3 R D - 9 T H

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Private Equity Track

Research4India Weekly update on the Indian PE Sector

PE Activity for the week

The year 2012 has so far aggregated $6.07bn (317 deals) of PE investments compared to $8.97bn (298 deals) during the same period last year. During the week ended 9th Sept, 2012, there were 7 PE/VC deals worth 199.6mn compared to 4 deals worth $21.2mn in the previous week. In the largest deal during the week, Jain Irrigation Systems Ltd raised $73mn (Rs 4.05bn) through an issue of equity shares to Mount Kellett Capital Management and IFC.

10500 9000 7500 6000 4500 3000 1500 0

8969.3 298 6066.2

500 400 300 317 200 100 0

Till date 2011 PE Investments

Till date 2012 No. of Deals

PE Deals During The week

Investor (s) Mount Kellett Capital Management, IFC Blackstone Carlyle, Multiples Red Fort Capital Norwest Venture Partners responsAbility Ventures, Ventureast Indian Angel Network

Target

Stake (%)

Value ($mn)

Stage

Sector

Industry Capital goods Chemical & Allied BFSI Real estate Health Services

Segment Irrigation equipment Fragrance and flavour Banking Real estate

Jain Irrigation

11.4

73.0

PIPE

Manufacturing

S.H. Kelkar & Co South Indian Bank Prestige Estates residential project Primary Healthcare Services Pvt. Ltd.

33 6.56 NA

44.0 41.0 36.0

Growth PIPE Project

Manufacturing Services Construction

NA

4.5

Early

Services

Clinics

DesiCrew Solution

NA

1.1

Early

Services

IT/ITeS

BPO

Aurus Network

NA

NA

Early

Services

Education

Online education

Source: Four-S PE Database

Research4India is the research services arm of Four-S Services Pvt Ltd. Here we provide regular research reports on key sectors of the Indian economy, and large unlisted companies in these sectors. For subscription / custom queries, please contact Seema Shukla at seema@four-s.com.

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Mount Kellett and IFC invest $73mn in Jain Irrigation Jain Irrigation Systems Ltd is raising $73mn (Rs 4.05bn) through an issue of equity shares to Mount Kellett Capital Management and IFC. The company is also raising another $130mn (Rs 7.21bn) through external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs). The funds will be used to cut the high cost short-term loans of the company besides long-term loans due this fiscal. A part of it will be also invested in one of its subsidiaries a new non-banking financial company, focused on agriculture and rural markets. Four-S Comment: Jain Irrigation is Asia's biggest irrigation equipment maker but there are concerns about its cash flow situation. It makes drip and sprinkler irrigation systems, which the government subsidises to farmers. The company collects these subsidies but payments take longer leading to problems with working capital and rising interest costs. To rationalize receivables in the micro irrifation service (MIS) business, the company has started implementation of a change in its business model wherein it is asking farmers to pay a higher proportion of the cost upfront besides seeking them to collect receivables from the government. The formation of a nonbanking financial company, Sustainable AgroCommercial Finance, is also a part of this plan. This will help Jain Irrigation borrow at a lower cost and get paid up front. two years ago, will continue to hold a 65% stake while another 2% will be with a few minority investors. Four-S Comment: The company is said to be the leader in the domestic fragrance market with over 2,000 customers and is the only Indian player of scale. It has unique intellectual property and a strong market presence for over eight decades. The company is professionally managed with CEO B Ramkrishnan at the helm of the affairs. Ramkrishnan is a chemical engineer from IIT Madras and a flavour and fragrance industry veteran. The deal values the company at Rs 7.36bn, nearly 1bn higher than its annual sales in the past year. In fiscal 2012, it posted an operating profit of Rs 1.1bn on sales of Rs 6.4bn.

Multiples, Carlyle invest $41mn in South Indian Bank QIP Multiples Alternate Asset Management has picked up over 5 per cent stake in the recently closed qualified institutional placement (QIP) of South Indian Bank, where the old generation bank has raised Rs 4.43bn. The QIP has also seen participation from The Carlyle Group, which started picking up stake in the Thrissurbased bank in May this year. South Indian Bank launched its share sale on September 3, and has sold 200 million shares or nearly 15 per cent stake at Rs 22.13 apiece to investors. The QIP has been subscribed by eight investors, which also include IFCI Ltd and SBI Magnum Sector Fund. Four-S Comment: PE investors are increasingly taking bets on older generation private sector banks with strong regional focus. Some of the banks, which have seen investments in CY12, include Karur Vysya Bank (Chrys Cap - $31.3mn, Olympus - $38.3mn), Development Credit Bank (Tano Capital, TVS Capital, Wolfensohn Capital Partners - $20mn), South Indian Bank and Federal Bank (Chrys Cap - $8.7mn). Given their low asset base and low market share, some of these banks are best placed to deliver high growth. Their core 2

