KPMG KBuzz Issue06

KBuzz
Sector Insights
April 2011 kpmg.com/in
As the summer months come to an end, both farmers and policy makers in the country are hoping for a good monsoon this year, given that the monsoon is crucial as a source of irrigation for 60 percent of the farms in India and approximately two thirds of Indias population depend upon agriculture for their livelihood. With India being the worlds second biggest producer of rice, sugar and cotton; inflation risingfood inflation rose by 8.55 percent in the week ending May 14and the direct correlation between disposable income and ample rainfall, a timely and evenly-distributed monsoon also augurs well for the economy as a whole. On a silver lining, PM Manmohan Singh signed a slew of trading and investment agreements with countries across the African continent and offered them three-year credit lines of USD 5 billion to achieve their development goals, while attending the India Africa Forum Summit in Ethiopia. India-Africa trade stood at USD 46 billion in 2010 with India setting an ambitious target of reaching USD 70 billion by 2015. I hope you find this edition of KBuzz insightful and interesting. Regards, Vikram Head Markets and Private Equity Advisory KPMG in India
Sources http://online.wsj.com/article/SB10001424052702304520804576346741093655236.html http://www.hindustantimes.com/Despite-delay-monsoon-on-track/Article1-702403.aspx http://www.thenational.ae/thenationalconversation/industry-insights/economics/indias-big-push-into-africa http://www.monstersandcritics.com/news/business/news/article_1641360.php/India-promises-Africa-5-billion-dollar-credit-line http://www.mydigitalfc.com/news/india-14-african-nations-strengthen-mutual-trade-889
2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
TABLE of CONTENTS
EDUCATION
03
ENERGY & NATURAL RESOURCES
07
FINANCIAL SERVICES
11
IT-ITES
14
MEDIA & ENTERTAINMENT
18
PHARMACEUTICALS
22
PRIVATE EQUITY
26
REAL ESTATE & CONSTRUCTION
29
TRANSPORTATION & LOGISTICS
32
EDUCATION
Education
KPMG view Education Sector: Pre-school market on the rise

Preschool segment in India is experiencing high growth and is expected to be a billion dollar market by 2012. The market is valued at USD 300 million in 2008 and it is expected to grow at an annual rate of 36 percent. Preschools are primarily an urban trend with rapid proliferation of organized preschool chains in metros. About 11.5 percent of the urban children between two to four years are going to preschool in India. The organized segments accounts for 17 percent of the market 1. It is a fast-growing market and is attracting investments from many private players. With low-entry barriers and franchisee business model, pre-school market is set to flourish in India in the coming years. Pre schools are attractive because they are in the non-regulated space within Education sector with relatively low capital investment requirement and hence shorter payback period. Also, they are less affected by the biggest issue in Education sector availability of faculty. In an under penetrated market, this (low entry barriers) provides a big attraction for new players to enter this space.. Narayanan Ramaswamy Head Education KPMG in India
2010 2011 2012
Narayanan Ramaswamy Head Education narayananr@kpmg.com
Market size and growth

USD (mn)
1200 1026 1000
+36%
800 600 400 200 0 2008 2009 408 300 555 755
Source: KPMG Investing in India, Nov 2008
Major developments 1 Date

May 2011
Development
Tree house receives investment of INR 310 million and INR 90 million from FC VI India Venture (Mauritius) Limited and Matrix partners Investment holding, LLC, respectively. The investment is meant for expansion of pre-school business, acquisition of office space, construction of educational spaces in Rajasthan and Gujarat.
May 2010 June 2009 Apr 2009
Tree house receives investment of INR 150 million from Matrix partners investment holding LLC. EuroKids started a unique concept called Eurogym, a specialized kids gym which is a part of EuroKids curriculum The New age knowledge solutions (NAKS) started a new chain of pre-schools I play I learn. These are planned for metropolitans in the initial stage Edvance group launched its first pre-school-Vivero International in Pune
Feb 2009
1.
KPMG Investing in India, Nov 2008, Press Articles
Education

Date
Sep 2008
Development
Educomp solutions ltd. Has acquired 50 percent stake in leading pre-school chain euroKIDS for USD 8.7 million. The agreement has provision for Educomp to increase its stake to 74 percent in stages. Matrix partners invested USD 7million in tree house preschool. Tree house doesnt allow franchise model and it plans to utilize the fund for expanding across the country. A preschool in New Delhi, The Banyan, has tied up with an American child care academy Magellan academy. The academy has centers in Florida and parts of Canada.
Aug 2008
Feb 2008
Key trends2 Many corporate houses have shown interest in setting up their own chain of preschools in India. Camlin started with its own brand-Alpha kids. Plans to expand to 100 schools by 2013. Yash Birla group has set up two playschools in Mumbai name Globe toters. Kangaroo kids signed about 400 joint ventures with builders and key partners. Kidzee, euro kids and Kangaroo kids are upgrading to K-12 schools and majority of their pre school population will be potential customers
Market share of major players

Tree House 3% Kangaroo Kids 4% Shemrock 5% Apple Kids 12% Others 12% Kidzee 34%
Euro Kids 30%
Source: Rediff Business "Pre school brands make their presence felt June 2009
2.
Rediff Business "Pre school brands make their presence felt June 2009
Education

