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DEALS SNAPSHOT
April - June 2017
INDIA MARKET UPDATE
DEALS SNAPSHOT
Dear Clients and Associates:
Welcome to the KNAV India Market Update for the quarter ended June 2017.
This update includes an analysis of private equity/venture capital investments and the key M&A deals in the quarter ended June 30, 2017.
Key highlights
• The quarter had around 277 private equity/venture capital investments rounding up to a value of USD ~5 bn. Some notable deals include:o Paytm’s fund raise of USD 1.4 bn from SoftBank showcases the potential of digital payments in India; &o Private placement of USD 360 mn in Tata Technologies by KKR and CPPIB.
• The quarter had around 78 M&A transactions rounding up to USD ~1.5 bn. The prominent deals are:o Sale of 12.18% stake in ICICI Lombard General Insurance by Fairfax to Warburg Pincus; &o HCL Tech’s acquisition of US BPO firm Urban Fulfillment for USD 30 mn.
• A detailed analysis and a selected listing of a few notable deals are presented in this update.
• Some notable and disruptive strategic moves by companies have also been included in this quarter’s edition.
Do share your comments and/or feedback on [email protected]
Thank you.
Vaibhav ManekPartner - Advisory services
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Suparna DuaPartner - Investment banking
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Private equity/Venture capital investments
April-June 2017
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DEALS SNAPSHOT
Of the total ~213 deals in this quarter, the highest number
of deals were in the technology sector (52 deals), followed
by finance (29 deals) and healthcare & e-tail (18 deals
each).
Of the total USD ~3.55 bn invested in this quarter, the
highest amount of funds were invested in the payments
sector (USD ~1.4 bn), followed by travel (USD ~754 mn)
and technology (USD ~443 mn).
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Consumer internet | PE/VC dealsThe following charts provide a sector-wise analysis of private equity/venture capital investments in theconsumer internet space in terms of number of deals and transaction value for the quarter.
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29
18
52
0
10
20
30
40
50
60
Number of deals1435
443
754
0
200
400
600
800
1000
1200
1400
1600
Transaction value in USD mn
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Brick and mortar | PE/VC deals These charts provide a sector-wise analysis of private equity/venture capital investments in the brickand mortar space in terms of number of deals and transaction value for the quarter.
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Of the total ~64 deals in the quarter, the highest number
of investments were in the finance sector (11 deals),
followed by food & beverages and real estate (10 deals
each) & healthcare (7 deals).
Of the total USD ~1.7 bn invested in the quarter, the
highest amount of funds were invested in the
construction sector (USD ~606 mn) followed by finance
(USD ~562 mn) and healthcare (USD ~199 mn).
1110
7
10
0
2
4
6
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10
12
Number of deals
606562
199
0
100
200
300
400
500
600
700
Transaction value in USD mn
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Investee Sector InvestorInvestment value
(USD mn)
Payments SoftBank 1400
Construction Cain Hoy 375
TechnologyKKR, Canada Pension Plan Investment Board (CPPIB)
360
Travel SIMI Pacific Pte 250
Travel
SoftBank, Lightspeed Venture Partners, Sequoia,
Greenoaks Capital Partners
250
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Top private equity/venture capital deals
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Investee Sector InvestorInvestment
value (USD mn)
Finance PremjiInvest 109
Pharmaceuticals Capital International Inc 107
TravelFalcon Edge Capital, Capital
Advisors104.5
FinanceKedaara Capital, Ontario Teachers’ Pension Plan
100
Logistics
Nasper, Accel India, SAIF Partners, Bessemer Venture Partners, Harmony Partners,
Norwest Venture Partners
80
Top private equity/venture capital deals
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Mergers & acquisitions
April-June 2017
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• Technology retains #1 position with 14 dealsSome of the highlights in the technology sector deals were: MapMyIndia’s acquisition of VIDTEQ, HCL Tech’s acquisition of Urban Fulfillment Services and Cognizant’s acquisition of TMG Health.
• Professional Services is placed at #2 position with 7 dealsSome of the prime deals in the professional services sector were: Anuj Puri’s acquisition of the Residential brokerage arm of JLL India, Tenon Group’s acquisition of Elite Cleaning and the merger of TMT Law Practice and DPSA Legal.
• Pharmaceuticals, Media & Entertainment and Finance are placed at #3 position with 6 deals eachSome of the deals in these sectors were: Pfizer’s acquisition of Neksium brand previously belonging to AstraZeneca AB, Casino Pride’s acquisition of a 30% stake in Baadshah and FlexiLoans Technologies’ acquisition of CreditPeriod.
