Draft

Private Equity in India 2009

Year in review

Foreword
Signs of an early off the block recovery; outlook cautiously optimistic
After a quiet rst three quarters, macroeconomic fundamentals began to recover in India toward the end of the year. The general view is that the worst is behind us, but caution remains due to fears of a ripple effect from a possible global double dip in the latter part of 2010. Aided by government stimulus and insulated by a lower dependency on exports (compared with other emerging markets), the Indian economy appears to be getting back on track with GDP for 2010 forecast to grow at 7.2% (up from 6.7% in 2009). On the ip side, however, ination has reached an all-time high of 8.5%. This, coupled with a recovery in economic growth, may put pressure on the Government to roll back some of its stimulus measures. Indias recently released 2010 budget, was well received by most as a well-balanced middle of the path budget focused on long-term growth. It was designed to reduce the scal decit in a calibrated way from 6.9% to 5.5% of GDP, while restoring duties on crude oil, gasoline and other rened petroleum products. While some worry that these taxes will be inationary in the short term, others believe they are necessary to wean consumers off unsustainable government subsidies. However, when combined with a rebounding economy, a stronger rupee, and a well-timed exit from scal stimuli, the proposed measures could support Indias continued growth. Before the collapse of Lehman Brothers in September 2008, PE grew in India from USD2.5 billion in 2005 (across 151 deals) to a peak of USD17 billion (across 375 deals) in 2007. However, the global crisis took its toll toward the end of 2008 and 2009, as the crisis unfolded and global tremors impacted the Indian economy; 2009 has been the most challenging year for PE activity to date, with PE investment falling to a fth of its historical peak. With liquidity scarce and PE houses taking a cautious approach, focus shifted from deal-making to preserving portfolio value as PE funds worked increasingly with management to improve operational performance and protect margins and cash. Encouragingly, however, there are two important emerging trends that should augur well for the future. First, there are signs that PE is rebounding with fourth quarter deal activity and big bang deals (underscoring investor condence) making a comeback. Second, the Indian PE environment is evolving to focus not on just investing but also on successful exits. There were 44 non-IPO exits in 2009 (up from 25 in 2008) worth USD1.2 billion. Looking ahead, India should continue to see strong PE deal activity, with mainstay growth-stage minority interest deals continuing to dominate. Exits should pick up over the next few years, as rms look to realize prots on investments made between 2004 and 2006. Regulation is also likely to increase to meet global investor demand for more transparency, better risk management, and more sophisticated internal controls.

In this issue
Foreword ....................................... 1 PE activity in 2009 ........................ 2 1.1. 1.2. 1.3. Investments ......................... 2 Exits .................................. 10 Fund-raising ....................... 11

Key trends in 2009 ...................... 14 2.1. 2.2. 2.3. 2.4. Rise in follow-on and co-investments ............ 14 Emerging sectors ............... 14 Due diligence and risk management ............... 17 Emergence of domestic LP class ............... 17

The LP-GP equation: aligning interests ......................... 18 Regulatory and tax update ........... 19 The way forward .......................... 20 Global PE landscape ..................... 21

PE activity in 2009

1.1. Investments
Subdued activity in 2009, uptick seen in last quarter encouraging 20052007
PE in India grew signicantly from 2005 to 2007 as many global PE rms established ofces in India, attracted by growth opportunities spread across various sectors. Factors such as a well-established corporate legal system, rich pool of entrepreneurial talent and liquid capital markets made India an attractive investment destination for PE. The country saw record deals of USD17 billion in 2007 the highest in the Asia-Pacic region. Deal-making, fund-raising and exit opportunities, the three important indicators of any countrys PE health, saw a remarkable year-on-year increase during that period. Figure 1: PE investments in India (200509)
2.4 20 18 16 14 12 10 8 6 4 2 0 7.5 17.4 375 306 335 10.5 3.5 400 350 300 250 180 200 150 100 50 0

After the global turmoil

The collapse of Lehman Brothers and the following global recession signicantly impacted the PE environment in India in 2009. PE deal value plummeted 66% to USD3.5 billion from USD10.5 billion in 2008, making it the worst year after 2005. Similarly, deal volumes also saw a major decline to almost half of the 2008 deal volume levels. However, after being signicantly impacted by the global downturn during the fourth quarter of 2008 and the rst quarter of 2009, PE deal ow improved from the second quarter, reecting that India has not only shown the resilience to withstand the crisis, but the ability to emerge relatively unscathed from it. The last quarter saw the most number of PE deals 51 and this momentum carried forward into the rst quarter of 2010 with 64 PE deals, worth USD2 billion. Figure 2: PE investments in India (200809)
Number of deals 4,705 2,759 2,243 813 645 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 119 83 79 53 50 41 51 38 974 967 950 140
Number of deals

Deal value (USDb)

151

Deal value (USDm)

120 100 80 60 40 20 0

2005 Deal value

2006

2007

2008

2009

Number of deals

Source: Asian Venture Capital Journal and Ernst & Young research

1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Deal value Number of deals

Source: Asian Venture Capital Journal and Ernst & Young research

2 Private Equity in India 2009: year in review

Figure 3: Top 10 PE deals in 2009

The top 10 PE deals in 2009 accounted for a total deal value of USD1.4 billion, representing 40% of total PE deal value during the year. Date
September 2009

Target
Aricent Technologies

Investor(s)
Canada Pension Plan Investment Board and Kohlberg Kravis Roberts & Company Bahrain Telecommunications and Millennium Private Equity IDFC Private Equity, Oman Investment Fund and SREI Infrastructure Finance Caldwell Investment Management IDFC Private Equity and Oman Investment Fund Goldman Sachs Capital Partners Apollo Management India BVP India Investors, Citigroup Venture Capital International and Sequoia Capital India IDFC Private Equity IDFC Project Equity

Value (USDm)
255

Sector
Technology

January 2009 August 2009

S Tel Quippo Telecom Infrastructure National Stock Exchange of India Quippo Telecom Infrastructure Max India Dish TV India Ind-Barath Power Infra

225 224

Telecommunications Telecommunications

June 2009 June 2009 December 2009 November 2009 October 2009

130 127 115 100 100

Financial services Telecommunications Diversied group Media and entertainment Infrastructure

September 2009 March 2009

BP Energy India Essar Power

95 68

Infrastructure Infrastructure

Source: Asian Venture Capital Journal and Ernst & Young research

In Indias largest deal in 2009, the Canada Pension Plan Investment Board and Kohlberg Kravis Roberts & Co (KKR) announced an investment of USD255 million in Aricent Technologies, a communications software products and services provider. This was a follow-on investment, as KKR rst acquired a majority stake in Aricent (formerly known as Flextronics Software Systems) in 2006 for USD900 million.