New players from the other education segments
Mahesh Tutorials, a major player in private tuitions space
Little Tigers
Career Launcher, a leading player in test preparation segment
Ananda
Educomp, an education solutions provider, also acquired 50% stake in Euro kids for INR 390 mn
Roots to Wings
Source: KPMGs Investing in India, Nov 2008; press articles
KPMGs view Based on the increased paying propensity and organized supply that will create awareness about preschools importance, the market is expected to grow on the back of low penetration. Considering the recent PE investments in a pre-school chain Tree house in 2010 and 2011 and schools decision to go for an IPO is an example of the optimism in the sector. We expect preschool market to touch USD 1 billion by 2012. There are some key issues that are specific to this segment. Pre schools will remain a largely local phenomenon and hence ability to influence local markets (brand, promotion, positioning, etc.) will be critical. Today, Pre schools in India have largely grown using a franchise route due to this. Franchising, in our view, is still at its nascent stage in India and there could be issues as these pre school chains scale up. Non availability of standard curriculum and content will mean innovation and credibility will be key at the unit level. Also, given the age profile of kids, safety becomes a key consideration. Lastly, competition is expected to intensify in the near future. It is the players with quality, commitment and credibility who are expected to take away the major chunk of this market
ENERGY AND NATURAL RESOURCES
KPMG view With a reduction in natural gas production from the KG basin, consumers would need to brace for increased fuel costs
Overview Declining production from the nations largest gas discovery till date is a major concern for energy security. Based on production estimates of 60 mmscmd from the KG basin fields by April 20111, Reliance has signed firm contracts of supplying 57.2 mmscmd of natural gas across all sectors. Out of these, the power sector accounts for the maximum allocation of 28.99 mmscmd, followed by fertilizer units at 15.34 mmscmd. The remaining 12.84 mmscmd was allocated to petrochemicals, refineries, sponge iron, LPG plants and city gas distribution networks2. With the production from these fields declining to less than 50 mmscmd2 the government has asked the field operator to supply gas only to priority sectors such as fertilizer, power, LPG and city gas distribution. Sectors such refinery, petrochemical, steel and other industries have been asked to look for alternative fuel supply to meet their energy requirements. According to the estimates from the Directorate General of Hydrocarbons (DGH), gas production in India is likely to increase from 155 mmscmd in 2010-11 to 222 mmscmd in 2014-15, growing at a CAGR of 9.4 percent per annum1. Most of the incremental production is likely to come from new discoveries in the east coast of India. However, with declining gas production from the Reliance fields, the target set by the DGH for 2011-12 seems difficult to achieve. The dominant fuel, coal, is also facing supply constraints, increasing the need for imports To compensate for the decline in gas production, India needs to find other energy sources. Increasing domestic coal production could be an option, but it has its own challenges: Getting statutory clearances, like environment and forest clearances, is a time consuming process Land acquisition and rehabilitation are issues as there is considerable resistance from local inhabitants There are infrastructural bottlenecks such as inadequate availability of railway lines connecting mines and power plants Indian coal has high ash content, raising environmental and climate change concerns Importing coal might be an effective alternative but a costly one. Furthermore, changes in regulatory policies of coal exporting countries like Indonesia and South Africa are also likely to affect coal imports. India needs to look for alternative sources to meet its gas demand. LNG could be a viable option, though some changes in existing policies are required Arvind Mahajan Head Energy and Natural Resources KPMG in India
Arvind Mahajan Head Energy and Natural Resources arvindmahajan@kpmg.com
1 2
DGH Press Article
Widening gap between natural gas supply and demand The demand for natural gas is increasing in India because the country is facing significant challenges with one of its primary fuel sources, coal. The many gasbased capacities which were announced with the expectation of Reliance supplies ramping up from 80 mmscmd to 120 mmscmd will add to the demand for natural gas . According to the XIth Planning Commission, the demand for natural gas is likely to touch around 280 mmscmd in 2011-12 with the power and fertilizer sectors contributing to around 70 percent in total gas demand3. This is significantly above the expected total supply of around 220 mmscmd4. Some of the key drivers of gas demand are: Power : Currently, India is facing a peak power deficit of around 10 percent5. Gas is the ideal fuel for peaking plants. Furthermore, given the robust economic growth and increased rural electrification, even the base load requirements have gone up substantially. Fertilizer: Natural gas is one of the most economical feedstocks for fertilizer production. Therefore, a drop in natural gas supply to fertilizer plants could lead to an increase in the governments fertilizer subsidy burden. Given that the import levels for fertilizers have gone up to about 30 percent from 10-15 percent a decade back6, there is an increasing need to set-up fertilizer plants. City Gas Distribution (CGD): The Petroleum and Natural Gas Regulatory Board (PNGRB) has plans to expand the CGD network to 100 Geographical Areas (GA) by 2012 and to more than 240 GA in the next five years7. The PNGRB has conducted bid rounds for about 30 GAs in the first four rounds 7 . Going forward, LNG would play an important role in bridging the demandsupply gap Currently, LNG is trading at around USD 11-13 per mmbtu8 which is almost three times the price of domestic gas making affordability an issue. However, the following steps could help make LNG a viable option: Duties cut: Currently, a 5 percent customs duty is levied on LNG imports9. Removing the duty would help bring down the cost of imported LNG and encourage its use. Optimal access to regas assets: Some sectors like steel, refining and petrochemicals have high ability to pay for gas because of the high costs of their existing liquid fuels. But due to limitations with open access to existing regas capacity, importing LNG by new players is a challenge. Optimal transmission: Gas consumers located on the east coast have to pay an additional USD 1.5-2.0 per mmbtu10 as transportation charges if the gas is swapped with west coast consumers. Furthermore, the taxation element is also not optimal, thus increasing the overall delivered cost of LNG at the customer gate. Floating Storage and Regas Units (FSRUs) could be an option to provide gas to power
3. 5. 7. 9. Planning Commission CEA Annual Report 2009-2010 PNGRB Ministry of Petroleum and Natural Gas 4. 6. 8. 10 . KPMG Analysis Department of Fertilizer, Annual Report 2009-10 Platts PNGRB, KPMG Analysis
plants, refineries and other industries located near costal areas. The FSRUs can be set up quickly and at one-tenth cost of a conventional regasification plant11. Once the production from domestic fields is ramped up, the FSRUs could be moved to some other location. Passing on higher power costs to consumers: There is a need to increase power tariffs and pass the higher input cost to end consumers. Also implementing time-of-day tariffs would make LNG a viable proposition for peaking power plants. Re-visit domestic gas allocation: The government could increase imported LNG usage by rationing domestic supplies to existing customers and providing the domestic gas to incremental plants i.e. assist in pooling at the consumers end. This would help in creating a level playing field for all gas consumers.
Key deals in April 2011

