Bain & Co - India Private Equity Report 2013

||D|/ |||\/| |CU|` |||C| 20o
Copyrlghl 2013 Boln & Compony, lnc. All rlghls reserved.

Conlenl: lndlo Edllorlol
Loyoul: lndlo Deslgn
Arpan Sheth Ieads Bain & Company's Private Equity practice in India and is the main author ol this report.
He is a partner based in the brm's Mumbai olbce.
Sriwatsan Krishnan is a manager with Bain & Company and is a member ol the India Private Equity practice.
He has co-authored this report and is based in New DeIhi.
Co||o||s
lndlo Prlvole Eqully Reporl 2013 | Boln & Compony, lnc.
Poge l
Key Ickecwcys
AbeuI Ihs reperI
1. |nIreducIen: 5|ew grewIh |er |ndcn PE cmd pe|Icc| cnd ecenemc uncerIcnIy
2. Overvew e| Ihe |ndcn PE |cndsccpe
3. An ndepIh perspecIve en |ndcn PE, new cnd ever Ihe nIermedcIe Ierm
4. |nvesIng n hec|Ihccre
5. |mp|ccIens
AbeuI |ndcn PrvcIe EquIy cnd VenIure CcpIc| AsseccIen
AbeuI 8cn & Cempcny's PrvcIe EquIy busness
Key cenIccIs n 8cn's G|ebc| PrvcIe EquIy prccIce
.................................................................................................... pg. 1
.. pg. 3
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pg.
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pg. P
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................................................................................................ pg. 34
....................................... pg. 3
....................................................... pg. 3Z
................................................... pg. 3P
...................................................................................................... pg. lll
Poge ll
Poge lll
|o, |u|ouvu,s
Overvew e| currenI cendIens
Glolal iivato oquity invostnont showod no signilicant incioaso in zoz, continuing zo's tiond towaids llat
giowth. Noith Anoiica was tho stiongost-oiloining naikot, whilo activity in Asia loll aiound zo% ovoi zo.
India saw doal activity lall lion Sq.8 lillion in zo to So.z lillion in zoz. Tho nunloi ol doals, howovoi,
incioasod lion to ovoi this oiiod, highlighting a lall in avoiago doal sizo.
Not suiiising, linitod aitnois (LPs aio showing incioasing caution this yoai whon allocating lunds. In lact, zoz
saw lunds with a nandato to invost in India, lut tho total lund valuo allocatod to India was only S. lillion, down
lion So.8 lillion in zo. All this has loon diivon ly tho lact that zoz was an uncoitain yoai in India loth
olitically and ocononically. Rooitod lasos in govoinanco, coulod with a lack ol claiity in iogulation, iaisod
considoiallo concoins alout India's attiactivonoss as an invostnont dostination. Dosito thoso challongos, tho
naikot is showing signs ol natuiity with all koy stakoholdois loconing noio conloitallo with tho idoa ol iivato
oquity (PE lunding. Tho lattoi hall ol zoz also saw tho govoinnont locono noio ioactivo and liing loiwaid
sono koy iocos ol logislation to cioato gioatoi tiansaioncy in tho iogulatoiy onviionnont.
Fundrcsng
India iocoivod only S. lillion ol tho Szo lillion lunding iaisod glolally in zoz, accoiding to UK iosoaich liin
Pioqin. Gonoial aitnois (GPs also adotod a cautious aioach, holding lack to olsoivo tho oiloinanco ol
oxisting invostnonts in a tuilulont onviionnont. In zoz, 8o% ol lunding cano lion ovoisoas invostois, a thono
that has loon olsoivod sinco tho oaily days ol iivato oquity invostnont in India. Thoio aio no indicatois that this
tiond will chango soon, with tiaditional souicos ol PE caital in India, such as insuianco conanios and onsion
lunds, inhilitod ly iogulation lion aiticiating in this assot class.
Nonotholoss, whilo zo undoultodly holds sovoial challongos loi PE liins, iaising caital is unlikoly to lo ono ol
thon. Oui suivoy iovoals that a najoiity ol GPs iato "dilliculty iaising caital" as sovonth out ol challongos, lai
lolow concoins such as dilliculty in oxiting and nisnatch in valuations. What is cloai is that GPs will nood to
dilloiontiato thonsolvos to attiact invostois and iovo thoy can dolivoi. Thoy can do this ly dononstiating a quality
tiack iocoid in invosting and oxiting.
