IL&FS Investment Managers Ltd. July 2008

Transcription

1 IL&FS Investment Managers Ltd July

2 Structure of Presentation! Section A : Overview! Section B : Investment Environment! Section C : Funds Under Management! Section D : Future Strategy 2

3 Section A : Overview 3

4 IL&FS Group Business Canvas Financial Services Investment Banking Structured / Asset Finance Project & Corporate Advisory Private Capital Mobilization Mergers and Acquisitions Asset Management Private Equity Specialist Equity Portfolio Management Distribution Franchise Network Merchant Banking Broking Trustee Infrastructure Infrastructure Project Development Project Sponsorship SEZ / Industrial Parks Power Advisory Surface Transport & Maritime Social Infrastructure Training Education Property Management Environment & Social Management Advisory Training Waste & Water Management Composite Service Platform 4

5 IL&FS Investment Managers! Acquired by IL&FS in 1996 Early recognition of establishing PE practice Structured as a pure asset management play Strong linkages forged with domestic and international investors! Maturity through exposure Seen the PE world expand from < US$ 20 mn to > US$ 15 bn Investment spectrum spanning VC to PE; Buy-outs to PIPEs Cross sectoral presence! Strong support of local partners / investees Over 60% of deal flow proprietary in nature Largely off-market deals, resulting from relationships; leads to better control on entry pricing/terms! Team experience straddles fund and economic cycles 92 investments since exits / liquidity events Realized gross US$ IRR > 27% Over US$ 1.7 bn under management Target US$ 2.5 bn by FY2009 5

6 Shareholding Publicly Held 43% IL&FS IL&FS = Infrastructure Leasing & Financial Services Founded 1987 Over US$ 2.96 bn of assets Shareholders include ORIX, ADIA, LIC, SBI, HDFC 1,500 employees in 60 offices Acquired IIML in % IIML IIML = IL&FS Investment Managers Limited Focused solely on alternative asset management 5% IIML Employees Note: Shareholding is as on March

7 Management Name Shahzaad Dalal Designation Vice Chairman & Managing Director Experience (Yrs) PE Experience (Yrs) Qualification B.Com, MBA Dr Archana Hingorani Executive Director B.A. (Economics), MBA, Ph.D Alok Bhargava Executive Director 22 6 B. Tech, MBA Manoj Borkar Chief Financial Officer B.Com, ACA Mark Silgardo Chief Operating Officer 26 2 B.A, MBA, PGDBA 7

8 Business Model Revenue Stream Management Fee: - Typically 1.5-2% of AUM for the fund life - Highly visible, annuity revenue stream over 6-10 years Carry: - Performance upside through profit share - Hurdle rate ranges between 8-11% p.a. - Carry is 20% of profits from investments - A upside component as Fund size / Asset under Management increases Investment Model - Long-term investment horizon of 3-5 years - Majority investments in unlisted companies - Active investors with clear focus on value creation - Mitigates risk of stock market volatility 8

9 Uniquely Placed Business The uniquely placed business model offers the following! Retail participation in an otherwise exclusive institutional domain! Indirect exposure to growth potential of large unlisted companies! Stable predictable revenue stream (through management fees) with defined performance upsides! Manager (IIML) better positioned to create upsides vs managers of other asset classes! Documented advantages of PE participation in the value of unlisted companies! Higher degree of value add and relatively early stage of investment provides significant upside at exit! This upside captured through the Carry Structure 9

10 Edge over other Classes PE Fund Management Mutual Funds! Long term committed investors; predictable AUM, Fees! Fund AUM subject to market conditions! High level of investor stickiness with the Manager, with investor reups in follow-on funds! Varying investor interest depending on extraneous factors such as distribution reach, marketing, sentiment! Proprietary deals result in entry at lower than market comparables! Entry at market prices! No redemption pressure and need to manage NAVs! Investment strategy hostage to NAV fluctuations and redemptions! Significant ability to guide investee companies and control outcomes! Inability to exercise any control! Carry structure captures upside! No such profit sharing structure! Limited regulation / compliance issues! Higher degree of compliance/risks 10

11 AUM Growth $ mn 2,000 1,500 1, AUM has risen at 139% CAGR 1, FY2006 FY2007 FY

12 Income & PAT Growth Income (Rs mn) IIML PAT has grown at 79% CAGR PAT (Rs mn) FY2005 FY2006 FY2007 FY Income (Rs mn) PAT (Rs mn) FY2008 Consolidated Income & PAT of Rs 1.06 bn & Rs mn 12

13 Financials FY2008 FY2007 FY2006 FY2005 FY2004 FY2003 Total Income Total Operating Costs PBT PBT Margin (%) PAT PAT Margin (%) EPS (Basic) Rs * Networth Dividend * Post Bonus Issuance Rs million 13

14 Cerebral Business = Higher Returns 120% 106% 100% 80% 67% 60% 40% 20% 34% 35% 45% 41% 67% 71% 0% FY2005 FY2006 FY2007 FY2008 ROCE ROE 14