Target name Kazakhstan Australia Target country Satpayev Oil Block Hancock Coal Pty Ltd Oil and Gas Business of Science Applications International Corporation Acquirer/Investor name ONGC Videsh Ltd GVK Power and Infrastructure Ltd Acquirer country India India Deal value (USD million) NA 8000 Stake (in percentage) 25 100
United States
Wipro Technologies
India
150
100
Source ISI Analytics, Press Articles
11.
Excelerate energy presentation, September 2009
10
FINANCIAL SERVICES
11
Financial Services
KPMG view Deregulation of savings deposit rate: Phase out completely or in a phased manner?
The Reserve Bank of India (RBI) in its annual monetary policy for 2011-12, announced a decision to hike the interest rate on saving deposit rate from 3.5 percent to 4 percent. Though the RBI has denied that this is a move towards deregulating saving deposit rates, industry experts feel otherwise. Earlier, on multiple occasions, the RBI had expressed its intention to deregulate the savings bank deposit rate. Abizer Diwanji Head Financial Services adiwanji@kpmg.com To convert their intention to action, the RBI released a discussion paper which was open to public comments on the deregulation of the interest rate on saving deposits in April 2011. This is the third attempt to deregulate the interest rate which according to the credit policy in 2006-07 is essential for product innovation and price discovery in the long-term.1 However, with high inflation, the probability of deregulation has increased given that the inflation adjusted savings deposits return continues to be negative. Against the 3.5 percent rate on savings deposits, the average inflation rate in India has been ~5.3 percent in the last decade, ~5.5 percent over FY05-10 and ~6.5 percent over FY08-11.2 The moot question before the RBI is: Should the savings deposit rates be deregulated now? Or should it be deregulated in a phased manner? Should the concerns of small savers be addressed separately? How serious are concerns related to asset-liability management (ALM) if deregulation happens? Should higher interest rate be paid on savings deposits without a cheque book facility? Deposits in saving account constitute 22 percent of the total deposits of Scheduled Commercial Banks (SCBs) and 13 percent of financial savings of the household sector.3 Thus, any change in interest rate on saving deposits has a major impact both on the bank as well as the depositor. There are mixed reactions from the banking fraternity on the discussion paper with small and large banks being for and against it. Discussions in favor of a deregulated savings deposit rate Attractive and dynamic interest rates The current saving rate of 3.5 percent (now revised to 4 percent) does not incentivize people to deposit their money in a savings account. A market-linked savings deposit interest rate can influence people to deposit more cash in the banking system. At the moment, INR 9 trillion is out of the banking system.4 Better transmission of monetary policy - As the changes in monetary policy do not get reflected in savings bank deposit, transmission of policy rates has not been effective. If the monetary policy reduces rates, all the other rates except the savings deposit rate get reduced. Hence, deregulation of the interest rate will help improve the transmission of the monetary policy. Product Innovation and encourage healthy competition With administered saving bank interest rate there is hardly any competition in the savings bank deposit segment. Deregulation of savings bank interest rate will bring in innovation in the product segment, encourage competition and hence benefit depositors.
1. 2. 3. 4. Livemint, 01-05-2011 MOSL Research RBI Discussion paper Deregulation of saving bank interest rate, 2011 The Hindu Business Line, 02-05-2011
The deregulation of savings rate will allow banks to be more flexible and innovative, leading to new products in savings space. On the flip side, it might also discourage banks to open low balance accounts given the high servicing cost. Hence, a phased approach needs to be adopted for deregulating savings rate Abizer Diwanji Head Financial Services KPMG in India
12
Financial Services
KPMG view Deregulation of savings deposit rate: Phase out completely or in a phased manner?
Opinions against savings deposit rate deregulation ALM mismatch Although savings bank deposits are short term deposit and can be withdrawn on demand, a large part (~90 percent2) of it is treated as core deposits, to increase banks exposure to long-term loans. With deregulation in place, depositors will be free to move their money to other banks offering better returns, creating unhealthy competition and exposing bank to ALM risk. High cost of funds Deregulation of savings bank interest rate would push up the cost of funds and reduce net interest margin, thereby affecting banks profitability. Banks would either increase the minimum balance to be maintained or reduce the number of transactions permitted free of cost and increase the customer service charges too. Also, Banks may not be willing to open savings deposit with small amount and would adversely affect the process of financial inclusion. Deregulation of savings rate Likely impact While the deregulation of savings deposit rate will make it in line with other interest rates, it would have a mixed impact on the banks finances. However, there is a consensus view that that if deregulation happens there would be a rate war in the near term. According to RBI, deregulation of the interest rate on savings bank accounts would benefit the consumers as it would allow lenders to innovate new products to attract more funds from low-income households. Various international experiences also suggest that deregulation of savings bank rate support overall development and contributes to increase in financial savings. But from the bankers perspective, to maintain their profitability, they may pass on the charges to consumers and have to consider ALM risk and unhealthy competition that may emerge out of deregulation. To sum up, the deregulation of the interest rate has both pros and cons. But RBI seems to favor the advantages of the deregulation vis--vis the concerns.

Target company Jain Irrigations NBFC Unit Universal Commodity Exchange (UCX) Muthoot Finance Ltd.(MFL) Shriram Transport Finance Company
Source: ISI Emerging Markets
Buyer International Finance Corporation (Minority Stake Purchase) Investment Fund (Minority Stake Purchase) Consortium of Baring PE Partners India, Citigroup global Markets, Credit Sussie Temasek Holdings Pte. Ltd. (Minority Stake Purchase)
Deal value (USD mn) 5 5.6 29.36 NA
Stake (%) NA 5 NA 12
13
IT-ITeS
14
IT-ITeS
KPMG view Innovation: The mantra for the future growth of Indian IT
Introduction The IT-BPO industry has had an unparalleled impact on the Indian economy showing a growth of 11 times over the past decade, up from USD 8.2 billion in 2000 to USD 88.1 billion in 2011.1 Indian companies need to step-up the value chain and position themselves as leading providers of Intellectual Property (IP) based services. Technology vendors have been taking cognizance of this changing mindset of clients and are driving forward services based on a Global Delivery Model. Led by innovation and end-toend transformational services, a Global Delivery Model focuses on the creation of IP rather than just providing cost-effective services that improve productivity.
Pradeep Udhas Head IT-ITeS pudhas@kpmg.com
Indian companies need to move-up the value chain and align with the innovation needs of enterprises to not only differentiate themselves from other low-cost destinations, but also compete with global industry leaders -Pradeep Udhas, Head IT-ITeS KPMG in India
Past decade
Next decade (2020)
Concentrated markets 75% of
Markets
Fortune 500; 80% from US/UK; 75% from BFSI, Telecom and Manufacturing; 60% from IT Services
Managing for cost, productivity and
Emerging markets focus SMB; BRIC,
GCC, Japan, Row; Public sector and healthcare
Customer
quality Core driver was labor arbitrage Onshore/offshore mindset
Innovation, end-to-end transformation,
risk & compliance

