Private equity roundup

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1 Q 201 is a quarterly newsletter on trends and prespectives related to private equity (PE) activity in India. In this edition Key economic indicators 2 Fund raising Investments & exits 5 Tax and regulatory updates 9 Outlook 1 Foreword Overall numbers for PE/VC investments during the quarter were broadly similar to those witnessed in 2Q1. However, the deal level data indicates that the aggregate value was skewed up primarily due to one mega deal US$1 billion investment in Flipkart by existing and new investors. This deal itself accounted for more than 5% of the total deal value in the quarter. The total deal value in Q1 was US$2.7 billion spread across 11 deals as compared to US$2.8 billion across 121 deals in 2Q1. The number of big ticket transactions (US$100 million or above) reduced to just three in Q1 as compared to eight such deals in the previous quarter. As has been the case in past few quarters, deal volumes were mainly driven by early stage investments. Growth deals also contributed nearly 0% of the total volume with no buyouts seen in this quarter. Technology, e-commerce and real estate sectors continued to be the most active accounting for 50% of deal volumes and more than two-thirds of the deal value. Fund-raising was sluggish with new funds raised of US$70 million 50% of the value announced in 2Q 201 (US$1 billion). Significant part (8%) of the total funds raised was contributed by just two funds (i) HDFC property Fund (US$250 million), and (ii) InvAscent India Life Sciences Fund 2 (US$1 million). Exit activity prima-facie looked robust with 8 exits during the quarter highest in the last five years. However, the detailed data showed that this was primarily led by open market exits (0 exits). The highlight of the quarter was two PE-backed IPOs Sharda Cropchem and Snowman Logistics almost after four quarters of non-activity in the IPO markets. The biggest exit of the quarter was the sale of stake in Idea Cellular by Providence Equity Partners for US$2 million through the open market route.

2 Key economic indicators India s GDP grew at a ten-quarter high of 5.7% in 2Q1 compared with.6% in 1Q1, primarily driven by an uptick in industrial and construction sectors. Industrial GDP grew at.2% as compared to a contraction of 0.19% in the last quarter, primarily on the back of robust exports and steady increase in domestic demand. Index of Industrial Production (IIP) slowed down to 0.% for the first two months in Q1, after an average growth of.2% in 2Q1. However, with the onset of the festival season, increase in consumer demand is expected to improve the IIP from September 201. Low crude oil prices, revival of monsoon and pre-emptive steps by the Government of India to keep food prices in check have helped Consumer Price Inflation (CPI) to ease to 6.6% in September, putting pressure on the RBI to reduce interest rates on the back of weak IIP data. Current Account Deficit (CAD) marginally increased due to increase in non-oil/nongold imports, reflecting a revival in domestic demand. Capital markets barometer (BSE Sensex) reached an all-time high of 27,20 during the quarter reflecting positive market sentiment following the formation of the new government. The quarter also reported record FII inflows at more than US$1 billion. Figure 1: GDP growth rate YoY change (%) YoY % for components of GDP 8% 6% % 2% 0% -2% 5.8% 5.7%.5%.6%.%.%.7% 5.2%.6%.6% 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 GDP Growth % Agriculture (%) Industry (%) Services (%) 10% 6% 2% -2% YoY GDP growth % Source: CMIE online database Figure 2: Index of Industrial Production (IIP) YoY change (%) YoY % change of IIP Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Source: CMIE online database 2

3 Figure : FII Flows (Net) Figure : FDI Flows US$ million ,68 1Q 2Q 8,10 (120) 12,670 10,57 (68),159 (,1) Q Q 1Q 2Q Q Q ,116 10,965 9,15 1Q 2Q Q 201 US$ million 9,000 8,000 7,000 6,000 5,000,000,000 2,000 1,000 0 Source: DIPP 8,18 7,197 7,79 7,26 5,8 5,77 5,97,28,100,778,966 1Q 2Q Q Q 1Q 2Q Q Q 1Q 2Q 2MQ Source: CDSL Figure 5: Rupee movement INR vs USD and Euro Jul-1 01-Aug-1 01-Sep-1 0-Sep-1 Figure 6: BSE Sensex , , , , Jul-1 01-Aug-1 01-Sep-1 0-Sep-1 US Dollar EURO Source: BSE website Source: RBI website