Top M&A sectors
Professional services
Pharma, Media and Finance
Technology
DEALS SNAPSHOT
Sector-wise analysis | M&A deals
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The ensuing charts provide an analysis of the M&A transactions in the quarter of the number of deals and the transaction value.
There were ~78 M&A deals in this quarter. The technologysector bagged the highest number of deals (14 deals)followed by professional services (7 deals) andpharmaceuticals, media & entertainment and finance (6deals each).
In the quarter, the total transaction value of all dealsamounted to ~USD 1.5 bn compared to ~USD 4.6 bn inthe previous quarter. In terms of the transaction value,the highest M&A deals were witnessed by financesector (USD 656 mn) followed by manufacturing (USD343 mn) and pharmaceutical (USD 123 mn).
6 6 67
14
02468
10121416
Number of deals656
343
123
0
100
200
300
400
500
600
700
Transaction value in USD mn
DEALS SNAPSHOT
Technology space as a leading sector attracting investments
• Technology sector showcased 14 investments
contributing 17% of the total deals reported in
the quarter, across various technology
subsectors like IT & ITeS, cloud, analytics,
social, IoT, etc.
• 10 investments in IT & ITeS lead the
technology sector.
• There has been 1 investment each in the data
analytics, IoT, social and cloud sub-sectors.
• Investments in upcoming advanced technology
sector like data analytics and social technology
showcases the maturity of the investors as well
as their risk appetite.
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11
1
10
1
Technology-subsector classification
Cloud
Data analytics
Internet of Things
IT & ITes
Social
DEALS SNAPSHOT
Top M&A deals for the quarter
Target Acquirer SectorTransaction value
(USD mn)
12.2% stakeFinance 383
50% in South Korea unit
Manufacturing 315
Old Mutual’s 26% stake
Finance 201
80% stakePayments 120
Pharmaceuticals 78
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DEALS SNAPSHOT
Target Acquirer SectorTransaction value
(USD mn)
(Realty PE business)
Mr. Anuj Puri, former chief of JLL India
Real Estate 71.5
Healthcare 70
IFC’s 7.5% stake
Healthcare 65
Hindustan Aegis LPG Company
Logistics 39
Content 30.7
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Top M&A deals for the quarter
DEALS SNAPSHOT
Analysis of a few transactions
April-June 2017
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DEALS SNAPSHOT
• Fairfax Financial Holdings sold 12.18% of its stake in ICICI Lombard General Insurance to Warburg Pincus, Clermont Group and IIFL Special Opportunities Fund for USD 383 million.
• ICICI Lombard General Insurance was formed as a joint venture between ICICI Bank and Fairfax Financial Holdings, owned by Mr. Prem Watsa.
• While Warburg Pincus acquired 9% of the entity from Fairfax, Clermont Group and IIFL Special Opportunities Fund took 1.59% each.
• This deal values ICICI Lombard General Insurance at USD 3.1 billion.
• The deal comes at a time when ICICI Lombard plans to file documents for an IPO (first private sector insurance company to go public).
• This stake sale forms a part of the plan of Fairfax to sell 25% in the present JV and launch a new insurance joint venture. 15
Fairfax sale of 12.2% stake in ICICI Lombard to Warburg Pincus, others
Deal analysis
9%
DEALS SNAPSHOT
Zee Group buys India.com along with a minority stake in Tagos Design Innovations
• Zee Group has acquired the remaining 49% stake in India Webportal Pvt. Ltd. (which operates India.com) for USD 30.7 million and a 12.5% stake in Tagos Design Innovations Pvt. Ltd. for USD 2.5 million.
• India Webportal, formed as a JV between Zee and US digital media publisher Penske Media Corporation, operates content brands and distribution businesses across television, print, and the internet.
• Tagos Innovations, founded in 2014 by GBS Bindra, Sushant Panda and Tripat Preet Singh, has a unique product-Charmboard, an in-video discovery platform that makes videos respond to a user’s touch and allows the user to discover more from the video.
• Zee Entertainment will acquire the 49% stake from existing investors MMC Investments Holding Company II Ltd (44%), and Ashok Kurien (5%).
• These deals are primarily been made for the purpose of consolidation of businesses and to leverage the use of technology to boost its existing portfolio.
Deal analysis
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Acq
uires 1
2.5
%
Acq
uires
DEALS SNAPSHOT
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• Lockheed Martin, one of the world’s largest companies in the aerospace and defence sector, has tied up with Tata Group to produce the latest version of F-16 fighter jets in India.
• This deal pitches against the Saab-Adani deal for manufacturing Gripen-E fighter.