This was followed closely by Bahrain Telecommunications and Millennium Private Equitys investment of USD225 million in S Tel, a GSM service provider. S Tel has a license to operate in six Indian states Bihar, Orissa, Jammu and Kashmir, Himachal Pradesh, North East and Assam.

3 Private Equity in India 2009: year in review

Investment analysis by sector

Core infrastructure and telecoms attract maximum capital; deal activity in technology most prolic
Indias infrastructure, telecommunications and technology sectors together accounted for 55% of total announced PE deal value in 2009. In terms of deal volume, technology, infrastructure and nancial services were the major sectors with 42% of the total announced deal volume. Figure 4: Composition of PE deal value by sector (2009) Figure 5: Composition of PE deal volume by sector (2009)

Infrastructure Telecommunications Technology Financial services Media and entertainment Logistics Industrial products Health care Others 281 210 173 166 134

747 693 497

Technology Infrastructure Financial services Telecommunications Consumer products and retail Industrial products Media and entertainment Others 0 12 11 11 18 15 26

31

636 0 100 200 300 400 500 600 700 800 Deal value (USDm)

56 10 20 30 40 50 60

Number of deals

Source: Asian Venture Capital Journal and Ernst & Young research

Source: Asian Venture Capital Journal and Ernst & Young research

4 Private Equity in India 2009: year in review

Infrastructure
Holding down the fort
Based on deal value, PE investment was highest in the infrastructure sector with USD747.5 million in deals accounting for 21% of the countrys total announced deal value in 2009. In the largest infrastructure deal during the year, a group of PE investors, including Bessemer Venture Partners, Sequoia Capital and Citigroup Venture Capital International, announced an investment of USD100 million in the Hyderabad-based power generation company, Ind-Barath Power Infra, for an 18% equity stake. The company plans to utilize these funds for expansion purposes. Currently, Ind-Barath Power Infra has ve projects in Tamil Nadu, Maharashtra and Karnataka and is setting up approximately 3,000MW of capacity. Earlier, in 2007, Ind-Barath raised USD61.6 million from Citigroup Venture Capital International.1
Figure 6: Top ve PE deals in infrastructure Date October 2009 Target Ind-Barath Power Infra Investor(s) BVP India Investor, Citigroup Venture Capital International and Sequoia Capital IDFC Private Equity IDFC Project Equity IDFC Project Equity IDFC Project Equity and Infrastructure Development Finance Co Value (USDm) 100

During 2009, Indias power sector dominated overall PE deal activity within the countrys infrastructure sector and constituted 60% of its total deal value. Within the power sector, renewable energy was popular with PE investors. BP Energy India (a division of BP that holds wind energy assets of 100MW in India), Greenko PLC (a power-producer focused on renewable energy), Soham Renewable Energy and Shalivahana Green Energy were the prominent companies in the renewable energy space that attracted PE investment during 2009.

Trends in infrastructure
During the year, PE investments in infrastructure declined by 62% in terms of deal value and 51% in terms of deal volume from 2008 levels. The average deal size also fell 29% to USD31.1 million, compared with USD43.8 million in 2008. This was primarily due to the overall decline in PE activity in India.
Figure 7: Trend in PE investments in infrastructure

1,192.6

2,265.6

1,968.8

747.5

3,000 Deal value (USDm) 2,500 2,000 1,500 1,000 500 0

28.4

49.3

43.8

31.1

48

53

53

September 2009 March 2009 April 2009 October 2009

BP Energy India Essar Power Ashoka Buildcon GMR Kamalanga Energy

95 68 50 48

26

80 70 60 50 40 30 20 10 0

2006

2007

2008

2009

Deal value

Number of deals

Average deal size for announced deals, in USDm

Source: Asian Venture Capital Journal and Ernst & Young research Source: Asian Venture Capital Journal and Ernst & Young research

1 Citigroup Venture Parks Funds with Infrastructure Cos., Asia Private Equity Review News Flash, 9 July 2007, via Dow Jones Factiva, 2007 Centre for Asia Private Equity Research.

Private Equity in India 2009: year in review

Number of deals
5

Indian PE infrastructure has generated signicant interest from global PE rms during the past few years. Approximately USD6 billion has been invested in the Indian infrastructure sector in a total of 180 deals during 200609. However, with its underdeveloped and undercapitalized infrastructure, India requires signicant impetus to accelerate its growth. The Government has recognized this need and has already initiated an action plan, which calls for substantial investment in infrastructure and heightened private sector participation in the coming years. According to the Ernst & Young-ASSOCHAM (Associated Chambers of Commerce and Industry of India) survey, The Opportunity Framework, September 2009, the Indian infrastructure sector offers a signicant investment opportunity for the PE community. The survey indicated that power, roads, highways and ports have attracted considerable investment-related interest from PE rms. Going forward, numerous government policy measures, coupled with signicant capacity additions by industry players, are expected to catalyze investments in the sector. As more private players enter the business, the sector is expected to evolve further and create attractive investment and exit opportunities for PE investors.

Figure 8: Top ve PE deals in telecommunications Date January 2009 S Tel Target Investor(s) Bahrain Telecommunications and Millennium Private Equity IDFC Private Equity, Oman Investment Fund and SREI Infrastructure Finance IDFC Private Equity and Oman Investment Fund Axious Investment Norwest Venture Partners Value (USDm) 225

August 2009

Quippo Telecom Infrastructure

224

June 2009 April 2009 March 2009

Quippo Telecom Infrastructure Quippo Telecom Infrastructure OnMobile Global

127 40 15

Source: Asian Venture Capital Journal and Ernst & Young research

Telecommunications
Large-size deals rule
The telecommunications sector accounted for 20% of the total announced deal value during the year. The sector saw USD693 million of PE investments from 15 deals in 2009. In the largest telecoms deal of the year, Bahrain Telecommunications and Millennium Private Equity jointly acquired 49% stake in S Tel, a GSM service provider, for USD225 million. The deal provides an opportunity for Bahrain Telecommunications to expand its operations in one of the fastest growing mobile markets in the world.

In addition to service providers, the telecoms infrastructure segment has also attracted the attention of PE deal-makers. This was demonstrated when Quippo Telecom Infrastructure, an independent tower rental company, successfully raised three rounds of funding from PE investors, including IDFC Private Equity, Oman Investment Fund and Axious Investment in 2009.