4 Fund raising Fund-raising numbers dipped to half (US$70 million) in Q1 as compared to US$1 billion during 2Q1. Almost 8% of total funds raised were from two big fund closures US$250 million by HDFC Property fund focused on investing in the real estate sector and US$1 million by InvAscent (fund manager for India Life Sciences Fund 2). Out of the total five fund closures during the quarter, three are VC funds echoing increasing interest levels in early stage investments. Figure 7: Quarterly India fund-raising (US$ billion) Q 11 2Q 11 Q 11 Q 11 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 Q 1 Announced Raised Source: EY research Figure 8: India focused funds raised during Q1 Name Fund focus Value (US$m) New/Follow-on fund HDFC Property Fund Real estate 250 Follow on InvAscent Health care 1 Follow on Orios VC fund Technology 50 New IvyCap Venture Trust Fund (First close of US$19 million in July 2012) Start-ups 22 New Exfinity (First close of US$17 million announced in June 201) Technology New Source: EY research The quarter reported six new fund-raising plan announcements, totalling US$2.1 billion, an increase of 18% from the last quarter (US$1.7 billion). 80% of the aggregate fund raising plan was primarily due to announcement by the Government of India to raise US$1.7 billion venture capital fund for start-ups, as part of the Union Budget 201. Of the total six funds, two are planning to raise debt funds primarily real estate focussed funds.

5 Investments & exits Investments The deal activity remained at the same levels as in the previous quarter with overall investment of US$2.7 billion across 11 deals (US$2.8 billion across 121 deals in 2Q1). The aggregate deal value was primarily driven by a mega transaction US$1 billion investment in Flipkart (online shopping website) co-led by Tiger Global, Naspers, GIC and other investors. Other than this deal, there were only two big ticket transactions (US$100 million and above) as compared to eight such deals in the previous quarter. The average deal size remained constant at US$1 million, whereas median deal size declined to US$8 million from US$12 million in the last quarter. Figure 9: Trend in PE investments Q 11 2Q 11 Q 11 Q 11 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 Q 1 Value (US$ billion) Volume Source: EY research Figure 10: Composition of PE deal volume by deal size Q 11 2Q 11 Q 11 Q 11 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 Q 1 < $10m $10m - $20m $20m - $50m > $50m NA Source: EY research 5

6 Other major investments during the quarter include US$15 million investment in Express Towers by Blackstone-Panchshil JV and a follow-on infusion of US$10 million investment in ReNew Power Ventures (developer of wind energy and solar energy projects) by Goldman Sachs and others. Figure 11: Top 10 PE investments in Q1 Target Investor Sector Deal Value (US$m) Flipkart India GIC, Tiger Global and Naspers and others * E-commerce 1,000 Express Towers Blackstone-Panchshil JV * Real estate 15 ReNew Power Ventures Goldman Sachs, Asian Development Bank, South Asia Infrastructure 10 Clean Energy Fund Hexaware Technologies Baring Asia Technology 89 Sterlite Power Grid Ventures Standard Chartered Private Equity Infrastructure 8 Cholamandalam Investment and Apax Partners Financial services 8 Finance Company Shriram Properties Tata Opportunities Fund Real estate 80 Hike Tiger Global LP, Bharti SoftBank Holdings * Technology 65 Idea Cellular IFC Telecommunications 65 Syngene International India Value Fund Pharmaceuticals 62 * These deals also included investments by non PE players (Naspers, Panchshil share in the JV, Bharti Softbank etc.). However, as details of their investments are not specifically available, we have considered the entire investment as PE. Figure 12: Composition of PE deal volume by financing stage Q 11 2Q 11 Q 11 Q 11 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 Q 1 Buyout Growth PIPE Early Stage Source: EY research 6