Access to talent and expertise Global value chain
Low-cost workforce, trainable talent
Diversified and specialized talent pool Globalized expertise and multiple
Three-tier system of servicing clients
Talent
pool Delivery-centric management Emphasis on recruiting and training
management tracks
Emphasis on knowledge management
and research
Source: KPMG Analysis, NASSCOM 2020
Dedicated high-level knowledge workers (acting as business partners)
Innovation is increasingly being viewed as a tool to drive growth, improve business efficiency, enhance business value and drive customer satisfaction. According to a global survey, 98 percent of business and government executives said that innovation will be critical to the success of their organizations over the next five years.2 Clients are seeking solutions that can transform their firms rather than merely providing operational benefits. Few IT-BPO companies have already embarked on their journey of innovation having employed a three-tier system of servicing clients. The system has large-volume transaction processing centres in the first tier; Centres of Excellence (CoEs), R&D hubs and Innovation centres in the second; and high-level knowledge workers with domain expertise to serve as business partners in the third tier. Companies are counting on the expertise being developed in the second / third layers to provide value addition to meet increasing client expectations.
1 2 3 NASSCOM Strategic Review 2011 HP Research Reveals Innovation Is Key to Success of Instant-On Enterprises, April 2011, HP Tech Mahindra to have center of excellence in south Tyneside, Nov 2008, Economic Times
Centres of Excellence (CoEs), R&D hubs and Innovation centres
Large-volume transaction processing centres (mainly outsourced)
15
IT-ITeS
Innovation strategies undertaken by Indian IT/ITeS firms Indian companies are looking at both organic and inorganic growth strategies in order to increase their capabilities. CoEs around technologies such as Remote Infrastructure Management, Cloud Computing, Unified Communications, Mobility, etc. have been established by a few companies. Companies have also started moving from service-line expertise to vertical expertise. For example, Tech Mahindra recently established a CoE in UK to provide a range of services to Public Sector clients.3 Firms lacking scale have targeted inorganic growth strategies; for example, ABB acquired Metsys and integrated its R&D capabilities to its Process Automation division. Other strategies may include: Partnerships with academia - IIT Kharagpur and Microsoft India launched the Microsoft CoE in Intellectual Property Research and Technology Policy.4 Partnering with other companies to develop solutions - Cognizant teamed up with Eagle Genomics to develop a cloud-based platform for Pistoia Alliance.5 Evangelizing technology start-ups by partnering with VCs Infosys operates a VC firm Catamaran Venture Fund which funds technology start-ups.6 Current state of innovation Indian companies are still at a nascent stage when it comes to innovation. While large MNCs have been able to conduct breakthrough research in India; their Indian counter-parts have been unable to match their levels because of limited investments made in R&D. They both utilize India more as an Engineering Support destination than for developing Product Leadership solutions. Indian ITBPO companies are late adopters in this markets and have started focusing on innovation only in the recent past. Patent filings by Indian IT and Telecom companies are only 0.37 percent of the total patent filings in India in 2010-11. Only 150 of the total patents filed in India came from Indian IT and Telecom firms such as Infosys, TCS, etc., depicting that smaller players are still mainly focusing on volume sales by offering services at cheaper prices.7 What lies ahead A promising future for innovation in India India is likely to see an addition of 139,000 R&D talent pool by 2015 from the 2009-level of 180,000.8 The number of patents filed in India is likely to increase from nearly 4,000 in 2009 to approximately 18,000 in 2015.8 Also, the number of software product start-ups, in India, has risen from 126 in 2000 to 518 in 2009, and is likely to further increase to 1,329 by 2015.8 As per NASSCOM, focused initiatives towards innovation can help companies unlock additional revenue potential of USD 150 billion by 2020.9 For this, the industry needs to work on expediting reforms in tertiary education to augment the quality of employable workforce, develop world-class infrastructure in tier-II/III cities, adopt and implement new business models. Players should aim at making While R&D investments in Software segment in India were USD 2.77 billion; majority of the IP filings came in from MNC Centres, which accounted for over 97percent of patent filings in the IT and Telecom sectors in India . Source: Controller General of Patents and Trademarks; Zinnov Consulting
4 5 6 7 8 9
IIT, Microsoft Launch IP Center of Excellence, Feb 2009, CXO Today Cognizant and Eagle Genomics to Work with Pistoia Alliance to Develop a Cloud-based Platform for Streamlining Sequence Services, Apr 2011, Cloud Computing Journal Infosys Co-Founder Adds Another $91 Million To Venture Fund, Nov 2009, Tech Crunch Infosys, TCS lead in Indian tech patent applications, Apr 2011, Real Time News Globalization: An Innovation Imperative, 2010, Zinnov Consulting NASSCOM, Perspective 2020
16
IT-ITeS
Business and Technology Transformation as their key proposition while pitching for new contracts. While IT vendors envision the future requirements of enterprises, they will be required to invest in establishing key innovation capabilities whilst energizing people in order to enhance their competencies and expedite growth.

Sr. no. 1 2 Target Headstrong Persistent Systems - Sprint Nextel JV Akritiv Technologies E2E Networks Target country India India Deal type Acquisition Joint Venture Acquirer/Investor Genpact Ltd. Persistent Systems ; Sprint Nextel Genpact Ltd. BlumeVentures Advisors ; Freeman Murray Acquirer country India India US Deal size (USD Mn) 550 NA Percent sought 100 NA
US
Acquisition Minority stake
India
NA
NA
India
India
NA
NA
Note: Deals covered till from 1 April 2011 to 30 April 2011 Source: ISI Emerging Markets
17
MEDIA & ENTERTAINMENT
18
1 8
Media & Entertainment
KPMG view Print Sector: Finding profitable avenues

One of the largest newspaper markets in the world, India is comparatively well off than its global counterparts, which have been experiencing declining revenues over the past few years. Although the overall Indian scenario looks promising, capitalizing on future potential, however, will depend on how the industry deals with present challenges. The tremendous opportunity lies in tapping the growth potential of the vernacular market while concurrently, the challenge will be to build additional capabilities to explore alternate sources of revenues from new media. Rising literacy, growth in disposable income, brand consciousness and strong commercial development in tier 2 and tier 3 cities have together contributed to increased penetration of regional print media. The regional market is expected to grow at a CAGR of 12 percent over the period 201115, outpacing English and Hindi language markets. The consumption of media is increasing in such areas and advertising volumes have been growing in the past few years. The pan India reach of regional newspapers is 468 million people compared to only 40 million in case of English newspapers1. At present, English enjoys an advertising premium over vernacular languages; however, experts feel that the gap is reducing. In 2007-09, the advertising rate premium commanded by English newspapers was roughly 10x times that commanded by regional languages. However in 2010, this disparity contracted from the historical 10x multiple to roughly 8x2. Tier 2 and 3 cities witnessed higher advertisement spends in consumer sectors in regional languages and local newspaper editions.
Projections of newspaper revenues by language Print media market English Market Hindi Market Vernacular Market Total print market
Source: KPMG Analysis
107 million copies sold daily 20 percent of world daily circulation 77,600 different newspaper titles 579 million- Literate population of India 30 percent penetration
*Source: Hitting the High Notes, FICCI-KPMG Indian Media and Entertainment Industry Report 2011
Rajesh Jain Head Media & Entertainment rcjain@kpmg.com
2011p 85 64 63 211
2015p 113 96 101 310
CAGR (2011-2015) 7% 11% 12% 10%
Vernacular newspapers have emerged as dominant players due to the advantage of familiarity and comfort to local readers. In India, localization helps in growth due to better understanding of regional consumer.3 As regional markets expand and per capita income increases, they present the regional print industry with a two pronged opportunity. On one hand the regional market offers an opportunity to increase circulation and readership due to rising literacy and affordability, on the other hand, premium reader segment provides an alternate to earn high revenues through increasing rates and targeted advertising.
1 2 3
FICCI-KPMG Indian Media and Entertainment Industry Report 2011 KPMG Analysis Regional media gains ground with advertisers, Afaqs!, March 28, 2011
19
Media and Entertainment