Blackstone acquires 33% Kelkar & Co for Rs 2.43bn

stake

in

SH

Blackstone has bought a 33% stake for 243 crore in SH Kelkar & Company (SHK), a Mumbai based maker of specialty fragrance and flavour ingredients that are used by leading consumer goods companies like ITC, Emami and Marico. The company aims to consolidate its position in India besides expanding its presence in the global markets. The Vaze family, which bought co-founder Kelkar family's stake in the company Research4India

Private Equity Track

strengths in terms of geographic focus or products are expected to drive their growth. than 130 people across five centres in Tamil Nadu and expects to expand its workforce to 1,000 employees in the coming years.

Red Fort Capital invests Estates residential project

in

Prestige Red Fort Capital invests Estates residential project in Prestige

Red Fort Capital has invested Rs 2bn (~$36mn) in a residential project of Bangalore-based public listed real estate player. In January this year, Red Fort Capital had raised a fresh $500 million fund from international investors to invest in residential and commercial real estate in India. The transaction with Prestige Estates has been done at the land acquisition stage for a greenfield development. As per news reports the fund has exhausted nearly half of the new fund and is back on the road to raise another real estate fund of the same size.

Indias largest angel investors group, Indian Angel Network, has invested an undisclosed amount in Delhi-based virtual classroom solution provider Aurus Network Infotech Pvt. Ltd. The start-up has a cloud based virtual classroom solution which connects teachers with students across the country, eliminating the need for hardware based video conferencing or satellite based equipment and networks and works at Internet speeds as low as 75kbps. It currently has tie-ups with more than 20 test prep and training centres.

Norwest Venture invests in NationWide Primary Healthcare Services Norwest Venture Partners has invested Rs 250mn ($4.5mn) for a minority stake in India's NationWide Primary Healthcare Services Pvt Ltd. NationWide plans to use the funds to increase the number of its primary healthcare centres to 120 from present 15 over the next 18 months. NationWide also offers corporate services, including on-site consultations and health education initiatives that are currently in use by companies, including Capgemini, Idea Cellular, Madura Coats and others.

Fund Raising & Liquidity Events

Nexus Venture Partners raises $270mn for third fund Nexus Ventures Partners has announced the close of its third fund with commitments of $270mn, taking the assets under management of the early-stage venture capital firm to nearly $600mn. Investors in the fund include endowments, foundations, and financial institutions across North America, Europe and Asia. Nexus Venture Partners will continue its focus on early-stage investments across technology, Internet, media, consumer and business services sectors. Besides investing in Indian firms, Nexus has also followed a strategy of investing in US-based companies leveraging the India-US corridor.

Rural BPO DesiCrew raises $1.2mn from responsAbility Ventures, Ventureast IIT Chennai-incubated rural BPO service provider DesiCrew Solution Pvt Ltd has raised Rs 70mn ($1.12mn) in Series B round of funding from responsAbility Ventures I, and Ventureast Fund Advisors India Ltd. DesiCrew offers services including generating, populating and moderating content, digitisation, live chat responses, mail room activities, project management, secondary research, transcription, translation, beta testing of web products, localisation of web products and website monitoring. Currently, it employs more Research4India

Blume Ventures looking to up fund size by as much as 25% Early-stage venture fund Blume Ventures is looking to increase the size of its maiden investment fund after it has witnessed oversubscription as part of the final close of Blume Ventures Fund I. Blume Ventures first fund had a target size of Rs 1bn and it hit the 3

Private Equity Track

first close for the fund in May 2012, raising Rs 820mn in the process. The firm also disclosed that it originally had 20-plus investors (LPs) and attracted interest from more than 30 new investors. Its investors include angel investors, entrepreneurs, executives and senior professionals. Its standard investment ranges from Rs 50 lakh-Rs 15mn in each company and the investment comes in tranches.

Private Equity News

Baring, Aditya Birla PE may buy stake in Anu Solar Power Baring PE Partners and Aditya Birla PE are two contenders looking to buy 20% stake in Anu Solar Power. The deal could value the company at Rs 5bn and Rs 1bn is expected to be invested by the PE players by the end of this month. Anu Solar Power is a concern dedicated to the promotion of renewable energy propagation and implementation in India. It is an Anu Group Enterprise which is engaged in diverse commercial activities as exports-imports of solar energy products, energy efficient solutions and solar based telecom products and services among others.

Helion Ventures to exit Amba Research Helion Venture Partner is planning to exit its 5 year old investment in Amba Research India Private Limited and is in talks with multiple buyers. Helion Ventures invested $7mn in the company in 2007 from its first fund, the $140mn Helion- I. Founded in 2003, Amba Research is a knowledge process outsourcing firm. The firm is primarily engaged in providing equity research, fixed income research and quantitative research for the global capital markets. It has delivery centres in Bangalore, Colombo and Costa Rica and sales offices in New York, London and Singapore.