7 Early stage deals continued to dominate the volumes accounting for nearly 57% of total announced deals. Early stage investing is not just restricted to technology and e-commerce, but there are host of other sectors including health care, business services, logistics, F&B, etc. Of the total 6 deals in this space, 60% were in the technology and e-commerce segment with balance across other sectors highlighting the growing confidence of investors in the new set of entrepreneurs in the country. The total number of growth deals declined by 20% as compared to 2Q1; however, it still represents around 0% of the total deal volume. There was no change in the number of PIPE deals as compared to the previous quarter. Figure 1: PE investments in Q1 by sectors Volume Value (US$ million) Technology E-commerce RHC Financial services Others Food and Agriculture Industrial products Business services Healthcare Pharmaceuticals Logistics Infrastructure Education E-commerce RHC Technology Infrastructure Financial services Pharmaceuticals Telecommunications Logistics Industrial products Chemicals Others Business services Food and Agriculture ,260 Source: EY research Note: RHC- Real Estate, Hospitality & Construction, RCP- Retail and consumer products By sectors, there has been no change as compared with 2Q1. Technology, e-commerce and RHC continued to be the top three sectors by volume contributing nearly 50% of total announced deals. Out of the 16 deals in the e-commerce segment, 10 were follow-on transactions. While e-commerce continues to be most favoured sector, ancillary segments such as logistics, technology and data analytics, which support the e-commerce sector, have also started attracting investors interest. While the numbers of deals in these segments are few, the same are likely to improve with the rapid evolution of the e-commerce industry. Insightful Labs, which provides SaaS-based personalisation and analytics solutions for online businesses has recently got start-up funding of around US$1 million from 500 Startups, Nexus India and One97 Mobility Fund. SSN Logistics (Delhivery.com) and Ecom Express are engaged in providing logistics solutions to e-commerce portals have got funding of US$5 million from Times Internet, Nexus Ventures & Multiples Private Equity Fund and US$17 million from Peepul Capital, respectively. The real estate sector has also been receiving greater interest from PE investors. The quarter saw 1 deals totalling to US$6 million. Of these 1 deals, a majority were in the project-specific funding and structured transactions. 7

8 Exits The quarter reported 8 PE exits, with two-thirds of the volume led by open market exits. The biggest exit of the quarter saw Providence Equity partners exiting Idea Cellular for US$2 million, closely followed by Goldman Sachs exit from Mahindra and Mahindra for US$228 million. Figure 1: PE exits in Q1 by type (volume) Q 11 2Q 11 Q 11 Q 11 1Q 12 2Q 12 Q 12 Q 12 1Q 1 2Q 1 Q 1 Q 1 1Q 1 2Q 1 Q 1 Buyback Open Market Secondary Strategic IPO/FPO Source: EY research While the number of exits through routes other than open market was not encouraging, it was similar to those witnessed in the previous quarter. The quarter also reported two PEbacked IPOs of Sharda Cropchem and Snowman Logistics almost after four quarters of non-activity. Due to the stock market rally and continued optimism, there are more than half a dozen companies backed by PE funds which are in various stages of IPO planning. According to sectors, industrial products saw the maximum activity, with 8 exits closely followed by real estate, hospitality and construction (7). Figure 15: Select exits during Q 201 Target Seller Exit Type Value (US$m) Buyers Idea Cellular Providence Equity Partners Open Market 2 - Mahindra and Mahindra Goldman Sachs (Principal Investments) Open Market Transpole Logistics Everstone Capital & Fidelity Growth Partners India Strategic 58 SBS Logistics Holdings Singapore Pte. Ltd. Sharda Cropchem Ltd. Henderson Asia Pacific Equity IPO 6 - Partners Maharashtra Natural Gas Ltd IDFC Private Equity Fund II & IL&FS PE Strategic 1 Indraprastha Gas Ltd. Cholamandalam Investment and Finance Company IFC Secondary 20 Apax Partners 8