Dec| mckng
Tho voluno ol doals giow only slightly, lion in zo to in zoz. At q%, this incioaso is voiy low, in lino with
tho ovoiall nood ol caution in tho naikot last yoai. This iostiaint, coulod with a doclino in tho total lunds invostod,
saw doal sizo signilicantly inactod, with avoiago doal sizo lalling lion Sz8 nillion in zo to S8.q nillion in
zoz. Eaily-stago giowth and vontuio caital (VC havo layod a ciitical iolo in doal naking in zoz, with tho
nunloi ol oaily-stago doals undoi So nillion alnost doulling to zqq. Also, tho to z doals nado u only Sq.
lillion, as oosod to S. lillion in zo, and tho avoiago doal sizo at tho to z diood ly alnost a quaitoi to S;
nillion oi doal last yoai.
Soctois that attiactod tho nost invostnont last yoai woio hoalthcaio and IT]ITES. Tho najoiity ol doals undoi So
nillion woio nado in tho o-connoico saco, which was a soctoi highlightod in Bain's !ndiu Privutc Equity Rcpcrt
.cr.. Tho sulsoctoi continuos to giow in zo, lollowing on tho noaily doulling ol doals valuod at loss than So
nillion in tho o-connoico saco, lion z% in zo to z% in zoz ol tho total doals.
Poge lv
Exoctations alout doal activity in zo ionain cautious lut still ositivo on tho wholo. Oui intoiviows suggost that
doal activity will soo nodoiato giowth in zo thioughout tho industiy. Tho stos takon towaids inioving India's
logislativo lianowoik havo nado invostois a lit noio uloat , and GPs suggost that noio doals will closo in zo.
PerI|e|e mcncgemenI
PE invostois wo soko to loliovo thoy add valuo to thoii oitlolio conanios in tho loin ol vision and stiatogy,
inioving coioiato govoinanco and linancial docision naking. This naiks a distinct chango in thoii lovol ol
aiticiation. Until iocontly, tho suoit ontioionouis sought was iostiictod iinaiily to custonoi accoss as woll
as donostic and intoinational oxansion lans. On tho othoi hand, with giowth and iolit oxansion haid to cono
ly, PE invostois aio iocognising tho valuo ol ooiating toans. Factoi in tho lack ol oxits and thoso toans locono
oxtionoly ciitical to ovoiall oitlolio nanagonont.
ExIs
Thoio was a signilicant incioaso in tho nunloi ol oxits in zoz conaiod with zo oxits last yoai voisus 88
tho iocoding yoai. This accountod loi a total valuo ol So.8 lillion, u lion Sq. lillion in zo. Tho nost oulai
oxit iouto loi loth VC and PE invostnonts in India continuos to lo thiough ullic naikot salos, including IPOs.
Tho linancial soivicos soctoi accountod loi aiound % ol all oxits. High-iolilo oxits occuiiod lion ICICI, HDFC
and Kotak thiough a aitial oll-loading ol stakos acquiiod lion zoo to zoo;, as thoso conanios novod to cash in
on tho iosuigont Indian stock naikot.
A vast najoiity ol liins wo soko to loliovo that oxits will incioaso in zo lasod on tho oxoctations that caital
naikots will lounco lack, which will incioaso invostoi aotito loi iivato-oquity-lackod IPOs.
|n |ecus: he hec|Ihccre epperIunIy
Tho hoalthcaio soctoi onoigod as a soctoi ol giowth in a contiacting PE industiy in zoz, and this is oxoctod to
continuo to giow this yoai. Invostnonts in hoalthcaio alnost tiilod ovoi tho ast yoai, iising lion So.qo lillion in
zo to aiound S. lillion in zoz. Doal voluno also ioso o%, with qq doals dono in tho soctoi in zoz.
Tho ovoiall Indian hoalthcaio naikot is aiound So lillion and has giown % in tho ast livo yoais. Howovoi, India
ionains a highly undoionotiatod naikot in toins ol hoalthcaio sonding oi caita and ollois hugo giowth
otontial. India's giowing oulation, incioasod incidonco ol disoasos, gioatoi alloidalility, oxanding insuianco
covoiago and suoitivo govoinnont schonos aio tho koy diivois ol high doullo-digit giowth oxoctations ol tho
PE industiy.
Alout qo hoalthcaio conanios havo iocoivod invostnont ovoi tho ast livo yoais, with % to zo% iaising noio
than ono iound ol caital. What this oints to is tho incioasing conlidonco in tho valuo cioation otontial ol tho
soctoi. Evon in toins ol oxits, tho ictuio is ionising. Ol tho S lillion invostod in hoalthcaio, Sz.8 lillion has loon
iotuinod, with an avoiago holding oiiod ol livo yoais loi tho to z doals.
/|ou| ||s |opo||
Bain & Conany iovidos stiatogic guidanco and advico to stakoholdois acioss India's iivato oquity (PE
landscao, including gonoial aitnois (GPs at PE lunds, linitod aitnois (LPs, ontioionouis and iogulatois.
