vccedge monthly deal update feb 2010

Feb ’10

A RESEARCH PUBLICATION | February 2010

MONTHLY DEAL UPDATEStatistics and analysis of Private Equity, Venture Capital

and Mergers & Acquisitions in India

http://www.vccedge.com/homepage

Contents

Page Number

I. Executive Summary 1

II. Private Equity Deal Flow - Introduction 2- Deal Breakdown 3

- Sectoral Breakdown 5

- Deal of the Month 6- Top 5 Private Equity Deals 7

III. Private Equity Exits 8

IV. M&A Round Up - Introduction 9

- Deal Breakdown 10- Sectoral Breakdown 12

- Deal of the Month 13- Top 5 M&A deals 14

V. Appendix 15

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Tel: +91-120-4171111

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mailto: [email protected]

EXECUTIVE SUMMARY

• Private equity investment in India in February 2010 grew more than 33% as compared to the same period last year. Privateequity firms invested a total of $455 million as against $346 million in February 2009. The total volume of private equity dealswas 26, just one deal more than the 25 deals witnessed in February 2009.

• M&A activity in India saw substantial growth on a month on month basis. The total value of deals was $2,317 million inFebruary 2010 as against $162 million in February 2009. In terms of volume, total number of M&A deals increased more than80% from 28 deals in February 2009 to 51 deals in February 2010.

• The largest private equity deal in February 2010 was Tikona Digital Network, that raised $107 million by selling 70% stake toGoldman Sachs, Indivision India Partners and Oak India Investments. Tower Vision raised $300 million from a consortium led byQuadrangle, however the equity portion is unclear hence has not been included in our report.

• The environment for private exits too has clearly improved with a sharp rise in February 2010 which saw 10 exits worth $475million as against only 3 exits each In February 2009 and February 2008. The major exits of the month were:

- the $323 million exit by Siva Ventures from Aamby Valley Ltd.

- the $62 million exit by Nalanda Capital from Sun TV Network.

MONTHLY REPORT

There is clearly an increase in deal activity in 2010.However, India will require much more confidence, risk appetite and the urge to grow rapidly before it can get back to the peak levels of 2007 and even 2008.

1

PRIVATE EQUITY

INTRODUCTION

Private equity investment in India in February 2010 grew morethan 33% as compared to the same period last year. Deal valuewas $455 million in the second month of 2010 as against $346million in February 2009. Deal volume, was virtually unchangedwith 26 deals recorded in February 2010, one more than the 25deals witnessed in February 2009.

There was a certain degree of momentum that had beenwitnessed in the second half of 2009 with $2.8 billion worth ofdeals as compared to $2 billion in the first half. This continuedon a month on month basis in 2010 with deal value in February2010, 10% higher than that in January 2010, but substantiallylower than December 2009.

A look at monthly numbers reveals that four months in 2009 –June, July, September and December had deal values greaterthan that in February 2010.

$346

$136

$270

$455

$612

$486

$165

$747

$421 $405

$586

$410$455

25

12

22

20

21

27

21

24 24

3638

2726

0

5

10

15

20

25

30

35

40

0

100

200

300

400

500

600

700

800

Feb'09 Mar'09 Apr'09 May'09 Jun'09 Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan' 10 Feb'10

Value Volume

In terms of deal value, monthly deal activity began with a slowmomentum in Nov ’09 and accelerated in Dec ’09 to reach $586million. However, this pace could not be maintained in 2010 anddeal activity in January was recorded lower at $410 million.There was an upswing in Feb ‘10 with deal value 10% higher at$455 million.

Exhibit 1: Month Wise Private Equity Trend

De

al V

alu

e (

$ M

n)

Deal V

olu

me

(Source: VCCEdge) 2

DEAL BREAKDOWN

With the global private equity markets shrinking, investorshave turned away from angel and venture capital deals ingeneral – and India is no exception.

The total number of VC investments announced during Feb’10 stands at 3 with an announced value of $11 million asagainst 8 deals with a total announced value of $31.1 millionin Feb ’09 and 11 deals amounting to $135.8 million in Feb’08.

500

Exhibit 2: Private Equity Breakdown

(Source: VCCEdge)

PRIVATE EQUITY

0 1 2 1 1 02 3 2

11

8

3

11

19

22

28

16

23

0

5

10

15

20

25

30

Feb'05 Feb'06 Feb'07 Feb'08 Feb'09 Feb'10

Angel

VC

PE

Exhibit 3:Median Deal Amount breakdown

$5

$10

$14

$25

$9$10

0

5

10

15

20

25

30


Deal Median ($ Mn)

The median deal value in Feb ’10 declined to $10 million asthe volume of larger deals (particularly deals > $100million) declined.