9 Tax and regulatory updates Q1 reported key tax and regulatory changes in India with the new Government presenting its maiden Union Budget, the Central Board of Direct Taxes (CBDT) issuing circular clarifying the tax treatment of Alternative Investment Funds (AIF) [other than Category I - Venture Capital Fund (VCF)], the Securities and Exchange Board of India (SEBI) notifying the SEBI (Real estate Investment Trusts) Regulations, 201 and SEBI (Infrastructure Investment Trusts) Regulations, 201 etc. Tax updates Finance (No.2) Act, 201 The first Union Budget, presented by the New Government on 10 July 201 (details of which were discussed in previous newsletter), received Presidential assent on 6 August 201. Several changes were also made at the enactment stage, which inter alia, include grandfathering for a period of holding and long-term capital gains tax rate for unlisted shares/debt oriented mutual fund units transferred between 1 April 201 and 10 July 201. In the Budget, the definition of the term short-term capital asset was sought to be amended to provide that an unlisted security and a unit of a mutual fund (except for an equity-oriented mutual fund) will be a shortterm capital asset if it is held for not more than 6 months. Grandfathering brings relief for transactions up to 10 July 201. CBDT circular on taxability of AIFs (other than Category I-VCF) The Income tax Act, 1961 (Act) specifically provides for a tax pass through status to AIF s registered as Category I - VCF with the SEBI. However, a similar status is not granted to other AIFs, i.e., Category I (other than VCF), Category II and Category III. Such AIFs seek to claim a tax pass through status by setting up a determinate trust structure. In a recent circular, the CBDT has clarified its position in relation to tax treatment of AIFs (other than Category I - VCF) set up as non-charitable trusts. The circular provides that in case of AIFs, wherein investor s name and beneficial interest are not explicitly known on the date of creation of trust, the AIFs will be regarded as indeterminate trust and the entire income of the AIF will be taxable at the Maximum Marginal Rate (MMR) of 0% in the hands of the trustee. The circular further provides that if the trust is determinate but has any income consisting or including business income then the entire income would be subject to tax at MMR. As a consequence of the above, based on specific facts, a majority of AIFs (other than Category I - VCF) could get characterised as indeterminate trusts and hence, be subject to tax at the MMR. Furthermore, the MMR exposure remains even if the AIF is a determinate trust in terms of the circular, since the tax authorities are likely to seek to characterise the income of the AIF as business income and not capital gains. It is pertinent to note that a CBDT circular is binding only on the income tax authorities and not on the taxpayer or on courts. Therefore, every case will have to be dealt with on a fact-specific basis keeping in perspective the judicial precedents and the provisions of the Act. Source: circular1_201.pdf Judicial precedents Delhi High Court rules 50% as the benchmark to evaluate substantial value on taxation of indirect transfers The Delhi High Court, in the case of Copal Research/Moody s, has analysed the applicability of indirect transfer provisions to transfer of shares between two non-residents. In this case, the Delhi High Court observed that the term substantially in Explanation 5 to Section 9(1)(i) of the Act has to be read as synonymous to principally, mainly, or at least a majority. While coming to such a conclusion, the Delhi High Court relied on the draft Direct Taxes Code 2010, Shome Committee Report, the OECD Model Convention and the UN Model Convention. However, the Delhi High Court did not take into consideration the Direct Taxes Code, 201 released by the Finance Ministry, which has reduced the limit for applicability of indirect transfer provisions to 20%. Although the Delhi High Court has interpreted the term substantially in a logical manner, it needs to be seen whether the High Level Committee set up as suggested by the Finance Minister in his Budget Speech in July 201, will consider the principles laid down by the Delhi High Court in determining applicability of indirect transfer provisions to cases referred to them. Source: DIT v. Copal Research Mauritius Limited, Moody s Analytics, USA & Ors 9