Trends in telecommunications
PE telecommunications deals during 2009 were nearly halved to USD693 million from USD1,412 million in 2008. However, deal volumes did not experience a signicant decline, with 15 announced deals in 2009, compared with 18 deals in 2008. In fact, in terms of deal volume, the sector has seen an upward trend over the past four years.

6 Private Equity in India 2009: year in review

Figure 9: Trend in PE investments in telecommunications

Technology
High on deal count
30 25 Number of deals

1,455.2 4,500 4,000 Deal value (USDm) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 Deal value 8 207.9

3,766.7
313.9

1,411.9
83.1

692.5
57.7

18 15 12

20 15 10 5 0

With 31 deals totalling USD497 million, the technology sector experienced the highest deal volume of all sectors, comprising 17% of the total deal volume and ranking third in announced deal value with a 14% share during 2009. In the biggest technology deal of 2009, KKR and the Canada Pension Plan Investment Board, acquired an additional 15% stake in Aricent Technologies for USD255 million. KKR acquired Aricent Technologies in 2006 in the largest buyout PE deal in India to date. During the year, smaller deals dominated the technology sectors deal landscape, with almost 55% of the deals less than USD10 million in value. Barring the Aricent-KKR Canada Pension Plan Investment Board deal, the average deal size during 2009 was approximately USD9.7 million. This suggests that PE and VC rms go for smaller deals in companies operating in niche segments, including internet marketing companies, knowledge process outsourcing, business process outsourcing and internet portals.
Figure 10: Top ve PE deals in technology Date September 2009 Target Aricent Technologies Financial Software and Systems MphasiS BFL Manthan Software Services Investor(s) Canada Pension Plan Investment Board and KKR Jacob Ballas Capital and New Enterprise Associates Baring Private Equity Partners ePlanet International Advisors, FIL Capital Advisors, Fidelity India Capital Partners, and IDG Ventures India Advisors New Enterprise Associates Value (USDm) 255

2007

2008

2009

Number of deals

Average deal size for announced deals, in USDm

Source: Asian Venture Capital Journal and Ernst & Young research

The Indian telecoms sector has witnessed several billion dollar plus PE deals, which have paved the way for large amounts of global PE capital to enter the countrys economy. Temasek Holdings Advisors USD2 billion investment in Bharti Airtel in 2007 was the largest PE deal in the Indian telecoms landscape during 200609. Furthermore, large deals have dominated PE activity in the sector, and the average deal size for announced deals exceeded USD50 million during 200609. From tower companies, to ancillary providers to value-added service (VAS) providers, PE investors have invested across a range of companies in the Indian telecoms sector. Going forward, the Indian telecoms sector presents a compelling investment opportunity for the global PE community. The expansion of telecommunications services in rural and semi-urban areas is expected to drive growth in the sector. In addition, the rollout of 3G services will boost growth prospects as 3G presents an opportunity to enhance revenues for VAS providers and other data services. In light of these factors, PE deal activity in the telecommunications space is likely to experience further growth in coming years.

August 2009

60

March 2009 November 2009

25 15

September 2009

RT Outsourcing Services

14

Source: Asian Venture Capital Journal and Ernst & Young research

7 Private Equity in India 2009: year in review

Trends in technology
Compared to the preceding years, 2009 was the worst year for PE activity in the technology sector. From a high of USD1.2 billion in 2006, PE deals reached an all-time low of USD497 million in 2009. Even in terms of deal volumes, activity was subdued, with only 31 announced deals during the year the lowest in the previous four years. Declining PE activity in the sector over the years may be an indicator that PE investors have expanded their investments to other growing and emerging sectors. Figure 11: Trend in PE investments in technology

Figure 12: Composition of PE investments by deal stage (2009)

204 2,000 1,600 1,200 80 800 400 0 18 32 3 Growth capital PIPE 9 0 Early stage Pre-IPO Buyouts 40 118 48 1,737 1,109 439 160 120

Deal value (USDm)

1,265.7 40.8 1,400 Deal value (USDm) 1,200 1,000 800 600 400 200 0 2006 Deal value 41

981.4 15.1 79

786.1 19.7

496.5 19.1 100 90 80 70 60 50 40 30 20 10 0

Deal value

Number of deals

Number of deals

60

Source: Asian Venture Capital Journal and Ernst & Young research

31

as listed companies present a safer option than the majority of unlisted private companies. Notably, private companies are usually not easily accessible as they are either not of optimal size or they form a part of fragmented sectors. PIPE deals declined 13% to USD1.1 billion during 2009 as compared with USD1.3 billion in 2008. This is primarily due to the overall decline in PE activity in 2009 from the global nancial turmoil. Further, in the absence of robust PE participation, listed Indian companies looking for fund-raising opted for qualied institutional placements (QIPs) to fund their expansion plans, since Indian companies nd them easier to execute and less risky in terms of price assurance. A total of USD8.6 billion was raised through QIPs in 54 deals through 2009. However, the last quarter of 2009 witnessed a slight increase, with PIPE deal activity gaining momentum during this period. In some of the prominent PIPE deals in the fourth quarter of 2009, leading PE players such as Bain Capital, Goldman Sachs and Apollo Management acquired stakes in listed Indian companies. Further, as India continues to be a fundamental growth capital market, buyouts have still not become important to those PE rms investing in the country. During 2009, a total of USD439 million was invested in nine deals. However, while minority deals are likely to continue to be the sectors mainstay, in the long term, buyouts are expected to become more common.

2007

2008

2009

Number of deals

Average deal size for announced deals, in USDm

Source: Asian Venture Capital Journal and Ernst & Young research

Investment analysis by stage

Growth stage continues to be mainstay of PE activity; buy-out market nascent
Keeping with the trend of the past few years, 2009 was also characterized by a large number of growth-stage deals. Growth capital funding accounted for half of the announced deal value and 66% of the announced deal volume. This is likely to continue in the near future as Indian companies look for capital infusions to fund their expansion plans. The preponderance of growth-stage deals was closely followed by private investment in public equity (PIPE) deals, which comprised 32% of the announced deal value and 18% of the announced deal volume in 2009. PIPE deals have attracted signicant PE interest

8 Private Equity in India 2009: year in review

Number of deals

Investment analysis by deal size

Cautious wait and watch approach through most part of 2009; mid-sized deals continue to dominate
After reaching an all-time high of USD53 million in 2007, the average PE deal size in India has experienced consistent decline. In 2009, the average PE deal size fell nearly 40% from 2008 and 57% from 2007. Figure 13: Trend in average deal size of announced deals (USDm)
60
Average deal size (USDm)