Advertisement, as stated earlier, is a prime contributor (65 percent in 2010)4 to the total revenue earned by the print sector. Till FY08, newspapers revenues grew steadily but since the slowdown in FY09, media industry witnessed a dip in advertising spending. Although the advertisement spending has bounced back, however, the future growth for print medium is expected to be stable and lower than other mediums. Therefore, it has become almost imperative for print players to shift focus to paid content models. Y-o-Y Growth of advertising revenues
30% 25%
Percentage
20% 15% 10% 5% 0% 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
The Print industry today is faced with a dynamic environment that is unprecedented changing business models, consumer and reader demographics present opportunities and challenges that will greatly improve profitability for flexible and aggressive players and erode the bottom line of static players - Jehil Thakkar Executive Director Media & Entertainment KPMG in India
Television
Print
Radio
Source: KPMG Analysis, FICCI-KPMG Indian Media and Entertainment Industry Report 2011
In order to move in the direction of these new models, publishers need to identify focused target groups and clearly position themselves as quality content providers adding value to readers. Being successful in doing that, the publisher is able to win greater loyalty of premium readers and willingness to pay for the services offered. Various print publications abroad such as The New Yorker, The Atlantic, The Economist and The Wall Street Journal, have earlier adopted the premium model where a reader pays to access their content.5 The same trend is catching up in India with players offering attractive pricing options and easy access in order to position paid content in the closely confined content and technical niches. The Indian print industry is exploring the new model of controlled circulation within the premium reader group. It is a distribution system where only qualified subscribers or a targeted group, receive the publication which is usually for free. Many brands prefer promoting their products and services through controlled circulation magazines. It governs the revenue and profit profile of many business publishers adopting such models. Although the published material is distributed for free, the publishers attract advertisers because of the quality of circulation profile and accuracy of the demographic intelligence. Recently, Robb Report, a luxury magazine, has been launched in India.
4 5
FICCI-KPMG Indian Media and Entertainment Industry Report 2011 Why You Should Pay to Read This Newspaper, New York Times, October 24, 2005
20
Media and Entertainment

The magazine is a 35 year old renowned journal of luxury lifestyle. It is reported to adopt the controlled circulation model and plans to print over 35,0006 copies for its inaugural issue. The group aims to target only the affluent and the influential class for circulating the magazine. It will neither be available on the stands nor through any other subscription route. The ad rates charged from advertisers are almost four times the rates of other magazines, such as Vogue or GQ or even Harpers Bazar.6 KPMGs point of view: A publisher does not need to choose between a vernacular reader and a premium reader. A publisher can safely focus on both in order to sustain and grow its business by diversifying through local special editions and charging readers for its content. The most important consideration for a publisher is to create a business model that strikes a balance in paid and free services for generating profits. The pre-requisite, therefore, is to plan a strategy that identifies the boundaries between premium and regular content and build up an effective pricing model around it. Going forward, we may see differentiated models being developed by industry participants to generate additional revenue streams.
6.
King of luxury magazines, Robb Report, is here, Exchange4media.com, May 02, 2011
21
PHARMACEUTICALS
22
Pharmaceuticals
KPMG view Ethics in pharmaceutical marketing: Learning from developed markets

Overview Marketing and promotion of pharmaceutical products is important both for pharmaceutical companies as well as for the healthcare professionals. Companies have a moral obligation and responsibility to provide accurate information to healthcare providers and consumers about the appropriate uses of medicines, vaccines or biotech products, as there are serious consequences associated with the incorrect use of prescription medicines. The pharmaceutical industry faces many challenges related to the ethical promotion of medicinal products. Transparent communication between the industry and the healthcare professionals, payers and patients is an important component of an ethical approach in pharmaceutical marketing and promotion. Like other functions of the pharmaceutical industry, pharmaceutical marketing and promotion are extensively regulated by various Codes of Conduct. Pharmaceutical product marketing and promotion is usually targeted at the healthcare providers or directly at the consumers (in a few countries). The four main forms involved in the marketing to healthcare professionals include: detailing, drug samples, gifting, and sponsoring Continuing Medical Education (CME) seminars. Historically, there have been cases where companies have engaged in off-label promotion of drugs for unapproved indications to drive sales of these drugs. They may also extend payments to healthcare professionals and physicians in order to influence the prescription practices followed by them. Gifts and benefits provided to the doctors under the guise of CME seminars or workshops are often under scrutiny of the competent authorities and are thought to influence the prescription practices of healthcare professionals. Pharmaceutical companies allocate approximately 15 percent of the sales value to marketing expenses which includes gifts, this practice adds to the cost of drugs making them expensive for the common man.1 Many companies have been caught engaging in off-label promotional activities and have had to pay large sums of money to settle charges against them. For example, in 2010, AstraZeneca paid approximately USD 520 million to settle off-label marketing of certain drugs not approved by the U.S. Food and Drug Administration (US FDA). Recently, Elan Pharmaceuticals agreed to pay approximately USD 203 million in an off-label marketing case.2,3 Importance of an ethical code and self-regulation An ethical code or criteria for the promotion of drugs plays an important part in ensuring that sales and marketing practices adopted by pharma companies are ethical and transparent. In developed markets, promotional practices are guided by Codes set by associations such as International Federation of Pharmaceutical Manufacturers & Associations (IFPMA), Pharmaceutical Research and Manufacturers of America (PhRMA), Prescription Medicines Code of Practice Authority etc. The IFPMA Code applies to all pharmaceutical products, including prescription, generic and Over-The-Counter (OTC) medicines. These codes are revised from time-to-time and define universally applicable baseline standards for marketing practices and apply to all promotional communications between the pharmaceutical industry and medical professionals/practitioners.4,5
1. 2. 3. 4. 5. KPMG Analysis Business Ethics_AstraZeneca to Pay $520 Million to Settle Illegal Marketing Charges_April 2010 Fierce Pharma_ Elan settles DoJ marketing probe for $203M_March 2011 IFPMA PhRMA
Anthony Crasto Head Pharmaceuticals acrasto@kpmg.com
23
Pharmaceuticals
KPMG view Ethics in pharmaceutical marketing: Learning from developed markets