10 Regulatory updates Change in government debt investment limits Within the overall limit of US$0 billion for investment in government securities (G-Secs), US$20 billion limit was allocated to SEBI registered foreign portfolio investors (FPIs) and US$10 billion limit was allocated to long-term investors. However, considering that the investment limit of US$10 billion for long-term investors is not fully utilised, SEBI has issued a circular enhancing the investment limit in G-Secs available to FPIs by US$5 billion by correspondingly reducing the amount available to long-term investors from US$10 billion to US$5 billion, within the overall limit of US$0 billion. The incremental investment limit of US$5 billion will be required to be invested by SEBI registered FPIs in government bonds with a minimum residual maturity of three years. Furthermore, all future investment against the limit vacated when the current investment by an FPI runs off either through sale or redemption will also be required to be made in government bonds with a minimum residual maturity of three years. There will not be any lock-in period and FPIs will be free to sell the securities (including those that are currently held with less than three years of residual maturity) to domestic investors. The Reserve Bank of India (RBI) has also issued a circular to give effect to the above. Source: CIR/IMD/FIIC/17/201 dated 2 July 201 and A.P (DIR Series) Circular No. 1 dated 2 July 201 Permission for FPIs to hedge against coupon receipts of debt Under the extant exchange control regulations, FPIs could approach an authorised dealer bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India subject to specified conditions. To enhance the hedging facilities for FPIs holding securities under the portfolio investment scheme (PIS), the RBI has issued a circular permitting FPIs to hedge coupon receipts arising out of their investment in debt securities in India falling due during the following 12 months subject to a condition that hedge contracts will not be eligible for rebooking on cancellation. However, the contracts can be rolled over on maturity provided the relative coupon amount is yet to be received. Source: AP (DIR Series) Circular No 28 dated 8 September 201 Issue of equity shares under the FDI scheme against legitimate dues According to existing law, under the automatic route, an Indian company is permitted to issue shares/convertible debentures to a person resident outside India against lump-sum technical know-how fee, royalty, external commercial borrowings and import payables of capital goods by units in special economic zones, subject to certain conditions such as entry route, sectoral cap, pricing guidelines and compliance with applicable tax laws. These guidelines have been widened to include issue of shares against any other funds payable by an investee company, remittance of which does not require prior permission of the Government or the RBI, provided that the equity shares will be issued in accordance with the extant FDI guidelines on sectoral caps, pricing guidelines etc. The issue of equity will be subject to tax laws as applicable to funds payable and conversion to equity should be net of applicable taxes. Source: AP (DIR Series) Circular No 1 dated 17 September 201 SEBI (Real Estate Investment Trusts) Regulations, 201 Following the introduction of specific tax regime for REITs and InvITs (business trusts) in the Finance (No. 2) Act, 201, the SEBI has notified the SEBI (Real Estate Investment Trusts) Regulations, 201 (REIT Regulations) with effect from 26 September 201 thereby, providing a framework for registration and regulation of REITs. Some of the key features of REIT Regulations notified by the SEBI are as under: REITs will invest in commercial real estate assets, either directly or through special purpose vehicles (SPVs). In such SPVs, REITs will hold or propose to hold controlling interest and not less than 50% of equity share capital or interest. Furthermore, the SPVs will hold not less than 80% of its assets directly in properties and will not invest in other SPVs. Once registered, REITs will raise funds through an initial offer. Subsequent raising of funds may be through follow-on offer, rights issue, qualified institutional placement, etc. The minimum subscription size for units of REIT will be INR0.2 million. The units offered to the public in initial offer will not be less than 25% of the number of units of the REITs on post-issue basis. 10