• Tata Lockheed Martin Aerostructures Limited has been formed with an aim to ‘produce, operate and export the F-16 Block 70 aircraft’ under the ‘Make in India’ initiative.
• Tata Group (under Tata Advanced Systems) will use the technology and manufacturing facilities of Lockheed Martin for the production.
• On a political aspect, this indicates that despite US President Donald Trump’s promises to keep skilled jobs in the US, his administration is willing to transfer F-16 production line from Texas to India.
• This deal creates numerous new job opportunities in India and the US and brings the world’s most combat-proven multi-role fighter aircraft manufacturing to India.
Lockheed Martin partners with TATA Group to manufacture F-16 jets in India
Deal analysis
DEALS SNAPSHOT
Disruptive strategic moves
April-June 2017
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• Amazon’s foray into the grocery segment is indicative of disruptive changes in this competitive high-volume business.
• Amazon’s recent acquisition of US-based supermarket chain Whole Foods Market for USD 13.7 billion is an acknowledgement of the importance of Brick and Mortar (B&M) stores in the Grocery segment.
• With this acquisition, it is likely to establish a combination of online and in-store goods, where customers can come into their local Whole Foods outlets and pick up their entire Amazon order.
• It is anticipated that this acquisition will improve supply chain capability, physical retail, big data analytics and minimum wastage of perishable commodities due to spoilage, as in the case of Amazon Fresh.
• The launch of Amazon Now (product delivery within 2 hours)and Amazon Pantry (next day delivery) for supply of grocery and other household essentials are indicative of the increasing interest of Amazon.
• Thus, while we are seeing several physical stores going online, we are also witnessing online marketplace opening B&M stores and going offline, indicating the interdependence of both the segments.
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Amazon’s entry into the groceries sector
Disruptive strategic moves
DEALS SNAPSHOT
• Companies like Sri Sri Ayurveda (promoted by Sri Sri Ravi Shankar- Art of Living founder), Patanjali Ayurved(promoted by Baba Ramdev- Renowned Yoga guru) are growing at a huge pace, giving threats to already established entities, including several renowned multinational firms.
• Priced 10% -30% cheaper than peers, it poses serious challenge to the products of many companies across different categories.
• Their aggressive pricing, unconventional marketing and strong follower base of the influencers (Sri Sri Ravi Shankar, Baba Ramdev) has helped them overtake established players in the market.
• Local sourcing and a not-for-profit motive encourages reinvestment of gains into the business, resulting in faster growth due to increased availability of organic funds.
• Established competitors such as Dabur, HUL, Emami and others are treading cautiously and have altered their strategy to tackle this threat.
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The rise of Patanjali
Disruptive strategic moves
Media attention
Smart pricing
Retail outlets
Product variety
Swadeshi factor
Advertising
DEALS SNAPSHOT
About KNAV
KNAV refers to one or more of the member firms of KNAV International Limited (‘KNAV International’), which itself is a not-for-profit, non-practicing, non-trading corporation incorporated in Georgia, USA.
KNAV International is a charter umbrella organization that does not provide services to clients. Services of audit, tax, valuation, risk and business advisory are delivered by KNAV's independent member firms in their respective global jurisdictions. All member firms of KNAV in India and North America are member firms of the US$ 2.01 billion, US headquartered Allinial Global.
Website - www.knavcpa.com
Reach us
If you want to know more about KNAV or its services please contact Mr. Vaibhav Manek at [email protected]. We will be glad to hear from you.
Suggestions/Feedback
For suggestions/feedback on this newsletter, please contact Ms. Suparna Dua at the KNAV Mumbai office on: [email protected]
Editorial credits
Deals Snapshot Editorial Hardik Adenwala and Akshay Mahalaxmikar –– KNAV Mumbai
The source of our data is our market research, publicly available reports and press items, and independent databases. While KNAV has made reasonable endeavors to ensure that the information provided in this newsletter is accurate and up to date as at the time of issue, KNAV shall not be liable for any errors, inaccuracies or delays in the information, nor for any actions taken in reliance thereon, nor does it endorse any views or opinions. KNAV disclaims all warranty, express or implied, as to the accuracy or completeness of any of the content provided, or as to the fitness of the content for any purpose to the extent permitted by law. The content herein is not appropriate for the purposes of making a decision to carry out a transaction or trade and does not provide any form of advice (investment, tax, legal) amounting to investment advice, nor make any recommendations or solicitations regarding particular financial instruments, investments or products, including the buying or selling of securities. KNAV has not undertaken any liability or obligation relating to the purchase or sale of securities for or by any person in connection with this document.
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