These codes also highlight the importance of self-regulation by the pharmaceutical industry. Many companies have adopted self-regulation guidelines to ensure transparent and ethical marketing of drugs. For example, Pfizer has adopted a Global Policy on Interactions with Healthcare Professionals. Under certain laws in the US and UK, companies are expected to disclose payments made to physicians and the reasons for these payments. Companies such as GSK and Pfizer among a few others disclose these statistics voluntarily on their corporate websites.6,7 The developed markets are also regulated by acts such as the Foreign Corrupt Practices Act (FCPA), which prohibits US individuals and companies from offering or giving anything of value to foreign government officials. This act helps in checking the illegal practices of pharmaceutical companies. Applying and enforcing the code in India Off-label use of drugs is a major issue in India too. In a country with lowliteracy rate and people self-medicating, correct promotion of drugs plays a big role. In India, OPPI is a member of the IFPMA and has adopted the IFPMA code of practice. The government, pharmaceutical industry, the pharmacists and the healthcare professionals are responsible in ensuring transparency and educating patients about the correct use of the drugs. They need to apply the leanings from the developed markets to ensure ethical practices in pharmaceutical marketing and promotion. Like other developed markets, the government of India is also examining the possibility of framing a uniform code of pharmaceutical marketing practices (UCPMP) to prevent unethical marketing practices by pharma companies.8 The government is taking steps to ensure that the companies are not luring doctors to prescribe expensive and unnecessary drugs. In 2010, the Medical Council of India modified the code of ethics for medical practitioners (Indian Medical Council Regulations, 2002) by barring them from accepting any gifts or travel facility from any pharmaceutical company, as well as endorsing drugs and consumer products on public platforms.9 The MCI guidelines on offering and accepting gifts or benefits from the pharma industry need to be implemented and adhered to. A transparent, uniform and a robust 'self regulation' system should be applied in India. The promotional claims by the pharmaceutical companies need to be balanced, relevant, up-to-date, accurate, unbiased and should not mislead either directly by implication or omission. The product literature should be factual and must conform to approved product information. The pharmacists act as intermediaries between the consumer and the pharmaceutical manufacturer and are also obligated to provide sound, objective advice about self-medication to the consumer. The government, pharmaceutical industry, pharmacists and healthcare professionals are responsible in ensuring transparency and educating consumers about the appropriate use of the drugs. The learning from the developed markets (e.g. a uniform code of ethics) can be applied in India to ensure ethical practices in pharmaceutical marketing and promotion. Further, adequate implementation and effective monitoring of existing guidelines is also critical. - Anthony Crasto Head Pharmaceuticals KPMG in India
6. 7. 8. 9.
Pfizer Company Website; Express Pharma_ Doctors under the influence? Economic Times_ Mulling a uniform code of pharma marketing practices: Govt_March 2011; Deccan Herald_ MCI sharpens ethics code for doctors_Jan 2010
24
Pharmaceuticals
KPMG view Ethics in pharmaceutical marketing: Learning from developed markets Key deals in April 2011
Sr. no. Target Target country Deal type and details Acquirer/Investor Acquirer country Deal size (USD million)
Acquisitions 1 2 aCROnordic Unimark Remedies Ltd. Scandinav ia India Acquisition Acquisition Ecron Acunova Hikma Pharmaceuticals Plc India UK 3.3 33
Collaborations Sun Pharmaceutical Industries Ltd. Form a joint venture to develop and sell generic drugs in emerging markets, including India Partnership to market diabetes drugs Sitagliptin and Sitaglipitin plus Metformin in India License agreement for eight patents on cholesterol-lowering drug Fenofibrate
India
MSD
India
Sun Pharmaceutical Industries Ltd.
India
MSD
India
Lupin Ltd
India
Abbott Laboratories and Laboratoires Fournier SA
US and France
Source: Company Press Releases, ISI Emerging Markets, Merger Market
25
PRIVATE EQUITY
26
Private Equity
KPMG view The emergence of the independent PE Fund Manger

Background The Private equity (PE) industry has established its roots in India over the past decade, driven by the nations economic growth, dynamic entrepreneurs and business opportunities available in nearly every sector. The year 2004 was the first year in which annual PE investments crossed USD 1.5 billion, before rising sharply to more than USD 12.5 billion in 2007.1 2010 was a landmark year for exits; with exit value touching USD 5 billion and some deals returning more than 10x to investors.2 Vikram Utamsingh Head Private Equity vutamsingh@kpmg.com The year 2010 also saw the emergence of the independent PE fund manager (GP). Several seasoned PE professionals left their jobs with PE institutions to go independent by setting up their own investment management businesses. The trend seems to have initially started in 2009 with industry veterans like Ajay Relan (ex-Citi Venture Capital International India Head) and Renuka Ramnath (ex-ICICI Venture Head) leaving their respective employments to start CX Partners and Multiples Alternate Asset Management, respectively. While CX Partners has raised about USD 515 million to provide growth equity capital to mid-market companies in India3, Multiples led by Renuka Ramnath has raised USD 375 million and is looking to do a few control transactions.4 This trend is not unusual for a new industry that begins to mature. We saw similar trends in the IT/BPO industries where companies like Infosys and Wipro spawned entrepreneurs. However the emergence of this trend in an industry that is less than a decade old in India demonstrates that the India PE industry is unique. India is clearly a small deal market with the average deal in the region of USD 26 million.5 Many attractive deals in the market are too small for large global funds who ideally like to make big ticket investments in line with their large fund size. As a result, there are few opportunities currently to invest over USD 100 million per deal. Some of the successful PE leaders in these global funds see a bigger opportunity to go independent and raise a midsized fund in the region of USD 200 million to USD 500 million and then do smaller-sized deals. Global funds and institutions have international/independent investment committees. Sometimes, this could create disconnects in exploiting the deal opportunities in India and slow down the entire investment decision process. Some local General Partners (GPs) have expressed frustration that a lack of understanding of the India environment has meant that some good deals have passed by. As an independent, the investment committee largely comprises of the local GP team thereby making the investment decision process quicker. As the industry has begun to mature, Limited Partners (LPs) are looking to back GPs with successful track records. LPs have also improved their understanding of the India PE market and more of them now are willing to back a midsized fund that will focus on select niche sectors and has a better chance of delivering the desired returns. GPs at global funds /institutions see this need as a unique opportunity today to raise funds independently.
1. 2. 3. 4. 5. Venture Intelligence, Data does not include Real Estate deals VCCedge 2010, KPMG Analysis VCCircle.com, 19 May 2010 VCCircle.com, 4 May 2011 VCCedge 2010
The emergence of the independent PE fund manager will help grow the industry and establish more credibility amongst investors - Vikram Utamsingh Head Private Equity KPMG in India
27
Private Equity
KPMG view The emergence of the independent PE Fund Manger