11 To come out with an initial offer, the value of assets owned/ proposed to be owned by REIT will not be less than INR5 billion. Furthermore, the minimum issue size for initial offer needs to be INR2.5 billion. Units of REITs needs to be mandatorily listed on a recognised stock exchange and REIT will make continuous disclosures in terms of the listing agreement. Trading lot for such units shall be INR0.1 million. A REIT may have multiple sponsors, not more than three, subject to each holding at least 5% of the units of the REIT. Such sponsors will collectively hold not less than 25% units of the REIT for a period of not less than three years from the date of listing. After three years, the sponsors collectively, will hold minimum 15% of the units of REIT throughout the life of REIT. Not less than 80% of value of REIT assets will be in completed and revenue generating properties and not more than 20% of the value of the REIT assets will be invested in the following: Developmental properties (restricted to 10% of the value of REIT assets) Mortgage-backed securities Listed/unlisted debt of companies/body corporates in real estate sector Equity shares of listed companies listed on a recognised stock exchange in India, which derives not less than 75% of their operating income from real estate activity Government securities Money market instruments or cash equivalents REITs will distribute not less than 90% of the net distributable cash flows, subject to applicable laws, to its investors, at least on a half yearly basis. REITs will invest in at least two projects with not more than 60% of value of assets invested in one project. The borrowings and deferred payments of the REIT at a consolidated level will not exceed 9% of the value of REIT assets. In case such borrowings/deferred payments exceed 25%, approval from unit holders and credit rating will be required. While this is a welcome move for investors, there are certain aspects from an income-tax perspective, which will require additional clarity such as applicability of minimum alternate tax to sponsor or transfer of immovable property by sponsor to REITs, deferral in case of transfer of immovable property by sponsor, etc. Source: SEBI PR No. 89/201 and 116/201 dated 26 September 201 SEBI (Infrastructure Investment Trusts) Regulations, 201 Along with REIT Regulations, SEBI has also notified the SEBI (Infrastructure Investment Trusts) Regulations, 201 (InvIT Regulations) with effect from 26 September 201 thereby, providing a framework for registration and regulation of InvITs. Some of the key features of InvITs Regulations notified by SEBI are as under: InvITs will invest in infrastructure projects, either directly or through SPVs. In case of PPP projects, such investments will only be through SPVs. An InvIT will hold or propose to hold controlling interest and more than 50% of the equity share capital or interest in the underlying SPV, except where the same is not possible because of a regulatory requirement/requirement emanating from the concession agreement. In such cases sponsor will enter an agreement with the InvIT, to ensure that no decision taken by the Sponsor, including voting decisions with respect to the SPV, are against the interest of the InvIT/its unit holders. Sponsor(s) of an InvIT will, collectively, hold not less than 25% of the total units of the InvIT on post issue basis for a period of at least three years, except for the cases where a regulatory requirement /concession agreement requires the sponsor to hold a certain minimum percentage in the underlying SPV. In such cases, the consolidated value of such sponsor holding in the underlying SPV and in the InvIT will not be less than the value of 25% of the value of units of InvIT on post-issue basis. The proposed holding of an InvIT in underlying assets will be not less than INR5 billion and the offer size of the InvIT will not be less than INR2.5 billion at the time of initial offer of units. The aggregate consolidated borrowing of the InvIT and the underlying SPVs shall never exceed 9% of the value of InvIT assets. Furthermore, for any borrowing exceeding 25% of the value of InvIT assets, credit rating and unit holders approval is required. 11

12 An InvIT, which proposes to invest at least 80% of the value of assets in the completed and revenue generating infrastructure assets, will: Raise funds only through public issue of units Have a minimum 25% public float and at least 20 investors Have minimum subscription size and trading lot of INR1 million and INR0.5 million, respectively Distribute not less than 90% of the net distributable cash flow, subject to applicable laws, to investors, at least on a half yearly basis A publicly offered InvIT will invest the remaining 20% in under construction infrastructure projects and other permissible investments. However, the investments in under construction infrastructure projects will not be more than 10% of the value of assets. An InvIT, which proposes to invest more than 10% of the value of their assets in under construction infrastructure projects will: Raise funds only through private placement from Qualified Institutional Buyers and body corporates Have minimum investment and trading lot of INR10 million Have minimum of 5 and maximum of 1,000 investors with each holding not more than 25% of units Distribute not less than 90% of net distributable cash flows subject to applicable laws to investors at least on a yearly basis Have minimum subscription size and trading lot of INR1 million and INR0.5 million, respectively Furthermore, the InvIT Regulations lay down conditions for investing in under construction projects for PPP as well as non-ppp. Source: SEBI PR No. 89/201 and 117/201 dated 26 September

