Snapshot of Q1

Private Equity

• Total private equity investment in India went up by more than 185% from $675 million in Q1 2009 to $1,943 million in Q1 2010.
• The median deal amount and the average value of private equity deals in Q1 2010 increased to $10 million and $26 million respectively from $8million and $19 million in 2009.
• Utilities, Consumer Discretionary & Financials were the most targeted sectors for investment with deals worth $484 million, $440 million and $403 million respectively.
• There were 32 exits worth $824 million in Q1 2010 as compared to only 9 exits in Q1 2009.

Mergers & Acquisitions

• Deal value rose to $19,198 million in Q1 2010, up from $5,195 million in Q1 2009.
• The number of domestic deals doubled from 39 deals worth $2,270 million in Q1 2009 to 80 deals worth $4,069million in Q1 2010.
• In terms of volume, the number of outbound deals more than doubled from 24 in Q1 2009 to 51 in Q1 2010, while in terms of value the increase was more than 7X, primarily due to the Bharti – Zain deal.
• The number of inbound deals increased to 29 in Q1 2010 from 24 deals in Q1 2009.
• Telecommunication Services, Energy and Healthcare were the most targeted sectors with deals worth $14,036million, $1,172 million and $961 million respectively in the latest quarter.

After a turbulent 2009, private equity investments in India displayed steady signs of recovery in the first quarter of 2010. This was helped by improved GDP numbers, stability in the business environment and an impressive recovery in the Indian stock market; which exhibited higher investor confidence, narrowing spreads and reduced volatility. The latest quarter registered the highest value of deals since 2009.

For the quarter ended March 2010, total announced deal value was $1,943 million, a jump of more than 185% from $675 million in Q1 2009. Total deal count in Q1 2010 also increased by 35% to 88 deals, up from 65 in Q1 2009. Interestingly, despite the enormous growth in deal value on a quarter-on-quarter basis, the deal count decreased by 11% to 88, down from 99 in Q4 2009.

Deal Breakdown

• Total number of Venture Capital investments announced in Q1 2010 stands at 17 with an announced value of $117million as against 23 deals at an announced value of $88 million in Q1 2009 and 37 deals amounting to $180 million in Q1 2008.

• The median deal amount and the average value in Q1 ’10 increased to $10 million and $26 million respectively as the volume of larger deals (particularly deals > $100million) increased.

• Private equity deals under $50 million accounted for 91% of total deal volume in Q1 ‘10.

• Larger deals ($50 million and above) accounted for 54% of total capital invested in Q1 ’10 as against 43% in Q1 ‘09.

Sectoral Breakdown

Utilities, Consumer Discretionary & Financials were the most targeted sectors for investment with deals worth $484 million, $440 million and $403 million respectively in Q1 2010. Together, they accounted for more than 68% of total private equity deal value during the quarter.

The major private equity deals were investments in Star Health & Allied Insurance, Coastal Projects Pvt. Ltd., Tikona Digital Networks Pvt. Ltd., Coffee Day Resorts & Hotels Ltd. and Asian Genco Pte Ltd. Other sectors, which have significantly contributed to private equity deal value in Q1 2010, are Information Technology and Industrials accounting for 14% of total deal value.

The most active sectors in terms of deal volume was Financials with 23 deals in the quarter, followed by Information Technology and Consumer Discretionary with 19 and 17 deals respectively. Other sectors contributing to the deal volume were Industrials & Utilities accounting for 7 and 5 deals each.

Energy: The Oil & Gas Exploration & Production sub-industry led this sector with 2 deals in Q1 2010. Energy accounted for 1.3% of deals in Q1 2010.

Materials: Materials was not popular among the investors. The sector saw 1 deal at a value of $35 million in Q1 2010.

Industrials: Deal volume in Q1 2010 decreased by 63%; Invested capital decreased by 60% from the $324 million spent in Q4 2009; Industrials accounted for 6.7% of deals in Q1 2010.

Consumer Discretionary: It accounted for 22.6% of deals in Q1 2010.

Telecommunication Services: It saw 4 deals at an announced value of $122 million. The sector accounted for 5.8% of deals in Q1 2010.

Utilities: This industry saw 5 deals at an announced value of $484 million in Q1, 2010. The sector accounted for 24.9% of deals in Q1 2010.