15 Section B : Investment Environment 15

16 India Growth Story Demographic Dividend 54% of the billion-plus population is below 25 years old Mid & higher income households to increase to 58% by 2013 By 2010, India to contribute additional 71 million people to global labor pool 7x that of US Exploding domestic consumption for lifestyle goods and services Upcoming Global Force Manufacturing & Services Hub Services (61%) and Manufacturing (19%), now a bulk of Indian GDP Near double digit growth across sectors Exports $ 150 bn in 2008; up from $100 billion in 2006 FDI of $ 25 billion in 2008; up from $ 8 billion in GDP (PPP US$ bn) 2,989 Intrinsic Advantages Well accepted accounting and judicial framework Strong entrepreneurial talent Resource abundance providing cost arbitrage 2 nd largest English speaking technical manpower after US Active and well regulated capital markets GDP Growth (%) (CAGR last 3 years) Share of World GDP (%) (PPP) Global GDP Ranking (PPP basis) rd Infrastructure Catch-Up Sustained, Government agnostic support Open to transparent policy and regulatory fine-tuning Aggregate investment of $495 billion by 2012 Private players scaling up; expected to take a larger slice of pie With growth drivers in place, there is potential for sustained growth 16

17 India : Emerging PE Destination! India increasing attractiveness as a PE destination Strong economic growth leading to a majority of Indian companies looking for growth capital PE has fast emerged as an alternate source of funds for companies to support expansion plans Large Global PE investors are either setting up dedicated Indian funds or increasing allocations for Indian investments in their global portfolios! Growing Private Equity space in India In 2007, India was the largest recipient of PE in Asia, ahead of Australia (US$ 14.6 bn), Japan (US$ 14.4 bn) and China (US$ 11.5 bn) About US$ 3.3 bn invested in Jan-Mar 2008 and US$ 17 bn invested in 2007 Fund sizes have increased from US$ mn, to about US$ 400 1,000 mn Increasing deal sizes: average investment size up from US$ 4 mn in 2000 to US$ 50 mn Value of Deals (US$ mn) 18,000 16,000 17, , , ,000 8, ,700 6, , ,000 1, ,650 2, Value of Deals (US$ mn) Number of Deals Source : Grant Thornton, IVCJ, AVCJ, Venture Intelligence No of Deals! Huge scope for catch-up to global levels Indian PE is approx. 1% of GDP; Mature markets like US and UK have a PE to GDP ratio of 1.5-2% PE investment in US, for instance, was $ 191 billion last year This indicates the tremendous scope for growth, not just on account of the underlying GDP growth but also on account of catch-up to global levels 17

18 PE: Competitive Landscape IIML Experience No of years in market Govt Funds SIDBI Helion Aureos UTI Ventures Kotak Blue River Tano Experienced an entire fund cycle in India IIML New Vernon New Silk Route Not experienced an entire fund cycle in India Approx. Deal Size Actis Citibank Barings Chrys Cap GW Capital StanChart Sequoia Warburg ICICI Venture Temasek Blackstone Carlyle Newbridge 3 i! Three PE funds managed since inception! US$ 220 mn invested in 62 transactions IT & ITES Life Sciences 12% Consumer Services Manufacturing! No losses till date 24% 30% 34%! First investors in Retail, Shipyard, Media! Signature deals : Shoppers Stop, IBN18, ABG Shipyard, JBF! IRR on exited investments : ~27% 18

19 PE Opportunity Infrastructure! Infrastructure investments to rise from 4.5% to 8% of GDP by 2012 Imperative for a 10% GDP growth Translates into $495 bn investments in the next 5 years Opportunities across sectors! Private players Well entrenched in Roads, Telecom, Power, Ports, Airports Opportunities in Urban Infrastructure, Railways and pipelines Sector wise independent regulators Source : SSKI! Key drivers in place Regulations : Investments not permitted in areas like power distribution, airports, railways etc now history Independent regulators add to investor comfort Government driven packaged mega projects like NHDP and UMPPs Funds Availability Government contribution : Viability Gap funding, project specific cess Cost efficient borrowing with sufficient depth possible Growing size of project executors of comfort to international lenders Attitude : Willingness to pay commercial user charges Growth Story : Sheer demand turning hitherto unviable opportunities into doable business plans! Outcome : A mix of public private participation expected, increasingly skewed towards private contribution Private players to invest over $ 200 bn 19

20 Infra : Competitive Landscape No of years in market Blackstone Macquarie 3i AMP AIG Chrys Capital Citibank ICICI CDC IDFC IIML IIML Experience! US$ 213 mn invested in 28 transactions Power, Gas Telecom Logistics 8% 12% Infra Services 12% 25% 20% Transportation 24% Ancillary! Early investors in Infra, Telecom, Roads, City Gas, Rail No of Deals Proposed Standard Chartered IL&FS Asia Infrastructure Fund with a corpus of US$ 800 mn! Signature Deals : Indraprastha Gas, Max Telecom, Noida Toll Bridge, Gujarat Pipavav Port, Ramky Infra! IRR on exited investments : ~28% 20