13 Outlook The general mood in the economy and among the investor community has been reasonably positive in the last two quarters as can be seen from the record highs achieved by the stock market barometer, the Sensex. However, this is not yet manifested in the PE deal numbers (both investments and to a large extent exits other than public market exits). There are continuing issues around inflation, tight monetary policy, subdued performance of the manufacturing sector etc., which are all tough challenges that India needs to overcome to get back to the 7%+ GDP growth scenario. All these have also had an impact directly or indirectly on the capital needs of Indian corporates and accordingly the PE deal activity. There have been a few positives globally, which should eventually have a positive impact on the deal activity in the future (i) stable crude oil situation with crude expected to be under US$90 per bbl in the medium term, (ii) S&P raised the outlook on India s sovereign rating to stable from negative. Indian Prime Minister s visits to and bilateral meetings with India s top trading partners such as the US, Japan, China, Australia etc. have drawn considerable interest and prima facie investment co-operation from these countries, which is also expected to support deal activity in the future. Though the PE activity remained flat this quarter, the new government initiative and outreach programmes such as Make in India and revival in the monsoon in the last two months of the quarter could provide significant boost to the manufacturing sector and consumer demand, respectively. This should augur well with the overall positive sentiments of investors towards India, and can improve the overall investment scenario. This, along with the revival of capital markets, should also support improvement in exit activity over the next few quarters. - India 1

14 About EY EY EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 175,000 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. In India EY India has offices in Ahmedabad, Bangalore, Chennai, Gurgaon, Hyderabad, Kolkata, Kochi, Mumbai, New Delhi, NOIDA and Pune. Its workforce of more than 9,900* people work toward the organization s vision of being a trusted business advisor that contributes to the success of its clients by creating confidence and value. We help our clients achieve their potential through our leading approach, which incorporates various service dynamics, including: An industry-aligned delivery model that harnesses our broad range. Practices focused on specific industries draw on knowledge, skills and our experiences of that industry in India and around the world. This helps us customize our approach to the unique needs of each client. Our services are broadly classified as four service lines: Assurance, Tax, Transactions and Advisory. Each service line is further streamlined into niche competencies and focused groups, which enable us to strengthen our outreach and offer a compelling portfolio of broad and well-defined services. Each team is built as a multidimensional group of professionals from diverse backgrounds, with a range of perspectives. They understand and address our clients concerns from a variety of standpoints, while using highly evolved tools and approaches to offer inputs in a structured and compelling manner. Values and ethics unite us, ensuring cohesive work toward the shared goal of making a difference. A special energy that we bring to each assignment defines the way we work and is our key characteristic. Today, we are recognized as leaders in the professional services industry, and the accolades we receive encourage us to continue striving for excellence. Most Attractive Employer award in the consulting sector by Randstad India s tier-one tax firm for the 12th consecutive year Euromoney ITR, World Tax Guide 201 Ranked #1 Financial Advisor in India for 12 consecutive years for most number of deals from Bloomberg The most reputed Tax Firm in India, consecutively for four years TNS Global Tax Monitor Survey 2012 International Accounting/Due Diligence firm of the year, 2012 M&A Advisory Most Active Transaction Advisor Award, PE and M&A for three consecutive years ( ) Venture Intelligence Financial Advisor of the Year Award, for two consecutive years ( ) Asian Venture Capital Journal, India Awards Financial Advisor of the Year M&A Award India, 2011, 2009 and 2008 Financial Times and Mergermarket Investment Bank of the Year Private Equity, 2011 VCCircle Awards Overall winner consultancy rankings, in survey of risk and compliance professionals OpRisk & Compliance magazine Risk and business advisory relationship with 160 of the BSE00 companies Excellence in Training award in the Employer Branding Awards for three years ( , , ) Continuous Innovation in HR strategy at work award in the Employer Branding Awards 2011 Methodology is based on EY s analysis of announced PE deal values used in this document are based on those provided in press releases pertaining to deal announcements. prevalent on the dates of the deal announcements. * The numbers include personnel from other member firms of EY Global based in India. 1