Deals amounting to less than USD10 million accounted for the lions share of total announced deal volume during 2009. Notably, deals in this range comprised 52% of the total announced deal volume, the highest in the last four years (39% in 2008, 34% in 2007 and 46% in 2006). Among a total of 17 deals, large-size deals (more than USD50 million) accounted for 11% of deal volume, a signicant decline when compared with 2008. (Such deals were close to 20% of the total announced deal volume in 2008.) Figure 14: Composition of total deal volume by deal-size category

53.3 Number of deals

140 120 38.7 100 80 60 40 20 0

50 40 30 20 10 2006 2007 2008 2009 28.8 23.1

119 110 107 80 55 63 49 26 54 27 28 78 66 73 51 17

Source: Asian Venture Capital Journal and Ernst & Young research

Less than USD10m

USD 11-20m

USD 21-50m

Greater than USD50m

2006

2007

2008

2009

Source: Asian Venture Capital Journal and Ernst & Young research

9 Private Equity in India 2009: year in review

1.2. Exits
More exits with smaller deal values; PE-backed IPO activity lowest in past four years, due to meltdown of capital markets
There were 44 PE-backed exits that occurred outside of the normal IPO route in 2009. This was considerably higher than the 25 non-IPO exits that PE rms performed in 2008. The increase was primarily due to increased buoyancy in the Indian stock markets, which witnessed a more than 80% increase from 2008

lows. From a sectoral point of view, the infrastructure sector was the most active, with 30% of the total non-IPO exits obtained by PE rms (as PE invests heavily in the infrastructure sector.) In the largest non-IPO exit, D.E. Shaw India Advisory Services exited from DLF Assets in a deal valued at USD500 million. Other prominent non-IPO exits included ICICI Venture Funds Managements USD79.7 million exit from Vetnex Animal Health (one of the leading players in the Indian animal healthcare market) and ChrysCapitals USD60.7 million exit from Shriram Transport Finance (a truck nance rm). Notably, PE players such as ChrysCapital, Citigroup Venture Capital International, IL&FS Investment Managers and Sequoia Capital executed multiple non-IPO exits during 2009.

Figure 15: Trend in non-IPO exits

Trend in non-IPO exits 13,787 80
Number of exits
20,287

Composition of non-IPO exits (2009) (in %) 9,647 17,465 25,000 59 44 25 10,000 20,000
BSE Sensex

7 7 11 30

60 40 20 0 2006 42

15,000

11

5,000 0 2007 2008 2009 Infrastructure Number of exits Sensex Real estate, hospitality and construction Industrial products Others 16 18

Media and entertainment Financial services

Technology

Source: Asian Venture Capital Journal and Ernst & Young research

10

Figure 16: Trend in non-IPO exits

2,163 1,933 3,168 1,232

Figure 17: Trend in PE-backed IPOs for the year 2008

3,051 2,657 835 1,332

3,600 3,200

80

Value (USDm)

2,800 Value (USDm) 2,400 2,000 1,600 1,200 800 400 0 2006 42

59 44 40 25 Number of exits

3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 0

40

21 11 7 0 2006 2007 2008 2009

0 2007 2008 2009

Value (USDm)

Number of exits

Value (USDm)

Number of IPOs

Source: Asian Venture Capital Journal and Ernst & Young research

Source: Asian Venture Capital Journal and Ernst & Young research

PE-backed IPOs
A total of USD1.3 billion was raised by PE-backed companies through just seven IPOs in 2009, the lowest number of PE-backed IPOs in the last four years. In the largest PE-backed IPO, Adani Power, backed by 3i Group, raised USD625.8 million in August 2009. In another IPO, Farallon Capital Management and LNM Internet Ventures-backed Indiabulls Power raised USD329.3 million in October 2009. Interestingly, power sector companies dominated the PE-backed IPO space and accounted for roughly 72% of the total funds raised through IPOs during 2009.

1.3. Fund-raising
India increasingly becoming an integral part of the Asia fund-raising story
PE fund-raising in India declined by 62% to USD3 billion from USD9 billion in 2008 as investors became selective and limited partners (LPs) as well as general partners (GPs) realigned their interests. However, since 2005, fund-raising activity has been on the rise in India compared with the rest of Asia from just 9% in 2005 to 21% in 2009, indicating Indias increasing attractiveness for PE investments compared to the other developing Asian countries.

Number of IPOs

28

Figure 18: Total PE funds raised

29,304 70,000
Total PE funds raised (USDm)

Key new funds have entered India

50,582 16,235 25 20.6 20 17.3
Percentage

47,306

58,210

60,000 50,000 40,000 30,000 20,000 9.2 7,085 6,644 8,753 15.0 11.4

15 10 5 3,345 0 2008 2009

During the year, several global and domestic PE rms set up shop in India. These include renowned rms including Advent International (a fund with approximately USD24 billion under management), OrbiMed (a US-based health care-focused global PE fund with approximately USD5 billion in assets under management) and PE Indian Infrastructure Fund (a fund sponsored by two Europe-based nancial groups, Principle and Europa).
Figure 19: Announced plans of new PE funds in 2009 Fund name Multiples Alternate Asset Management Akansa Capital Principle Europa Indian Infrastructure Fund Avendus Aditya Birla PE Catamaran Investment Advent International OrbiMed Focus sector Sector agnostic Sector agnostic Infrastructure NA Sector agnostic Health care, retail and technology Sector agnostic Health care Target fund size (USDm) 400 300-400 300 220 200 130 NA NA

10,000 2,683 0

2005

2006

2007

India

Asia

Funds raised in India as a % of funds raised in Asia

Source: Asian Venture Capital Journal

During the year, EMPEA/Coller Capital Emerging Markets Private Equity Survey, 2009 reinforced Indias position as an attractive investment destination for global PE investors. The survey captured the views of 156 PE investors worldwide on investments in emerging economies. According to the survey, India was ranked third among developing economies in terms of attractiveness for investment over the next 12 months. . On the back of strong underlying fundamentals and economic growth, coupled with signs of improving liquidity globally, LPs are expected to gradually increase their allocations to the PE asset class. For them, India is becoming a favored investment destination over other emerging markets.