Top 5 Deals in 2010

Top 5 deals accounted for more than 45% of the total private equity deals in Q1, 2010.

Morgan Stanley Infrastructure Partners and others invest $425 MN in Asian Genco Pte Ltd:

• Morgan Stanley Infrastructure Partners, General Atlantic LLC, Goldman Sachs Investment Management, Norwest Venture Partners and Everstone Capital invested $425 million (INR 19.33 billion) in Asian Genco Pte Ltd.
• The company will use these funds for grow their power generation assets across India.
• Wong Partnership LLP acted as legal advisor to Asian Genco Pte Ltd. on the deal.
• Asian Genco is an infrastructure company with investments in Indian power generation assets and engineering services businesses.

Kohlberg Kravis Roberts & Co. and others invest $200 MN in Coffee Day Resorts & Hotels Ltd:

• Kohlberg Kravis Roberts, New Silk Route Partners and Standard Chartered Private Equity acquired 20% stake in Bangalore based Coffee Day Resorts & Hotels Ltd. for a price of $200 million (INR 9.21 billion).
• The company will use the proceeds to increase the number of retail outlets and also add international locations to its portfolio in Austria, Pakistan and Dubai.
• AZB Partners, Simpson, Thacher & Bartlett acted as legal advisor to KKR and Dua Associates, Tatva Legal advised Coffee Day on the deal.
• Coffee Day Resorts & Hotels Ltd., a wholly owned subsidiary of Amalgamated Bean Coffee Trading Co. Ltd., owns and operates hotels and resorts.

Indivision India Partners and others invest $107 MN in Tikona Digital Networks Pvt. Ltd.

• Goldman Sachs Investment Partners, Indivision India Partners and Oak India Investments acquired 70% stake in Mumbai based Tikona Digital Networks Pvt. Ltd. for a price of $107.1 million (INR 5 billion).
• The company will use the funds to expand its network coverage to 50 cities by 2010 from 10 cities.
• Tikona Digital Networks designs and develops wireless broadband services for home and enterprise customers in India. TDN provides edge voice, video, IT applications and multimedia content services over any broadband or IP centric network.

ICICI Venture and others invest $100 MN in Star Health & Allied Insurance

• ICICI Venture Ltd., Sequoia Capital India and Carlyle Group acquired 40% stake in Chennai based Star Health & Allied Insurance Co. Ltd. for a price of $100 million (INR 4.5 billion).
• The deal values the target company at $250 million (INR 11.25 billion).
• MAPE Advisory Group acted as financial advisor to Star Health and Ernst & Young advised the investors on the deal.
• Star Health & Allied Insurance Co. Ltd. provides individual and group health insurance products in India.

Fidelity International Ltd. and others invest $55 MN in Coastal Projects Pvt. Ltd.

• Deutsche Bank AG, Fidelity International Ltd. Sequoia Capital India, Baring Private Equity Asia acquired 16% stake in Hyderabad based Coastal Projects Pvt. Ltd. for a price of $55.15 million (INR 2.5 billion).
• The company will use the funds for the working capital purposes. Coastal Projects Pvt. Ltd. is executing over 300 kms of tunnel work in Andhra Pradesh, Karnataka, Kerala, Himachal Pradesh and several north-eastern States.
• Motilal Oswal Investment Advisors acted as the financial advisor to Coastal Projects on the deal.

Mergers and Acquisitions

M&A activity in India has surged over the last few quarters. Total announced deal value in Q1 2010 was $19,198 million, a 250% increase over the $5,195 million witnessed in Q1 2009 and a 265% increase over Q4 2009. The total deal count also increased by 70% to 167 in Q1 2010 from 98 in Q1 2009.

The year ahead will see an increase in value and volume of Indian M&A activity as investor confidence and liquidity return to the market. Strategic investors will try to take advantage of lower valuations in the midst of the crisis and strengthen their position across various sectors.

The number of domestic deals increased from 68 and 39 in Q1 2008 & Q1 2009 respectively to 80 in Q1 2010. The value of domestic deals was $4,069 million in Q1 2010 compared to $2,270 million in Q1 2009.

In terms of volume, the number of outbound deals more than doubled from 24 in Q1 2009 to 51 in Q1 2010, while in terms of value the increase was more than 7X from $1,862 million to $13,236 million.

The number of inbound deals increased to 29 in Q1 2010 from 24 deals in Q1 2009 at a higher value.