$13 $10

$28

$75

$16$24

0

10

20

30

40

50

60

70

80


Average Deal Size

Exhibit 4: Average deal size in ($million)

(Source: VCCEdge)

(Source: VCCEdge)

3

$145Mn $139Mn $537Mn $2029Mn $346Mn $455Mn

DEAL BREAKDOWN

500

PRIVATE EQUITY

Exhibit 5: Number of transactions by Deal Size Exhibit 6: Total investment by Deal Size


Undisclosed 2 9 7 13 4 7

Under $ 5m 6 3 5 4 9 1

$5 - $25 m 2 11 7 9 9 13

$25-$50 m 2 - 3 6 2 2

$50 -$100 m 1 - 2 - - 2

$100+ - - 2 8 1 1


Under $ 5m 17 7 8 10 21 2

$5 - $25 m 23 133 77 108 94 158

$25-$50 m 56 - 97 186 71 83

$50 -$100 m 50 - 106 - - 104

$100+ - - 250 1727 161 107

(Source: VCCEdge)(Source: VCCEdge)

4

0% 20% 40% 60% 80% 100%

Feb'05

Feb'06

Feb'07

Feb'08

Feb'09

Feb'10

Undisclosed Under $ 5mn $5 - $25 m

$25-$50 m $50 -$100 m $100+

0% 20% 40% 60% 80% 100%

Feb'05

Feb'06

Feb'07

Feb'08

Feb'09

Feb'10

Under $ 5mn $5 - $25 mn $25-$50 mn

$50 -$100 mn $100+

Private equity deals under $100 million continued their upwardtrend, accounting for 95% of total deal flow in Feb ’10.

Larger deals ($ 100 million and above) accounted for 76% of totalcapital invested in Feb ’10.

Banking, Finance & Insurance, Telecom and Education were themost targeted sectors for investment with deals worth $125million, $107 million and $53 million respectively. Together, theyaccounted for more than 62% of total private equity deal valueduring the month.

Major PE investments influencing the deal values of these sectorswere investments in Tikona Digital Networks, Ambit CorporateFinance, Integreon, Manipal Universal Learning and Multi CommodityExchange of India. The other sectors, which have significantlycontributed to private equity deal value in Feb ’10, are IT/IT Servicesand Real Estate accounting for 21% of total deal value.

SECTORAL BREAKDOWN

PRIVATE EQUITY

The most active sectors in terms of deal volume wereBanking, Finance & Insurance with 6 deals in the month, followedby IT/IT Services and Real Estate with 4 deals each. Other sectorscontributing to the deal volume were Telecom and Educationaccounting for 2 deals each. As seen in Feb ’09, Feb ’10 also saw alarge number of deals in IT/IT Services .

Sno. Sector Value ($Mn) Volume Avg Deal Size*

1Banking, Finance & Insurance 125 6 31

2 Telecom 107 2 107

3 Education 53 2 27

4 IT/IT Services 50 4 50

5 Real Estate 50 4 17

Exhibit 7: Top 5 Sectors by Deal Value in Feb’ 10 ($mn)

(Source: VCCEdge)

Exhibit 8: Top 5 Sectors by Deal Volume for the month Feb’ 10

(Source: VCCEdge)

Telecom , 2

Banking, Finance & Insurance , 6

Education , 2

IT/IT Services , 4

Real Estate , 4

5

*based on disclosed deal values

Telecom , $107

Banking, Finance & Insurance

, $125Education , $53

IT/IT Services , $50

Real Estate , $50

PRIVATE EQUITY

DEAL OF THE MONTH

Target : Tikona Digital Networks Pvt. Ltd. Announced : 10-Feb-10

Indivision India Partners, Oak Investment

Partners, Goldman Sachs

Industry : Telecom Deal Feature : Co investing

(Source: VCCEdge)

Tikona Digital Networks, the wireless Internet broadbandservice provider, raised $107.1 million (INR 500 crores) fromthree PE investors by selling a 70% stake. The investorsinclude Goldman Sachs, Indivision India Partners and OakIndia Investments.