Sources: Dow Jones Factiva, ISI Emerging Markets and Ernst & Young research

Domestic funds were on the increase in 2009 as several corporate entities set up their own PE funds: Aditya Birla Private Equity, the PE arm of the Aditya Birla Group, raised USD100 million of the targeted USD250 million at the end of 2009. It also plans to launch at least four more PE funds, each amounting to USD400500 million over a period of ve years. Vivek Paul, the former Vice Chairman of Wipro and former partner at TPG Capital, has launched his own fund, Akansa Capital, with a fund-raising target of USD300400 million. N R Narayana Murthy, Chief Mentor of Infosys Technologies, has launched a new venture capital fund, Catamaran Investment, which has capital of approximately USD130 million and will invest in health care, retail and technology companies in India.

12 Private Equity in India 2009: year in review

These will join the domestic PE community, which includes PE rms established by the Indian corporate houses such as Wipro Chairman Azim Premji, Anil Ambani, the TVS family, the Future Group and the Tata Group. These domestic funds are attracting the interest of a number of nancial institutions (FIs), as these FIs have legacy relationships and signicant exposure to their parent corporate business.

Figure 20: Top PE funds raised during 2009 Name TA Associates Focus sector Health care, media, technology NA Geography Global (with focus on India) India, China Fund size (USDm) 4,000

Top PE funds raised during 2009

Although 2009 was a challenging year for PE organizations, proven funds with a successful track record were able to raise capital. Furthermore, with several infrastructure-focused funds created, the sector was in favor among several PE rms. Wellknown global PE organizations that successfully raised funds during the year include TA Associates, Norwest Venture Partners, Actis, India Value Fund Advisors, IL&FS Investment Managers, NYLIM Jacob Ballas and ICICI Ventures.

Norwest Venture Partners Actis

1,200

Infrastructure

Emerging markets including India India India, China India India

750

India Value Fund Advisors StanChart-ILFS Infra Fund NYLIM Jacob Ballas India Fund III ICICI Venture (IAF III)

NA Infrastructure NA Infrastructure

725 640 440 350

Sources: Dow Jones Factiva, ISI Emerging Markets and Ernst & Young research

13 Private Equity in India 2009: year in review

Key trends in 2009

Marked with a changed macroeconomic environment, PE activity in India went through several interesting trends through 2009. From a rise in co-investments to increasing focus towards due diligence and risk management, 2009 saw new themes emerging as PE rms adapted to the aftermath of the global turmoil. Furthermore, relatively recession-proof sectors such as education and health care garnered signicant PE interest.

2.1 Rise in follow-on and co-investments

Follow-on investments, coupled with co-investment, were the key themes observed during 2009. The increasing trend of follow on investments, specically after the credit crisis, has been driven by PE rms working to help their portfolio companies withstand the downturn and gain an advantage from the fall in valuations. Leading PE houses such as Blackstone, KKR, 3i, ICICI Ventures and Kotak Private Equity announced their follow-on deals in 2009. In addition, co-investments became popular as a riskmitigation strategy in 2009, even in the case of medium-sized deals. Shrinking risk appetite, coupled with capital preservation as the primary motive, resulted in PE players coming together and joining hands to pick up stakes in companies.

during 2009 include Navis Advisors USD30 million investment in Edutech and Matrix India Asset Advisors USD20.5 million investment in FIITJEE. The increasing interest of PE players towards the sector is primarily driven by the signicant demand-supply gap that exists in it. Currently, India has an undercapitalized education sector. A burgeoning middle class and a large young population have resulted in an increasing need for professional educational services (coaching classes, IT training and e-learning). This imbalance between the number of people

2.2 Emerging sectors

Several sectors, such as education, health care, cleantech and micronance garnered PE attention in 2009 due to their relatively immunity to the economic downturn, as well as their high-growth potential. Other emerging sectors include power and roads and highways, which are high on the government agenda and consumption-focused sector, which is correlated with Indian economic growth.

Education: on the learning curve

From USD12 million in PE funding in 2008, the education sector attracted close to USD120 million, with an average deal size of USD15 million, in eight deals during 2009. PE players invested in technology-based education infrastructure companies and training institutions or coaching classes. Some notable deals

to be educated and provision of education services has created signicant opportunities for investment in education companies in India. Going forward, the sector has the potential to attract investment of around USD100 billion over the next ve years,2 and PE investors are expected to play a key role in this expansion. According to Ernst & Youngs Private enterprise in Indian higher education report, the sectors ability to withstand a downturn in the economy, predictability of cash ows and low dependence on working capital makes it attractive for potential investors.

USD100 billion of investment potential in Indian education sector, Asia Pulse, 12 January 2010, via Dow Jones Factiva, 2010 Asia Pulse.

14 Private Equity in India 2009: year in review

Health care: scaling new heights

As the demand for quality health care services increases, PE investors are also looking to acquire interests in hospital chains and diagnostic centers. The sector experienced a total of USD134 million of investment, comprising an average deal size of USD17 million in nine deals in 2009. Hospitals and hospital chains have been the primary beneciaries of PE funding and companies such as Nova Medical Centers, Max India and Kavery Medical Center and Hospital successfully raised PE funding in 2009. Currently, the health care space in India is characterized by its inadequate infrastructure, a signicant rural-urban divide and private spend of 80%. This calls for a massive increase in the participation of private sector players. Going forward, Indias health care services market is expected to grow from INR1,513 billion in 2007 to INR2,654 billion by 2012. Of this, the private health care sector is expected to contribute INR1,560 billion from INR690 billion at present.3

Cleantech: lighting India

The year 2009 has also seen the rising interest of PE houses in the renewable energy space. PE rms have invested close to USD185 million in a total of ve deals in the renewable segment during 2009, with an average deal size of USD37 million. A substantial shortfall in power supply, the depletion of fossil fuels and concerns related to energy security have been the key factors responsible for driving PE investors toward this sector. Several PE rms, such as Wolfensohn Clean Energy Fund, South Asia Clean Energy Fund, IDFC Private Equity, Global Technology Investment Group, Ashmore Climate Change Capital and FE Clean Energy are looking at deals in the renewable energy space in India. In addition, various sector-agnostic funds such as Morgan Stanley, Citigroup Venture Capital International, Axis Private Equity and 3i Group have also made investments in Indian renewable companies in the past.

Figure 21: Investment drivers for PE investments in health care

Private equity investment opportunity

Need for private sector players Under penetration Low health care expenditure Need for quality health care Medical tourism also an emerging business segment

Demand-supply imbalance Inadequate health care infrastructure Lack of skilled manpower

Transitioning demographics Growing population Rising income levels Rising lifestyle-related diseases

Healthcare Services, Centrum Research, June 2009, via Thomson Research.