M&A deals under $100 million accounted for 80% of total deal flow in Q1 2010.

Larger deals ($100 million and above) accounted for 90% of total capital invested in Q1 2010 as against 86% in Q1 2009.

Sectoral Breakdown: Telecommunication Services, Energy and Healthcare were the most targeted sectors for acquisitions with deals worth $14,036million, $1,172 million and $961 million respectively. Together, they accounted for 84% of total private equity deal value during the quarter.

The major transactions were the acquisitions of Zain Africa BV, Tower assets of Aircel, Parkway Holdings Ltd. and Trinity Coal Corp.

The most active sectors in terms of deal volume was Information Technology with 38 deals in the quarter, followed by Consumer Discretionary and Industrials with 28 deals each. Other sectors contributing to the deal volume were Materials & Financials accounting for 20 and 16 deals respectively.

• Energy: It accounted for 6.1% of deals in Q1 2010.
• materials: Deal volume increased by more than 160%; Invested capital increased by 17% in Q1 2010.
• Industrials accounted more than 3.9% of deals in Q1 2010.
• Consumer Discretionary: Q1 2010 and Q4 2009 saw 28 deals each; Invested capital increased by 84% in Q1 2010.
• Consumer Staples: Invested capital increased by 17% in Q1 2010; Consumer Staples accounted for 2.2% of deals in Q1 2010.
• Financials accounted for 4.2% of deals in Q1 2010.
• Health Care: Deal volume decreased by more than 33%; Invested capital increased by 134% in Q1 2010.
• Information Technology: Deal volume increased by more than 32%; Invested capital decreased by more than 50 % in Q1 2010.
• Telecommunication Services accounted for 73% of deals in Q1 2010.
• Utilities: Deal volume decreased by more than 40%; Invested capital decreased by 8% in Q1 2010.

Top 5 M&A Deals in 2010

The top 5 deals accounted for more than 71% of the total M&A deals in Q1 2010.

Acquisition of the African Operations of Zain by Bharti Airtel Ltd.

• Bharti Airtel Ltd. entered into a definite agreement to acquire African operations of Zain Africa BV for a price of $10.7 billion (INR 493.56 billion).
• The buyer will pay $9 billion (INR 415.14 billion) in cash and will assume debt of $1.7 billion (78.41 billion).
• Zain Africa BV provides mobile telecommunication services in the Middle East and African continent. The company offers mobile voice and data services to individual and business customers.

Acquisition of Tower Assets of Aircel Ltd. by GTL Infrastructure Ltd.

• GTL Infrastructure Ltd. acquired tower assets of Aircel Ltd. for a price of $1.8 billion (INR 84 billion).
• The debt for the deal was syndicated by SBI Capital Markets Ltd. Citigroup Inc and Barclays Capital acted as financial advisors for GTL Infrastructure Ltd. Nomura, Rothschild and Standard Chartered Bank acted as financial advisors for Aircel Ltd.
• Wadia Ghandy advised GTL and Amarchand advised Aircel on the deal.

Fortis Healthcare Ltd. invested in Parkway Holdings Ltd.

• Fortis Healthcare Ltd. acquired 23.9% stake in Singapore based Parkway Holdings Ltd. from TPG Capital for approximately $685.3 million (INR 31.10 billion).
• AZB & Partners acted as legal advisor to Fortis Healthcare Limited on the deal.
• Parkway Holdings Ltd. provides health care services.

Essar Group acquired Trinity Coal Corp.

• Essar Group agreed to acquire Trinity Coal Corp. for approximately $600 million (INR 27.47 billion) from Denham Capital Management LP.
• Trinity Coal Corp. is a coal producing company.

Telenor ASA acquired stake in Unitech Wireless Ltd.

• Telenor ASA acquired 7.15% stake in Unitech Wireless Ltd. for a price of $433.36 million (INR 20.22 billion).
• The additional investment will allow Uninor to proceed as per the business plan and successfully expand operations in India. This is the fourth and final round of investment from the Telenor group, which is to inject a total of INR 61.20 billion for a 67.25% stake in the joint venture with Indian real estate company Unitech Ltd.
• Unitech Wireless Ltd. is a telecom services player in India. It has licenses to operate in all 22 circles across the country.

Courtesy: VCCedge

Indiabiznews, May 08, 2010