Tikona Digital Networks (TDN) designs and develops wirelessbroadband services for home and enterprise customers inIndia. TDN provides edge voice, video, IT applications andmultimedia content services over any broadband or IP centricnetwork. Tikona is engaged in building the next generationwireless broadband services for home and enterprisecustomers in India. It has an all India class A ISP licensegranted by the Ministry of Communications, Govt. ofIndia, for this purpose. The company was founded in 2008 byRajesh Tiwari and Prakash Bajpai.

The broadband service provider will use the funds to expandits network coverage to 50 cities by 2010 from the current 10cities it has operations in.

The company is also looking at raising additional funds of up toINR 1200 crore by 2011 and has already submitted its proposalto the Foreign investment and promotion board (FIPB) to raiseForeign Direct Investment (FDI).

Buyer : Deal Value ($ mn): 107.1

6

PRIVATE EQUITY

The largest deal by value was Tikona Digital Networks whichraised INR 500 crore from Goldman Sachs, Indivision IndiaPartners and Oak India Investments by selling a 70% stake.

This was followed by the investment made by Qinvest LLC inAmbit Corporate Finance Pte. Ltd. and Actis LLP’s investment inIntegreon Managed Solutions, Inc .

The Top 5 deals occurred across various sectors.

TOP 5 PRIVATE EQUITY DEALS

Exhibit 9: Top Private Equity deals in Feb ‘10

The top 5 PE deals accounted for more than 63%of the total private equity deals in Feb ’10. InFeb ’09, the top 5 deals had accounted for morethan 76% total value for the month.

(Source: VCCEdge)

S.No. Industry Target Buyer PE Type Deal Value ($ mn)

Indivision India Partners, Oak Investment Partners, Goldman Sachs

2Banking, Finance,

Insurance Ambit Corporate Finance Pte. Ltd. QInvest LLC Private Equity 54

3 IT/IT Services Integreon Managed Solutions, Inc Actis LLP Private Equity 50

4 Education Manipal Universal Learning Pvt. Ltd. PremjiInvest Fund Private Equity 43

5Banking, Finance,

InsuranceMulti Commodity Exchange of India Ltd.

Ashmore Investment Management Ltd. Private Equity 40

Tikona Digital Networks Pvt. Ltd.Telecom1 Private Equity 107

7

(Source: VCCEdge)

PRIVATE EQUITY

PRIVATE EQUITY EXITS

Exhibit 10: Top Private Equity Exits in Feb ’10

The month of Feb ‘10 saw 10 exits worth $475 million. In comparison there were only 3 exits each In Feb ’09 and Feb ’08.

Exhibit 11: Private Equity Exits in Feb’ 10(Source: VCCEdge)

S.No. Sector Target Buyer Exit Type Deal Value ($ mn)

1 Real Estate Aamby Valley Ltd. Siva Ventures Ltd. Buyback 323

2 Media & Entertainment Sun TV Network Ltd. Nalanda India Fund Open Market 61

3 Media & EntertainmentHathway Cable & DatacomLimited

ChrysCapital & Morgan Stanley India IPO 40

4 Logistics SpiceJet Ltd. Istithmar World Capital Open Market 36

5 Logistics Pipavav Shipyard Ltd. 2i Capital PCC Open Market 21

M&A, 3

Buyback, 1Open

Market, 5

IPO, 1

8

Dea

l Val

ue

($ M

n)

Deal V

olu

me

(Source: VCCEdge)

MERGERS & ACQUISITION

INTRODUCTION

Exhibit 12: Month Wise M&A Trend

In terms of deal value, the monthly deal activity began with aslow momentum in Nov ’09, accelerated in Dec ’09 to reach$2,991 million. However, this pace could not be maintained in2010 and deal activity recorded a dip in Jan ’10 & Feb ’10 withdeals worth $2,816 million and $2,317 million respectively.

M&A deal value during February 2010 stood at $2,317million, 13 times the same period last year. Deal count alsowitnessed an upward trend and increased by 82% to 51 dealsin February 2010, as compared to 28 deals witnessed duringFebruary 2009.

There was a certain degree of momentum that had beenwitnessed in the second half of 2009 with $8.4 billion worthof deals as compared to $6.6 billion in the first half. Howeveron a month on month basis deal value in February 2010 wassubstantially lower than that in Jan ’10 and Dec ’09.