15 Private Equity in India 2009: year in review

According to an Ernst & Young report in 2009, Cleantech in India: tapping the potential, India has emerged as a global hotspot for cleantech activity over the past few years, primarily due to the countrys growing energy needs and the escalating cost of conventional energy sources. Furthermore, technological advancements, coupled with favorable government policies, are driving both domestic and international private sector investments in cleantech. The sector is poised for robust growth, given the Governments ambitious capacity expansion and investment plans. The Government has proposed capacity additions of 15,000MW in the renewables segment during the Eleventh Five Year Plan period (FY07FY12), with an investment requirement of around INR104.6 billion. Carbon trading may emerge as another potential growth driver for the sector in the near future.

Power Micronance: Tapping the bottom of the pyramid

Indias micronance sector has witnessed substantial growth in the past few years, aided by two underlying factors. The rst is the expanded reach of micronance institutions (MFIs) and the establishment of a pan-India presence. The second is the increased participation of PE funds and banks. As these entities brought in more funds, the micronance sector integrated further with capital markets worldwide. PE rms such as AavishkaarGoodwell, Lok Capital, Unitus Equity Fund, Bellwether and Grammen Capital India have been active and have invested in the countrys micronance space. During 2009, MFIs including Asmitha Micron, Asirvad Micronance and Bhartiya Samruddhi Finance also raised PE funding. The low penetration level of nancial services provides tremendous growth opportunities. Recent statistics4 support the increasing need for nancial services to penetrate into rural India. Sixty-ve percent of the Indian population does not have a bank account. Twenty-seven percent , or 300 million people in India live below the poverty line (earn less than USD1 per day). Eighty-seven percent of the countrys poorest households do not have access to easy credit. Seventy percent of the rural poor do not have a savings account. This is likely to increase the investment potential of the micronance sector for PE investments in India.
4 Guide to Micronance- India, Research on India Netscribes, July 2009, accessed via ISI emerging markets.

A signicant demand-supply gap is expected to continue until 2017 in the Indian power sector. The Government has initiated various reforms to meet this rising demand and address the acute power shortage in the country. Furthermore, the private sector is also increasing its involvement to address Indias chronic power shortage issues. Driven by the signicant investment opportunities offered by the sector, PE investors are expected to add in additional funds, thereby feeding the expansion plans of private players. In addition, players in the cleantech and renewable energy segment are also expected to benet from the enhanced interest of the PE community. Factors such as rising energy demand, technological improvements, depleting fossil fuel reserves and global warming concerns are driving the development and usage of renewable sources for power generation, boosting the investment potential of the sector.

Roads and highways

Although India has a widespread road network, spanning around 3.3 million km, there is still a shortage of good quality roads, primarily due to the lack of funds and low standards of construction. There is a compelling argument for increasing investment in the sector, specically through public-private partnerships. Furthermore, the Government has undertaken several initiatives such as the launch of the National Highway Development Programme and the Pradhan Mantri Gram Sadak Yojana to improve and maintain roads in the country.

16 Private Equity in India 2009: year in review

PE rms have been substantial investors in the Indian road sector. This momentum is likely to be maintained as PE players continue to provide growth capital funding to companies for expansion in the sector. There are a large number of opportunities relating to construction companies, highway holding companies and individual road special purpose vehicles. The Government is also encouraging private participation as indicated by the Road Transport and Highway Minister Kamal Nath who initiated a global campaign to attract global investment in the Indian road sector in 2009.

2.3 Due diligence and risk management

In 2009, PE rms began to focus more on risk management while making new investments. The due diligence process became more rigorous, substantially increasing deal closure times. Further, PEs worked more closely with investee companies to improve their operational performance and enhance their value to reduce the adverse effect of the global downturn. Consequently, PE players began hiring industry experts with operational experience as operating partners to help them achieve this objective. In fact, 2009 saw PE rms looking to industries such as manufacturing and services for CEOs, managing directors and other senior executives. In addition, due diligence assumed more importance during the year as PE rms were focused on robust risk management functions, while evaluating PE investment decisions. Going forward, risk management will continue to be an area of focus as PE rms become more careful in their approach after learning from the ramications of the credit crisis.

Domestic consumption-focused sectors

There have been two primary drivers for the PE community to invest in domestic consumption-focused sectors. First, these sectors have been relatively insulated from the shocks of the economic crisis, and provided a cushion for PE investors during tough times. Second, growth in these sectors is directly linked to economic development and the countrys favorable demographics. As the economy charts higher growth paths, the demand for consumer products, consisting of personal care products, soaps and detergents and food, is expected to increase. In addition, on the back of a burgeoning middle class and higher disposable incomes, the demand for consumer services such as beauty salons, centralized cab services and restaurants, and entertainment businesses such as multiplex chains and amusement parks is expected to grow.

2.4 Emergence of domestic LPs as a source of capital

The PE industry in India has been primarily dominated by foreign LPs, but tight global liquidity conditions during 2009 made these investors cautious about new commitments to Indian funds. 2009 saw the rise of Indian LPs comprising banks, insurance companies, pension funds and high net worth individuals as important sources of capital. In addition, PE rms including ICICI Venture, Reliance Private Equity, Milestone Religare Investment Advisors, HDFC Property Ventures, IL&FS Investment Managers, Kotak Realty Fund, Tata Capital and Piramal Real Estate Fund announced their plans to raise domestic capital.5

5 Domestic investors emerge as show-stoppers, Mint, 29 September 2009, via Dow Jones Factiva, (c) 2009. HT Media Limited.