For instance, Ranjeet Nabha, former MD and CEO of Indian operations of WL Ross & Co, plans to start his special situations opportunities fund of around USD 250 million.6 Social venture fund Acumen India director Varun Sahni has started his own PE firm, Global Impact Investors, which plans to raise USD 100 million to specialise in critical service sectors in emerging markets.7 Similarly other fund managers have decided to focus on opportunities exclusively in mid-market companies, consumer driven businesses, smaller ticket deals or other niches. A few GPs are also shifting tracks to the public markets where they believe that the opportunities are more attractive than those in the private markets. A high profile, recent example is the spinout team from Sequoia Capital to build out a public market investment firm.8 This new breed of independent investment managers seek to capitalise on their intimate knowledge of the local markets and strong network of relationships with LPs, owners of businesses and regulators to generate superior returns. Setting out on their own enables them to make quicker decisions, look at a broader range of opportunities and also make independent decisions. KPMGs point of view On the face of it, the rise of independent fund managers should be good for the industry as well as for investors. The emergence of more midsized funds with niche themes would make Private Equity capital more widely available to smaller and midsized Indian companies in tier 2, 3 and 4 cities. This is clearly needed as such companies find it difficult to access the capital and debt markets to raise funds. Within niche sectors, the risk appetite of PE funds could also increase. This could foster more entrepreneurship in these niche sectors. This trend could help grow the industry and establish more credibility amongst investors. The India PE industry is small in size today with about USD 8 billion in deals in 2010.9 For investors, these funds should deliver superior returns as there will be more focus. However, investors would need to ensure that these independent fund managers establish high standards of operating governance, robust processes and practices and transparent investor reporting practices. These funds would also need to be monitored more closely until their reputation has been established.
6. 7. 8. 9.
DealCurry.com, 16 December 2010 VCCircle.com, 13 September 2010 VCCircle.com, 15 February 2011 Venture Intelligence
28
REAL ESTATE & CONSTRUCTION
29
Real Estate & Construction
KPMG view Managing scalability challenges in the Real Estate business

Over the last decade real estate has been a growth story which every one has been talking about. The sector has seen some of the largest investments. The India growth story directly impacts this sector and there is a general consensus that the growth in this sector will continue to be robust due to the inherent demand for quality and affordable housing in the country. Amit Mookim Executive Director Real Estate & Construction amookim@kpmg.com The potential is not just confined to the existing players but also provides new players with a diversification opportunity, which some of the old economy businesses already have ventured into. However, real estate has predominantly remained entrepreneurial, regional, and to a large extent managed through personality driven practices and processes. It is therefore not surprising that even after almost two decades of strong business on the back of economic reforms real estate is still referred to as un-organized and fragmented. Building scalability -The governance and capability challenge The businesses are under pressure to manage internal and external stakeholder expectations, while balancing the growth imperatives. Currently developers are posed with never before faced challenges comprising paucity of land, increased governance requirements and severe shortage of development capacity, which have been compounded by inflationary pressures and rising finance costs. These challenges manifest in forms which are often attributed to market conditions and external factors, however, deep diving into the root causes does provide insight into the capability gaps. Few key pointers to assess such gaps and potential scalability hurdles are noted below: Are there identified and defined growth targets and strategic alignment, in terms of markets, geographies, asset classes and investment philosophy for example being an asset heavy or asset light business, land buying and aggregation or redevelopment/ joint development etc. Is the management ready to delegate? Or the promoters are still hands on actively involved in low value add activities like construction management/ projects being managed through labor contractors, family members in key positions like procurement and contracting? What is the quality of people being inducted? Is there competency planning, or are the old loyalists being assigned new roles/ larger portfolios to manage. Is there an identifiable dependency on key personnel? Is the operational environment geared up for transparent operations and reliable information systems which provide assurance on controls to current and future investors? Sustainable growth for the real estate business organization is linked to an approach that balances governance, cost and delivery capability - Amit Mookim Executive Director Real Estate & Construction KPMG in India
30
Real Estate & Construction
KPMG view Aspects and enablers of scalability

Sustainable growth for the real estate business organization is linked to an approach that balances governance, cost and delivery capability. This would involve making appropriate re-alignments to the business model, allowing flexibility of entrepreneurial wisdom, balanced with structured, transparent management systems. KPMG view- Scalability solution for growing real estate businesses KPMG understands the challenges, and has worked consistently with multiple real estate business owners to assist in managing these challenges. KPMG works in an integrated manner across member firms to provide a single source solution that hand holds business owners in visioning and developing a future state organization that is enabled to manage growth in a sustainable manner. The key aspects of the KPMG Scalability solution are: Define strategy and vision: Set the pace and direction of growth in an objective manner based on facts, well-based assumptions and detailed sensitivity analyses. Organization capability building: Assist in developing an operating structure that simplifies and clarifies roles and reporting relationships by driving accountability; yet retains the competitive edge. Establishes development of competency and robust human capital. Performance management processes to attract, retain and grow talent for funding future businesses and physical reach. Defined business processes and performance measures: Develop future state processes that can withstand the challenges of large - scale operations enabled by strong MIS. Enable practices to be replicable and also make processes less people dependent. Technology enablement: Develop an IT roadmap that enhances the businesss ability to provide reliable information for decision making and drives standardization. Enable to move towards an integrated technology platform. As many established conglomerates enter the real estate business, and the existing entrepreneurs drive towards sustainable growth, the differentiating factor would be the ability to manage scalability and proactively leverage opportunities.
31
TRANSPORTATION & LOGISTICS
32
Transportation & Logistics
KPMG view Air freight hot spots

Overview The airfreight sector in India has been witnessing a steep and consistent growth over the last few years. Driven by Indias strong GDP growth, rising domestic consumption and EXIM trade as well as supply side improvements, the air freight market has grown at a CAGR of 8.5 percent (FY06-FY10) to reach 1.95 million tonnes in FY10. It is expected to grow at a higher CAGR 10.5 percent over the next few years to reach 3.2 million tonnes by FY15. This growth will, in turn, be supported by planned investments of over INR 80,000 crores1 in the airport sector in the XIIth Five Year Plan, more than double of the INR 36,000 crores2 in the XIth Plan, leading to the development of world class airport infrastructure at Delhi, Mumbai, Chennai, Hyderabad, Bengaluru and several other locations and corresponding strong traffic growth in these key hubs. However, these trends stretch well beyond the metropolitan cities into Tier 2 locations creating novel opportunities the subject of this paper. Aggressive emergence of Tier 2 air cargo hubs3 Against the overall growth of CAGR 8.5 percent between FY06 and FY10, the air freight market at metro/tier 1 hubs has grown at a CAGR of 8.3 percent from 1.27 million tonnes to 1.75 million tonnes. In contrast, the tier 2 hubs have grown at a CAGR of 11.8 percent from 132,000 tonnes to 207,000 tonnes in the same period. Amongst the larger micro-markets, Cochin has experienced the steepest growth doubling volume to 42,000 tons in four years. Trivandrum and Ahmedabad are other large markets that have demonstrated good growth. Pune and Calicut are other locations that have broken into 10,000 tons+ category in the same period and are growing at a CAGR ~20 percent Jaipur, given the growth rate of CAGR 27.3 percent, seems to be the next crucial destination catering to the increasing freight demand in North-Western India. Among other tier 2 cities handling sub-10,000 tonnes volume, a firm trend appears with respect to North-Eastern India. Guwahati (CAGR~2.3 percent), the traditional leader, is being overtaken by Agartala (22.9 percent) and Imphal (31.1 percent). Though these high growth rates can be attributed to low base volumes, the actual volume handled by these twin cities have risen drastically to compete with Guwahatis benchmark of ~ 5,000 tonnes.
Manish Saigal Head Transportation & Logistics msaigal@kpmg.com
Against the national benchmark of air freight growing at 8.5 percent (FY06-FY10), the tier 2 hubs have been growing at CAGR of 11.8 percent shifting focus to emerging air hubs like Cochin, Jaipur, Pune, Ahmedabad and Coimbatore - Manish Saigal Head Transportation & Logistics KPMG in India
Air freight at major Tier 2 hubs*