Med firm Prime India to raise funds Prime India Healthcare Services Private Limited is planning to raise PE funds through stake dilution. The plan was divulged along with the company's plans to launch electronic health cards to store patient record. It is aiming to raise around Rs 20mn for capex and opex by giving out a stake of 15-20%. Prime India is a medical tourism and healthcare recruitment company. It has an office in Chennai and has a team of over 50 employees. The company has tie-ups with around 24 healthcare service providers including MedPlus pharmacy chain, Dr Agarwals Eye Hospital and beauty and wellness service provider VLCC.

Actis may sell stake in Nilgiri to Temasek Singapore's Sovereign fund Temasek is looking to buy out Actis' stake in The Nilgiri Dairy Farm Private Limited. Actis had bought 51% stake in the company for Rs 3bn ($65mn) in a management buyout in 2006 and later hiked the stake to 67%. The promoters are not keen on selling the stake. The Nilgiri Dairy Farm Pvt. Ltd. operates a chain of retail stores in South India. It offers dairy products, such as fresh wholesome and skimmed milk, cheese, curd, etc. and bakery products, including plum cakes, chocolate coated biscuits, truffles, puff roles among others. It has stores spread out across South India.

Future Venture backed Mother Earth to raise funds Store operator Mother Earth is planning to rope in private investors for growth purposes and has outlined Rs 400mn investment for the same. It is targeting 'social' PE investors to back its expansion plans. Future Ventures had invested Rs 140mn in 2009 for 40% stake which was followed by a second round taking its stake to 60%. Grassroots Business Fund also holds 25% in the company and the rest lying with the promoters. 4

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M&A Activity for the Week
During the week ended 9th Sept, 2012, there were 5 M&A deals worth $202.1 (size of 1 deal was not known). In the largest deal during the week, Tech Mahindra Ltd has acquired 100% stake in Hutchison's BPO biz, Hutchison Global Services Pvt Ltd (HGS), for $87.1mn.
Stake (%) 100 NA 49 NA 43 Deal value ($ mn) 87.1 61.0 39 15.0 NA

Acquiror Tech Mahindra Ltd United Drug

Target Hutchison Global Services Pvt Bilcare Ltd - US, UK biz

Sector IT/ITeS Pharmaceutical Manufacturing-steel Manufacturing-steel FMCG

Mitsui & Co. Ltd and Sanyo Special Mahindra Ugine - steel biz Steel Co. Ltd Pitti Casting The Hershey Company
Source: Four-S PE Database

Vaksh Steel - Foundry division Godrej Hershey Limited - Goderj Industries' stake

Market Update
Key Domestic Indices
Indian Market Movements Index BSE Sensex S&P CNX Nifty CNX Nifty Junior Nifty Mid Cap 50 CNX IT Bank Nifty CNX Infrastructure CNX Realty 31-Aug-12 17,541.64 5,258.50 9,892.15 1,994.30 6,072.35 9,990.50 2,233.85 199.00 7-Sep-12 Change (%) 17,683.73 5,342.10 10,057.90 2,033.70 6,342.70 10,122.00 2,268.30 204.30 0.80% 1.56% 1.65% 1.94% 4.26% 1.30% 1.52% 2.59% High 18,523.78 5,629.95 10,961.35 2,481.60 6,811.30 11,226.75 2,868.70 299.65 52 Week Low 15,135.86 5,269.40 9,891.95 1,995.15 6,083.35 10,020.70 2,237.40 199.35

Key Global Indices

Global Market Movements Index NASDAQ Dow Jones Industrial Average S&P 500 NIKKEI 225 Hang Seng Straits Times Index FTSE 100 31-Aug-12 3,066.96 13,090.84 1,406.58 8,839.91 19,482.57 3,025.46 5,711.48 7-Sep-12 Change (%) 3,136.42 13,306.64 1,437.92 8,871.65 19,802.16 3,011.70 5,794.80 2.21% 1.62% 2.18% 0.36% 1.61% -0.46% 1.44% High 3,134.17 13,338.66 1,426.68 10,255.20 21,760.34 3,088.45 5,989.07 52 Week Low 2,298.89 10,404.49 1,074.77 8,135.79 16,250.27 2,521.95 4,868.60

Source: Google Finance, Yahoo finance

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About Research4India

Research4India is the research services arm of Four-S Services Pvt Ltd. Here we provide regular research reports on key sectors of the Indian economy, and large unlisted companies in these sectors. These reports will be available on our upcoming site www.research4india.com, as well as from leading international research sellers like Thomson Reuters, Bloomberg, Research and Markets, CapitalIQ etc.

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