$162

$3,725

$1,088

$513

$1,160 $1,107

$602

$1,231

$650

$1,832

$2,991$2,816

$2,317

28

36

2927

40

46

32 32

42 42

5254

51

0

10

20

30

40

50

60

0

500

1000

1500

2000

2500

3000

3500

4000

Feb'09 Mar'09 Apr'09 May'09 Jun'09 Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan' 10 Feb'10

Value Volume

A look at monthly numbers reveals that two months in 2009 –March and December had deal values greater than that inFebruary 2010.

9

The number of domestic deals increased from 18 and 8 in Feb’08 & Feb ’09 respectively to 23 in Feb ’10. The value ofdomestic deals was $980 million in Feb ’10 compared to $4million in Feb ’09.

In terms of volume, the number of outbound deals more thandoubled from 8 in Feb ’09 to 18 in Feb ’10.

The number of inbound deals was virtually unchanged with 8deals in Feb ’10, one less than the 9 deals witnessed in Feb ‘09.

DEAL BREAKDOWNExhibit 13: M&A Breakdown

(Source: VCCEdge)


4 4

13

18

8

23

12

108

98

6

10

6

11

8

18

0

5

10

15

20

25


Domestic

Inbound

Outbound

$395Mn $443Mn $19,237Mn $2,689Mn $162Mn $2,317Mn

$5

$20$22 $21

$3

$22

0

5

10

15

20

25


Deal Median ($ Mn)

Exhibit 14:Median Deal Amount breakdown

The median deal value in Feb ’10 increased to $22 millionas the volume of larger deals increased.

$40$27

$696

$136

$14$82

0

100

200

300

400

500

600

700

800


Average Deal Size

Exhibit 15: Average deal size in ($million)

(Source: VCCEdge)

(Source: VCCEdge)10

DEAL BREAKDOWN

500

Exhibit 16: Number of transactions by Deal Size Exhibit 17: Total M&A volume by Deal Size

M&A deals under $100 million showed an upwardtrend, accounting for more than 80% of deal flow in Feb ’10.

Larger deals ($ 100 million and above) continued their dominanceaccounting for 72% of total capital invested in Feb ’10.


Undisclosed 7 6 12 21 17 23

Under $ 5m 5 4 4 4 7 5

$5 - $25 m 2 3 8 7 1 10

$25-$50 m 2 3 2 7 2 5

$50 -$100 m - - - 2 1 3

$100+ 1 2 7 1 - 5


Under $ 5m 8 13 6 10 13 10

$5 - $25 m 22 50 96 99 5 136

$25-$50 m 57 112 78 258 68 197

$50 -$100 m - - - 121 76 249

$100+ 309 267 19056 2200 - 1724

(Source: VCCEdge)(Source: VCCEdge)

0% 20% 40% 60% 80% 100%

Feb'05

Feb'06

Feb'07

Feb'08

Feb'09

Feb'10

Undisclosed Under $ 5m $5 - $25 m

$25-$50 m $50 -$100 m $100+

0% 20% 40% 60% 80% 100%

Feb'05

Feb'06

Feb'07

Feb'08

Feb'09

Feb'10

Under $ 5mn $5 - $25 mn $25-$50 mn

$50 -$100 mn $100+


11

Telecom, Agriculture and Real Estate were the most targeted sectorsfor investment with deals worth $867 million, $358 million and $323million respectively. Together, they accounted for more than 65% oftotal private equity deal value during the month.

The most active sectors in terms of deal volume wasManufacturing with 11 deals in the month. Followed byTelecom, Agriculture and Banking, Finance & Insurance with 4deals each in Feb ’10. Other sector contributing significantly todeal volume Real Estate accounting for 2 deals . As seen in Jan’09, Jan ’10 also saw a large number of deals in Manufacturing.

The major transactions influencing the deal values of these sectorswere transactions in Essar Telecom Infrastructure, Unitech WirelessLtd. and Equipav SA Acucare amongst others. Other sectors, whichhave significantly contributed to M&A deal value in Feb ’10, areManufacturing and Banking, Finance & Insurance, both accountingfor 21% of total deal value.