42,000 35,000 Tonnes handled 28,000 21,000 14,000 7,000 FY06 FY07 FY08 FY09 FY10 Cochin Trivandrum Ahmedabad Pune Calicut Agartala Jaipur Indore Guwahati Imphal Amritsar
Source: Crisils Airport Industry Statistics July 2010 and KPMG Analysis Note: 1. 2. *. Source: 1. 2. 3. Estimated assuming share of investment in airports in XII Plan remains approximately same as that in XI Plan; Revised projections from Planning Commission of India, January 2011; Analysed airports include those with either >15,000 tonnes freight or >20 percent growth rate (except Guwahati included for North-eastern comparison) Planning Commission, KPMG Analysis; Planning Commission, KPMG Analysis; All quantitative figures (volumes, growth rates, etc.) in this section are based on information from Crisils Airport Industry Statistics July 2010 and KPMG Analysis
33
KPMG view Air freight hot spots

The key drivers behind increased freight handling at airports such as Cochin, Trivandrum and Ahmedabad include rising local demand, improved international connectivity and the resultant hubbing activity and expanding cargo-handling infrastructure. Other emerging hubs such as Pune, Jaipur, etc.5 are witnessing high growth rates primarily driven by increasing domestic volumes, freight handling services by low cost airlines and better connectivity. Segregated by attractiveness for 3PL players and freight forwarders Further analysis suggests that these upcoming hubs can be broadly classified into two categories - 1) attractive-for-3PL players, and 2) attractive-for-freight forwarders based on the hubs domestic versus EXIM focus. Location attractiveness for 3PL players and freight forwarders# Attractive-for-3PL
High (>30,000 tonnes)
Pune Medium (~10,000 tonnes) Agartala Coimbatore Jaipur Indore Legend: CAGR (FY06 -FY10) 20% or more >10-20% Trivandrum <10% <0% Ahmedabad Cochin
Guwahati
Imphal Nagpur Low (<1,000 tonnes) Goa Lucknow Low (<1,000 tonnes) Medium (~ 10,000 tonnes) Calicut
(>30,000 tonnes)
Attractive-forfreight High forwarders
Source: Crisils Airport Industry Statistics July 2010 and KPMG Analysis
KPMGs perspective There are ample opportunities for players across the logistics value chain to enter and/or expand their presence within Indias air freight sector, driven by strong demand as well as improved carrier services. While metro or Tier 1 cities will continue to dominate the overall market, we believe that it is the new set of Tier 2 cities that represent new and uncluttered opportunities. Service provider firms will do well to evaluate their presence, focus and service orientation in these new locations in the context of this unprecedented growth being experienced in these locations.
Note: # Airports have been analyzed based on FY10 volumes handled as reported by the respective airports; aassumption: 3PL players and freight forwarders are respectively domestic and EXIM cargo-focussed Source: 5 Crisils Airport Industry Statistics July 2010 and KPMG Analysis
34
KPMG view Air freight hot spots Key recent deals

Target Continental Warehousing Nhava Sheva GMR Airports Holding Transpole Logistics Atlas Logistics Nikkos Logistics Target country Acquirer/ investor Warburg Pincus StanChart PE Fidelity SBS Holdings Aqua Logistics Acquirer/ investor country US Deal type Deal value (USD Mn) Stake acquired
India
PE investment PE investment PE investment Acquisition Acquisition
100
NA
India India India India
India US Japan India
150 13 33 33
NA NA 80 70
Source. Venture intelligence database
35
This document has been compiled by the Research, Analytics, and Knowledge (RAK) team at KPMG in India.
kpmg.com/in
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. 2011 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.

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KBuzz

ENERGY & NATURAL RESOURCES

MEDIA & ENTERTAINMENT

REAL ESTATE & CONSTRUCTION

TRANSPORTATION & LOGISTICS

KPMG view Education Sector: Pre-school market on the rise

Narayanan Ramaswamy Head Education narayananr@kpmg.com

Market size and growth

Source: KPMG Investing in India, Nov 2008

Major developments 1 Date

May 2010 June 2009 Apr 2009

KPMG Investing in India, Nov 2008, Press Articles

KPMG view Education Sector: Pre-school market on the rise

Market share of major players

Euro Kids 30%

KPMG view Education Sector: Pre-school market on the rise

Mahesh Tutorials, a major player in private tuitions space

Career Launcher, a leading player in test preparation segment

Source: KPMGs Investing in India, Nov 2008; press articles

ENERGY AND NATURAL RESOURCES

ENERGY AND NATURAL RESOURCES

Arvind Mahajan Head Energy and Natural Resources arvindmahajan@kpmg.com

DGH Press Article

ENERGY AND NATURAL RESOURCES

ENERGY AND NATURAL RESOURCES

Key deals in April 2011

Source ISI Analytics, Press Articles

Excelerate energy presentation, September 2009

Key deals in April 2011

Deal value (USD mn) 5 5.6 29.36 NA

Pradeep Udhas Head IT-ITeS pudhas@kpmg.com

Next decade (2020)

Concentrated markets 75% of

Emerging markets focus SMB; BRIC,

GCC, Japan, Row; Public sector and healthcare

quality Core driver was labor arbitrage Onshore/offshore mindset

Innovation, end-to-end transformation,

risk & compliance

Low-cost workforce, trainable talent

Diversified and specialized talent pool Globalized expertise and multiple

Three-tier system of servicing clients

pool Delivery-centric management Emphasis on recruiting and training

Source: KPMG Analysis, NASSCOM 2020

Dedicated high-level knowledge workers (acting as business partners)

Centres of Excellence (CoEs), R&D hubs and Innovation centres

Large-volume transaction processing centres (mainly outsourced)

Key deals in April 2011

Acquisition Minority stake

MEDIA & ENTERTAINMENT

Media & Entertainment

KPMG view Print Sector: Finding profitable avenues

Rajesh Jain Head Media & Entertainment rcjain@kpmg.com

2015p 113 96 101 310

CAGR (2011-2015) 7% 11% 12% 10%

Media and Entertainment

KPMG view Print Sector: Finding profitable avenues

Media and Entertainment

KPMG view Print Sector: Finding profitable avenues

KPMG view Ethics in pharmaceutical marketing: Learning from developed markets

Anthony Crasto Head Pharmaceuticals acrasto@kpmg.com

KPMG view Ethics in pharmaceutical marketing: Learning from developed markets

Sun Pharmaceutical Industries Ltd.

Abbott Laboratories and Laboratoires Fournier SA