17 Private Equity in India 2009: year in review

The LP-GP equation: aligning interests

The economic downturn of 2008 did not just affect the global PE industry, but also LPs that invest in PE funds and GPs that manage these funds. The downturn has resulted in a rebalancing of the relationship between LPs and GPs, with LPs becoming more selective in their approach when choosing GPs. According to Ernst & Youngs 2009 report, Shifting sands: Limited partners perspectives on the future of private equity, it is likely that LPs are interested in partnering with a smaller number of GPs with strong investment strategies, unlike their previous approach of more is better. In terms of management fees, even the best GPs in the industry are likely to face pressure on the traditional 2% management fee/20% carried interest fee model. Furthermore, management fees are expected to experience downward pressure and are likely to go below the 2% mark. The past few years have seen a distortion in the way GPs and LPs have been aligned, resulting in disparity between the risk exposure and returns enjoyed by GPs compared with LPs. After the credit crisis, LPs are expected to realign this gap and are likely to formulate partnership agreements that equalize their treatment of LPs and GPs. Furthermore, communication between LPs and GPs is expected to improve. Moreover, as an after effect of the crisis, LPs are likely to keep a close watch on information ows to closely monitor their portfolio performance

ILPA principles
The Institutional Limited Partners Association (ILPA), a global organization dedicated to the interests of institutional limited partners in PE, has published a set of principles and best practices in PE partnerships known as the ILPA principles. These principles are intended to promote leading practices and unied terms. According to these principles, several terms and conditions that that have been in place for quite some time now require renewed attention in PE partnership agreements. The principles revolve around three major guidelines alignment of interest, governance and transparency. Alignment of interest: Management fees should cover the normal operating costs of the rm and these costs should not be excessive. GPs should have a substantial equity interest in capital commitment, with a higher percentage in cash, and there should be tighter provisions to avoid prot distribution imbalances between GPs and LPs. Governance: LPs should have stronger rights. Partners should have the ability to elect to dissolve a fund or remove a GP without cause. The auditor of a fund should be independent, and the meetings, processes and procedures of limited partner advisory committees should be standardized across the industry. Transparency: GPs should be transparent while providing details to investors about fees and carried interest calculations as well as detailed valuation, and nancial information related to portfolio companies should be made available, as requested, on a quarterly basis. As a result, in future, LPs will expect GPs to form closer relationships with them (to enhance information ow and transparency). The former require increased communication and detailed information to monitor their portfolio performance. Most importantly, LPs seeking increased communication is an indication of their desire for enhanced transparency and closer alignment of their objectives with that of GPs.

18 Private Equity in India 2009: year in review

Regulatory and tax update

Tax update
The signicant tax-related development was the release of Direct Tax Code (the code). The code is proposed to come into effect from 1 April 2011 and it would replace the Income Tax Act of 1961. Key provisions from the code are: Companies (including foreign companies) will be taxed at 25%. At present, Indian companies are taxed at 30% and foreign companies are taxed at 40% Companies having even partial control or management in India would be considered as resident in India Income arising from indirect transfer of capital assets situated in India is deemed to accrue or arise in India Neither the code nor the tax treaty will have a preferential status. And in the case of a conict between the two, the latter in point of time shall prevail

Regulatory update
Several regulatory developments were initiated by the Government of India. Key updates related to foreign investments include: Increase in cumulative debt investment limit by USD9 billion (from USD6 billion to USD15 billion) for foreign institutional investor (FII) investments in corporate debt Firm commitment requirement for registration as foreign venture capital investors Modication in the reporting mechanism for foreign direct investment in India transfer of shares/preference shares/convertible debentures (together called equity instruments) by way of sale Other regulatory developments include: Notication from Stock Exchange Board of India (SEBI) regarding delisting of equity shares Amendment of SEBI Takeover code for application of open-offer obligations in case of American Depository Receipts (ADR) and Global Depository Receipts (GDR) Notication from SEBI for issue of capital and disclosure requirements regulations 2009 (ICDR Regulations), which rescinded the SEBI disclosure and investor protection guidelines 2000 (DIP guidelines) Reserve Bank of India released guidelines for issue of Indian depository receipts External commercial borrowing (ECB) policy also modied and there has been a withdrawal of relaxation in all-in-cost ceilings for ECBs

19 Private Equity in India 2009: year in review

The way forward

Outlook cautiously positive after encouraging macroeconomic fundamentals and investor sentiment

The consistent improvement in the macroeconomic environment of the country during the latter half of 2009 suggests that the process of recovery is slowly but surely gaining ground. Corporate earnings reports are sending out a positive message, stock markets are regaining their 2007 levels and GDP numbers are steadily climbing. Other growth indicators, including industrial production, exports and core sector growth signal that the economy is doing better than expected. FIIs are also, after their ight last year, coming back and investing in India. FIIs have invested a total of USD16.8 billion in domestic equities in India in 2009, the highest-ever inow into the country in rupee terms in a single year.6 As we move into 2010, the sanguine outlook for Indias economic environment is likely to be reected in the countrys PE deal landscape. The optimism stemming from India Inc.s ability to withstand the economic crisis is expected to further fortify the investment in PE as an asset class. Fund-raising activity is also expected to gather pace as investor condence rebuilds and liquidity increases. PE deal ow is expected to improve further as many global PE rms, sitting on dry powder (money ready to invest), will actively invest to multiply their portfolios.

Deal-making will be more prevalent in the traditional middle market (i.e., deals from USD1030 million). In 2010 we expect to see PE rms attracted to infrastructure enablers and domestic growth sectors. An increase in domestic consumption, primarily on account of a burgeoning middle class and a growing population, is expected to drive cross-sector growth rates in the country. Thus, domestic consumption, core infrastructure sectors (power and roads), nancial services including micronance, and underserviced sectors (e.g., health care and education) are expected to see higher PE activity. On the exit side, the momentum seen throughout 2009 is likely to be maintained in 2010. Given the recent rallying around the countrys capital markets, PE investors are expected to make the most of this opportunity and make some meaningful exits. The outlook for PE activity in India is favorable. With the strong fundamentals of the economy, coupled with recent indicators of recovery, PE activity in India is expected to have an upward trend, and PE rms will become increasingly more active in their investee companies, in order to unlock the value of their investments.

Jitendra Sanghvi, Optimism in the air, Corporate India, 15 January 2010, via ISI Emerging Markets.