SECTORAL BREAKDOWN

Exhibit 18: Top 5 Sectors by Deal Value for the month Feb’ 10 ($mn)

Exhibit 19: Top 5 Sectors by Deal Volume for the month Feb ’10(Source: VCCEdge)

(Source: VCCEdge)


Snos. Sector Value ($Mn) Volume Avg Deal Size *

1 Telecom 867 4 289

2 Agriculture 358 4 119

3 Real Estate 323 2 323

4 Manufacturing 262 11 37

5Banking, Finance & Insurance

243 4 121

Telecom , $867

Agriculture , $358

Real Estate , $323

Manufacturing , $262

Banking, Finance & Insurance

, $243

Telecom , 4

Agriculture , 4

Real Estate , 2Manufacturing , 11

Banking, Finance & Insurance , 4

12

*based on disclosed deal values


DEAL OF THE MONTH

(Source: VCCEdge)

Target : Unitech Wireless Ltd. Announced : 10-Feb-2010

Telenor ASA 433.4

Industry : Telecom Deal Feature : Strategic Investment

Buyer : Deal Value ($ mn):

Telenor, a Norway-headquartered telecom major, hiked itsstake in Unitech Wireless, with an investment of $433.4million (INR 2,022 crore). Post this transaction, the investorsstake has increased to 67.25% from the 60.1% held earlier.

Unitech Wireless is a joint venture company of real estatefirm Unitech Ltd and Nordic telecom giant Telenor Group. Itlaunched its India operation across eight circlesinitially, under the brand name Uninor. The eight circlesinclude Tamil Nadu, Kerala, Karnataka, AndhraPradesh, Uttar Pradesh East, Uttar Pradesh West and Bihar.

.

Unitech Wireless was founded in 2008 and is based in NewDelhi. With this fresh round of funding, Telenor’s totalinvestment in Uninor stands at INR 6,135 crore. This is thefourth and final tranche by Telenor into the firm.

(Source: VCCEdge)

13


Exhibit 20: Top M&A deal in Feb ’10

The largest deal by value was Telenor ASA acquisition of a 7.15%stake in Unitech Wireless Ltd. for a price of $433.4 million. Thiswas followed by, Transend Infrastruture’s $433 million buyout ofEssar Telecom Infrastructure and Shree Renuka Sugars’acquisition of a 51% stake in Equipav SA Acucare Alcool for aprice of $334 million.

Top deals have occurred across various sectors. Two of the topfive deals were in the Telecom sector.

TOP 5 M&A DEALS

The top 5 M&A deals accounted for more than71% of the total M&A deals in Feb ’10. In Feb’09, top 5 deals accounted for more than 94%of total value for the month.

(Source: VCCEdge)

Snos. Sector Target Buyer M&A Type Value1 Telecom Unitech Wireless Ltd. Telenor ASA Inbound 433.4

2 TelecomEssar Telecom Infrastructure Pvt. Ltd.

Transcend Infrastructure Ltd. Domestic 433

3 Agriculture Equipav SA Acucare Alcool Shree Renuka Sugars Ltd. Outbound 334.74 Real Estate Aamby Valley Ltd. Sahara India Commercial Corp. Ltd. Domestic 3235 Banking, Finance, Insurance Northgate Capital LLC Religare Enterprises Ltd. Outbound 200

14

APPENDIX

MOST ACTIVE INVESTMENT BANKS AND LAW FIRMS

Motilal Oswal Investment Advisors Pvt. Ltd. SBI Capital Markets Limited Angermann M&A International GmbH

Banco Itau BBA SA Blend Financial Services Ltd. Enam Securities Pvt. Ltd. Equirus Capital Pvt. Ltd. Ernst & Young Pvt. Ltd. Grant Thornton ICICI Securities Ltd. IL&FS Financial Services Ltd.

Jefferies India Pvt. Ltd. Kalozal Consultants Pvt. Ltd. Kotak Investment Banking Mape Advisory Group Pvt. Ltd. Marks Baughan & Co, LLC Merrill Lynch & Co. Inc. o3 Capital Global Advisory Pvt. Ltd. Singhi Advisors Limited

Viedea Capital Advisors Pvt. Ltd. Yes Bank Ltd.

Active Investment Banks in 2010

AZB & Partners Desai & DiwanjiIndus G&D Law

Khaitan & Company LexygenNishith Desai Associates Rajani Associates Allen & Overy LLP ALMT Legal Argus Partners Davis Polk & Wardwell LLP

Goodwin Procter LLP MMB Legal Naik Naik & Co. Reed Smith Richards Butler LLP Tatva Legal Vaish Associates Sand Hill Counsel

Active Law Firms in 2010

15

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For more information:Arjun Bahl I Analyst I VCCEdge

+91-120-4171103 I [email protected]

For sales enquiries:Shashank Randev I BDM I VCCEdge

+91-120-4171111 I [email protected]

vccedge monthly deal update feb 2010

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