15 EY s Private Equity practice 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. It s how EY makes a difference. Partners Fund assurance Personal tax Assurance Fund-raising Tax structuring Audit of fund performance Sell-side advisory Funds Buy-side support Mergers and acquisitions Due diligence Valuations Investment Tax structuring Environmental compliance Human capital Valuations Exit readiness IPO readiness Portfolio services Transition Transaction integration Sale mandates Governance Assurance Assurance Tax compliance Risk management MIS development Process advisory Standard operating procedures Growth Internal audits and fraud reviews Technology security Valuations IT strategy Operational improvement Market entry options Working capital management Contacts Rajiv Memani Country Managing Partner rajiv.memani@in.ey.com Sudhir Kapadia Tax and Regulatory Advisory Services sudhir.kapadia@in.ey.com Arpinder Singh Fraud Investigation & Dispute Services arpinder.singh@in.ey.com Amit Khandelwal Transaction Advisory Services and Transaction Support amit.khandelwal@in.ey.com Ram Sarvepalli Advisory Services ram.sarvepalli@in.ey.com Narendra Rohira PE Tax Leader narendra.rohira@in.ey.com Mike Rogers Global Deputy Private Equity Leader michael.rogers@ey.com Jeff Bunder Global Private Equity Leader jeffrey.bunder@ey.com Sachin Date EMEIA & UK PE Leader sdate@uk.ey.com For any private equity-related inquiries please contact: Mayank Rastogi Partner Private Equity and Transaction Advisory Services mayank.rastogi@in.ey.com 15

16 Our offices in India Ahmedabad 2nd floor, Shivalik Ishaan Near. C.N Vidhyalaya, Ambawadi Ahmedabad Tel: Fax: Bengaluru 12th & 1th floor U B City Canberra Block No.2, Vittal Mallya Road Bengaluru Tel: Fax: (12th floor) Fax: (1th floor) 1st Floor, Prestige Emerald No., Madras Bank Road Lavelle Road Junction Bengaluru India Tel: Fax: Chandigarh 1st Floor, SCO: Sector 9-C, Madhya Marg Chandigarh Tel: Fax: Chennai Tidel Park, 6th & 7th Floor A Block (Module 601, ) No., Rajiv Gandhi Salai Taramani Chennai Tel: Fax: Hyderabad Oval Office 18, ilabs Centre Hitech City, Madhapur Hyderabad Tel: Fax: Kochi 9th Floor ABAD Nucleus NH-9, Maradu PO Kochi Tel: Fax: Kolkata 22, Camac Street rd Floor, Block C Kolkata Tel: Fax: Mumbai 1th Floor, The Ruby 29 Senapati Bapat Marg Dadar (west) Mumbai , India Tel: Fax: th Floor Block B-2 Nirlon Knowledge Park Off. Western Express Highway Goregaon (E) Mumbai-00 06, India Tel: Fax: NCR Golf View Corporate Tower B Near DLF Golf Course Sector 2 Gurgaon Tel: Fax: th floor, HT House Kasturba Gandhi Marg New Delhi Tel: Fax: th & 5th Floor, Plot No 2B Tower 2, Sector 126 NOIDA Gautam Budh Nagar, U.P. India Tel: Fax: Pune C 01, th floor Panchshil Tech Park Yerwada (Near Don Bosco School) Pune Tel: Fax: Ernst & Young LLP EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In doing so, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Ernst & Young LLP is one of the Indian client serving member firms of EYGM Limited. For more information about our organization, please visit Ernst & Young LLP is a Limited Liability Partnership, registered under the Limited Liability Partnership Act, 2008 in India, having its registered office at 22 Camac Street, rd Floor, Block C, Kolkata Ernst & Young LLP. Published in India. All Rights Reserved. EYIN ED None 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 Ernst & Young LLP 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. RS