20 Private Equity in India 2009: year in review

Global PE landscape
New horizons emerge

While 2009 was a challenging year for PE on all fronts, it has offered a window into the industrys exibility in adapting to a changing economic environment. The year 2010 is already exhibiting more robust global PE activity as funds look to invest and divest in a more stable economic setting, according to our report, 2010 global private equity watch: new horizons emerge. The following is an extract from this report.The full report is available online: http://www.ey.com/GL/en/Services/Specialty-Services/ Private-Equity/2010-global-private-equity-watch--newhorizons-emerge. PE rms continued to focus on preserving portfolio company value as operating excellence replaced nancial engineering. Over the last few years, larger rms have concentrated on hiring operating partners and managers to focus on improving their portfolio companies. They have also tapped former executives of global Fortune 500 and other multinational companies, along with a coterie of ex-management consultants, to serve as senior advisors. These executives, who have years of strategic and operating experience, have been invaluable in helping struggling companies streamline operations, improve their working capital, ease their nancial situation and position themselves for growth. Fund-raising will continue to be a challenge for the next 12 to 18 months. With Preqin reporting that PE rms had USD500 billion in uncommitted capital waiting to be deployed at the end of 2009, one of the biggest challenges may be nding quality targets. That said, rms closed USD234.9 billion worth of funds, 60% less than in 2008. As limited partners continue to demand better returns and more transparency, competition among general partners will heat up, even as investors who sat on the sidelines last year prepare to commit more capital, according to a recent Preqin study. Mid-sized buyout, distressed debt, secondary, and emerging market funds focused on China, India and Brazil may garner increased interest. While 2010 should be a better year than 2009 on all fronts, regulatory reform is a major uncertainty that could slow the industrys recovery. The EUs proposed directive on alternative investment fund managers (AIFM) will dramatically affect both European and foreign rms operating in the EU. Increased capital requirements in many markets could adversely affect lending, as could the Volcker Rule in the US, which would force banks to sell their PE operations and the income streams they provide. Evolving tax rules in many jurisdictions could affect returns, as decit-ridden governments seek to increase their tax revenue. During the rst three months of 2010, global PE rms have announced 358 transactions valued at USD27.0 billion, compared with 415 transactions priced at USD17.0 billion for the same period in 2009. While the average deal size, where the value was disclosed, for those three months rose to USD157 million from USD70 million last year, it remains far below the pre-recession high of USD706 million in the second quarter of 2007. This year is looking to be an intriguing year with global PE activity on the rise.

Globally, PE rms made 1,612 acquisitions in 2009, a 36% decrease from 2008. The average size of an acquisition in 2009 was smaller USD100 million versus USD158 million in 2008 as total deal value fell 56% to USD95.5 billion. While there were fewer buyout deals during 2009, minority investments as a percentage of total acquisitions rose from 45% to 50%, even as the value of such transactions fell from USD57.7 billion to USD21.9 billion. However, annual data masks the real story of 2009. The long retreat that began in the summer of 2007 ended as a comeback that began in the third quarter and gained strength as larger deals were announced toward year-end. Globally, transactions worth USD39 billion were announced in the fourth quarter, up from USD24 billion in the third quarter, and more than double the USD18 billion announced in the fourth quarter of 2008. Driving this recovery is the renewed willingness of banks to underwrite debt. Bloomberg reported that global high-yield debt issuance nearly tripled last year to USD210 billion, from USD74 billion in 2008. PE rms, particularly those in the US, used their share of new issues to replace existing portfolio company debt, gaining critical debt extensions in the process. The use of newly issued high-yield bonds to renance leveraged loans is expected to continue through 2010 as interest rates on government bonds are expected to remain low, causing investors to seek higher yields. Leveraged loans used to nance new acquisitions bounced back in the fourth quarter. While Thomson Reuters reports that new issues in the US totaled USD80 billion in 2009, nearly half of that total USD37 billion was issued in the fourth quarter, up from just USD14 billion in the third quarter and USD21 billion in the fourth quarter of 2008. Financing for new acquisitions should increase gradually in 2010, barring major banks being hit with defaults on government and commercial debt in Greece and, possibly, Spain. Liquidity also returned on the sell side. The recovery of worldwide stock markets restored the IPO as a viable exit strategy in the US and Asia. PE sponsors brought 53 new companies to market in 2009, raising proceeds of USD16 billion, compared with USD11 billion in 2008. Only three of these IPOs occurred in Europe, while 25 took place in both the Americas and in the Asia-Pacic region. While trade sales fell sharply last year to USD65 billion from USD140 billion, they have increased steadily since bottoming out in the rst quarter of 2009, as bid-ask spreads between buyers and sellers narrowed.

21 Private Equity in India 2009: year in review

Methodology
Private Equity in India 2009 : year in review is based on Ernst & Youngs analysis of announced PE deals and other PE-related news and information reported in secondary sources and the Asian Venture Capital Journal (AVCJ). Deal values used in this document are as provided by AVCJ. The deals have been reclassied, wherever required, based on Ernst & Youngs sector classication policy. PE-backed IPO represents an unlisted PE investee that has become publicly listed subsequent to the investment by the PE fund. Non-IPO exits include: public market sales, secondary sales (sale by one PE fund to another PE fund), strategic sales (sales by one PE fund to a strategic investor) and buybacks.

About Ernst & Young in India

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young in India has ofces in Ahmedabad, Bangalore, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, New Delhi and Pune. Its workforce, comprising over 6,700* people, continues to work toward our vision of being a trusted business advisor that contributes to the success of our clients by creating condence and value. We help our clients achieve their potential through our approach, which incorporates various service dynamics, including: Rich and pertinent industry-specic experience combined with wide-ranging domain knowledge. Our approaches can be broadly classied into four service lines: Assurance, Tax, Transactions and Advisory. Each service line is further streamlined into niche competencies and groups, which enable us to strengthen our outreach and offer a compelling portfolio of detailed and well-dened services. Our teams are multi-dimensional, with professionals from diverse backgrounds, who have relevant knowledge and domain perspectives. This helps them understand and address our clients concerns and provide their input in a structured and cohesive manner. We have a special energy that unites us: the E factor. This E factor is the energy and enthusiasm our people bring to any project or assignment, which clearly sets us apart and gives us our differentiating edge. We are leaders in the professional services space and our accolades encourage us to continue striving for excellence. Some achievements: Indias tier-one tax rm for the seventh consecutive year ITRs World Tax 2010 Ranked #1 Financial Advisor in India by Bloomberg for eight consecutive years for most number of deals 2009 Asia M&A Atlas Award for Asia-Pacic M&A Investment Bank of the Year and Asia-Pacic M&A Deal of the Year Most Active Transaction Advisor Award PE and M&A for 2009 by Venture Intelligence Financial Advisor of the Year M&A Award India, in 2008 and 2009 by Financial Times & Mergermarket OpRisk and Compliance magazine Consultancy Rankings: a survey of over 300 risk and compliance professionals ranked us overall winner Risk and business advisory relationships with 160 of the BSE300 companies Recipient of the Golden Peacock National Training Award 2008 Excellence in Training award in the Employer Branding Awards 2008 and 2009
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23 Private Equity in India 2009: year in review

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At Ernst & Young, our Private Equity group offers a detailed range of services to assist you and your investee companies every step of the way from your fund set-up stage through the transaction life cycle. Our teams work closely with you, offering incisive and proven industry experience coupled with integrated, objective practical advice and support to help you meet your needs.

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EYG no. FR0007 Private Equity in India 2009 year in review Artwork by Deepti Khatri. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

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