Deshpande

14

Page 22: MDS-III Brochure 221210

RISK, MITIGANTS AND INVESTOR PROTECTION

Page 23: MDS-III Brochure 221210

MDS III - KEY RISK CONSIDERATIONS AND MITIGANTS

Key Risk FactorsKey Risk Type Key Mitigants

Economic andRegulatory Risks

Execution Risk

Financial Risk

Exit Risk

General Risks

15

Page 24: MDS-III Brochure 221210

TYPICAL PROTECTION RIGHTS

16

SECURITIES ON INSTRUMENTS

Investment to be structured with Put / Call option to sell / buy the shares at the agreed valuation

Put/Call Option

Promoters shares in the SPV/Portfolio company would be pledged in an escrow account and pledge would be released only upon receiving the agreed return

Share Pledge/Escrow

Corporate or personal guarantee of the Promoters to be invoked in case of default in payment of agreed return

Guarantee

CONTROL AND MANAGEMENT

Right to appoint directors on the board of the SPV /Portfolio company Board Seat

The sale proceeds of the project would be deposited in the Escrow account which would be jointly managed by Investor and Promoter / Developer

Escrow mechanism

Page 25: MDS-III Brochure 221210

APPENDIX

Page 26: MDS-III Brochure 221210

INDICATIVE DEAL PIPELINE

Project 1

Project 2

Project 3

Project 4

Project 5

Project 6

Project 7

Location DevelopmentType

Indicative Amount(Rs. crores)Project

17

APPENDIX A

Page 27: MDS-III Brochure 221210

INDIA MACROECONOMICS - STEADY GROWTH IN POPULATION AND URBANIZATION

0

20

40

60

80

100

120

140

160

180

1995-96 1998-99 2001-02 2005-06 2009-10

Urban Households Rural Households

Total number of Households (million)

Source: NCAER

0%

1%

1%

2%

2%

3%

850

900

950

1000

1050

1100

1150

1200

98-9

9

99-0

0

00-0

1

01-0

2

02-0

3

03-0

4

04-0

5

05-0

6

06-0

7

07-0

8

08-0

9

Population (million) and Annual Growth Rates (%)

18

Urban CAGR 3%Rural CAGR 2%

APPENDIX B

Page 28: MDS-III Brochure 221210

INDIA MACROECONOMICS - GDP GROWTH LED BY SERVICES & INDUSTRIAL PERFORMANCE

0%

2%

4%

6%

8%

10%

12%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2005 2006 2007 2008 2009 2010

Growth Rate (%)

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009 2010

Agriculture Manufacturing Services

19

APPENDIX B

Page 29: MDS-III Brochure 221210

INDIA MACROECONOMICS - OTHER FACTORS ALSO INDICATE A FAVOURABLE TREND

Construction Housing & Real Estate Other Sectors

-

5

10

15

20

25

30

35

40

45

2005-06 2006-07 2007-08 2008-09 2009-10

Foreign Investment (US$ bn)

0

5000

10000

15000

20000

25000

Mar

-07

May

-07

Jul-

07

Sep-

07

Nov-

07

Jan-

08

Mar

-08

May

-08

Jul-

08

Sep-

08

Nov-

08

Jan-

09

Mar

-09

May

-09

Jul-

09

Sep-

09

Nov-

09

Jan-

10

Mar

-10

May

-10

Dow Jones

Performance of the Indian Stock Indices and Dow Jones

20

APPENDIX B

Page 30: MDS-III Brochure 221210

INDIA REAL ESTATE - IN RECOVERY MODE….

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Dec-07

Feb-0

8

Mar-08

Apr-08

May-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Feb-0

9

Mar-09

Apr-09

May-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Feb-1

0

Mar-10

Apr-10

May-10

Aug-10

-

&

21

APPENDIX B

Page 31: MDS-III Brochure 221210

…LED BY IMPROVEMENT IN RESIDENTIAL LAUNCHES AND SALES

0%

20%

40%

60%

80%

100%

120%

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

NCR-Delhi Mumbai Chennai Pune Hyderabad Kolkata

0%

5%

10%

15%

20%

25%

30%

0

10000

20000

30000

40000

50000

60000

70000

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

New Launches Net Absorption Absorption Rate

40%

30%

20%

10%

0%1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Mumbai NCR-Delhi Chennai

Abso

rpti

on R

ate

(%)

40%

30%

20%

10%

0%1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

Hyderabad Kolkata Pune

Ab

sorp

tio

n R

ate

(%

)

22

APPENDIX B

Page 32: MDS-III Brochure 221210

SUPPORT PARTNERS

&

&

&

Kn

LEGAL ADVISORS

TAX AND STRUCTURING ADVISORS

AUDITOR

VALUATION AND MARKET INTELLIGENCE

REGISTRAR AND TRANSFER AGENT

23

APPENDIX C

Page 33: MDS-III Brochure 221210
Page 34: MDS-III Brochure 221210

CONTACT INFORMATION - For Fund related queries

CONTACT INFORMATION - For Operational queries

Mahesh Payannavar - Sr. Principal, Real Estate InvestmentsEmail : [email protected]

Afaque Ahmed - VP, Real Estate InvestmentsEmail : [email protected]

Amit Kumar - Regional Head North, Fund Raising & Investor ServicesEmail : [email protected]

Ami Jhaveri - Manager, Investor RelationsEmail : [email protected]

Cell :

Namrata Sharma - AVP, Investor Relations & Fund Raising Email : [email protected]

Cell :

Prabhu A - Sr. Executive, Investor RelationsEmail : [email protected]

Cell :

Sachin Tulsyan - & DevelopmentEmail : [email protected]

Ujwal Parekh - Associate, Real Estate InvestmentsEmail : [email protected]

MILESTONE CAPITAL ADVISORS LIMITED