21 PE Opportunity Real Estate Expected size of Real Estate market in India : About US$ bn by 2015 Real Estate PE Investment by Asset Class! This growth is expected due to the following factors : Strong economic fundamentals Large and Growing middle class; changing socio-economic trends Increasing demand for good quality office space driven by IT and KPO companies Increasing investment in Infrastructure New investment platforms emerging : REIT, REMF! Opportunities in Real Estate exist in : Integrated Townships Organized Retail Adaptive Re-use of Industrial Land Urban Site Rehabilitation SEZs IT / ITeS Sector FDI in Real Estate as a % of Total FDI in India* 3.4 % 9.2 % RE expected to capture 20-25% of FDI inflows *Source: Commerce and Industry Dept, GoI. FDI has gone up from $ 5.5 bn to $ 20.1 bn in the same period 16.5 %

22 RE : Competitive Landscape IIML Experience IL&FS India Realty Fund-I & II! Two active funds under management with total Fund size ~ US$ 1.2 bn Total Fund Size (US$ Mn) 900 Tata Infra & Real estate Fund 450 HDFC Realty Fund Red Fort Capital Sun-Apollo Urban Infra REF Infinite India Real Estate Fund ICICI Venture Trikona-Trinity! Pioneer in India : First RE fund launched in 2005 / 2006! US$ 557 mn already deployed in 19 transactions Mumbai : 32% Multi City : 21% NCR : 19% Bangalore : 8% Pune : 7% Others : 13% Competitors: comparatively slower pace of deployment! Early investors in SRA, Industrial Parks, 100% asset buyouts 0 FDI Real Estate Funds Raised between Rate of Deployment (% of Total Corpus) Funds managed by IIML Note: Analysis covers Existing FDI real estate dedicated funds (fund size>us$ 300mn; and does not include Global Proprietary Funds 100%! Signature Deals : QVC, Ansal, Mantri, IRPPL, Akruti City, ETL, DB Realty, MK Malls! US$ 557 mn already deployed in 19 transactions 22

23 Section C : Funds Under Management 23

24 Fund Across Spectrum Private Equity Real Estate Infrastructure Two active funds aggregating US$ 316 mn First fund fully divested distributed carry Established 2005 Two funds aggregating US$ 1.2 bn Proposed SCI Asia Infrastructure Growth Fund Pan Asian focus Private Equity Investment Spectrum 24

25 Milestones IL&FS India Realty Fund - II IL&FS Milestone Fund Pan Asia Proj. Deve. Fund IL&FS India Realty Fund- I Tara India Fund III India Project Development Fund India Auto Ancillary Fund Leverage India Fund South Asia Regional Apex Fund AIG India Sectoral Equity Fund

26 Diversified Exit Strategy 45 Exits / Liquidity Events Trade Sale 7% Buyback 22% Strategic Sale 29% Listed / IPO 42% Exit Returns of 27% in US$ terms with a multiple of 2.5x 26

27 Existing Funds Fund Vintage Corpus (mn) Hurdle Rate No. of investments No. of Exits Capital Refunded (mn) Profits Returned (mn) Expected End of Fund SARA Mar (Rs) 18% (Rs) 590 (Rs) 2010 PAPDF May-06* 1800 (Rs) 6%** LIF Apr (Rs) 7% (Rs) 484 (Rs) 2011 REF - I Apr ($) 11% REF-II # Dec ($) 10% TARA # Sep ($) 8% * Singapore Fund in June 2007 # Yet to fully close ** Compounded semi-annually 27

28 FY2008 : Fund-Raising IIREF - 2 TARA SCB Infra Fund Size (US$ mn) Raised so far Domestic * International * First Close Dec-07 Sep-07 Jul-08# Final Close # Jul-08 Jul-08 Jul-09 # Expected * IL&FS and SCB Contribution 28

29 Section D : Future Strategy 29

30 PE : Deepening Markets! From around a billion dollars 3 years ago; projected to grow to $ 20 bn by 2010! Cross sectoral investments opportunities to increase A third of investments in 2007 went into Real Estate Robust levels in Banking, Financial services, Telecom, IT and manufacturing Infrastructure set to capture a larger share Increasing opportunities as sectoral caps are relaxed Single Brand Retailing Cargo Aviation! Tried and tested exit routes provide comfort to foreign capital Public markets have proved to be preferred choice Trade sales to increase as capital with different risk / return profile flows in! Outcome : PE activity levels will accelerate Key to success : Global sources ; Local partners 30

31 Into the Future! IIML has a successful business model built assiduously over the last decade Fund Manager of repute A port of first call for investees! Business model to be replicated resulting in enhanced AUM / revenues through Larger follow on funds New emerging opportunities Extending Geographies! Substantial increase in activity levels on all counts in the next 2-3 years Enhanced Fund raising High level of investment deal flow More investments to reach liquidity / exit stage Carry in the medium term 31