Bain has layod a koy iolo in dovoloing India's PE industiy ovoi tho ast docado, and wo havo diawn uon this
oxoiionco loi oui iivato oquity iooits, which outlino dovolononts and tionds in tho industiy, ovoi tho ast loui
yoais. Wo aio loasod to collaloiato with tho Indian Piivato Equity and Vontuio Caital Association (IVCA in
liinging you oui latost odition.
Oui India Piivato Equity Rooit zo contains in-doth analysis ol India's PE landscao, including a closo look at
tho giowing hoalthcaio soctoi, as woll as oui oisoctivo on tho lutuio. Oui conclusions woio inloinod ly
intoiviows with stakoholdois, including GPs at PE lunds, LPs, ontioionouis and iogulatois. Wo also diow lion
Bain's ioiiotaiy doal and oxit datalasos, and an oxtonsivo suivoy ol GPs at vaiious PE lunds.
In soction z, wo oxanino tho Indian iivato oquity industiy and idontily tho koy tionds that havo shaod tho ast
yoai. Wo idontily tho challongos still lacing tho soctoi and tho changing attitudos ol industiy layois, oxanining
loth thiough tho lons ol thoii widoi olitical and ocononic contoxt.
Soction givos an ovoiviow ol oach asoct ol iivato oquity invosting: lund-iaising, doal naking, oitlolio
nanagonont and oxits. Wo look at how tho dilloiont olononts ol tho invostnont iocoss havo ovolvod ovoi tho ast
yoai and outlino oisoctivos lion industiy iolossionals loi tho yoai to cono.
In soction q, wo tako a coniohonsivo look at tho hoalthcaio soctoi, which is attiacting incioasing invostnont, and
oxanino tho iolo that iivato oquity lays.
Finally, in soction , wo sto lack and assoss what thoso nultilo lactois noan loi tho lutuio ol PE invostnont in
India. Wo analyso tho cuiiont iolos layod ly vaiious stakoholdois and nako ioconnondations loi how LPs, GPs,
ontioionouis and ionotois can woik to cioato a thiiving invostnont clinato.
Poge 1
Poge 2
||||ouuc|o| S|ov g|ov|| |o| ||uu| || uuu po||cu| u|u
Acioss tho glolo, zoz was anothoi volatilo yoai. Euioo stiugglod to naintain a cohoiont liscal olicy in tho laco ol
intoinal schisns and dolatos alout tho lutuio ol tho ouio. Sain's ioquost loi a Sz lillion ioscuo loi its linancial
soctoi was soon ly nany as a iolininaiy sto towaids a lull lailout. Giook oloctions causod intoinal olitical
uniost and ocononic iilos thioughout tho ouio zono, tiiggoiing dolato ovoi whothoi Giooco night loavo tho
ouio. On tho othoi sido ol tho Atlantic, oliticians continuod thoii gano ol liinknanshi ovoi ocononic olicy and
liought tho US to tho odgo ol tho so-callod liscal clill".
Howovoi, tho closo ol tho yoai saw anxiotios oasing. Piosidont Olana's iooloction guaiantood a coitain lovol ol
continuity in US ocononic olicy, and a doal stiuck in lato Doconloi avoitod tho liscal clillloi now. Evon Euioo
logan to show sono signs ol chooi, with Iioland on its way to aiticiating in tho lond naikots towaids tho ond ol zo.
In Asia, tho stoiy is still ono ol giowth, alloit tho high giowth iatos ol iovious yoais aio gono: China iooitod only a
;% incioaso in GDP and India saw a dio to aioxinatoly % GDP giowth in tho thiid quaitoi ol this linancial
yoai. Asia's stock naikots also ionainod laiily ositivowhilo tho Shanghai Indox giow ly % lotwoon Januaiy
and Doconloi, India's NIFTY saw stiong giowth ol aiound zq%. This giowth was niiioiod in Wostoin stock
naikots, with tho S&P giowing ly o%, NASDAQ ly % and tho Goinan DAX ly % (cc 1/,c .
Poge 3
oco|ouc u|co||u||,
1/,c Vorld slock morkels show heollhy growlh
Source: Boln lVCA VC,PE reseorch survey 2013 [n=4|
Slock morkel lndlces
0.8
1.0
1.2
1.4
)on Feb 3 Apr )un 1 Aug 3 Ccl Dec Z
MlFlY
DA/
S&P 00
Shonghol Slock
Exchonge
MASDAC
24
10
31
CAGk
(JJ-J2}
11
Dosito tho ositivo signs ol giowth, glolal iivato oquity invostnont showod no signilicant incioaso, continuing
zo's tiond ol a llat giowth iato. Tho only iogion to show an incioaso was Noith Anoiica (cc 1/,c :. Tho
Asia-Pacilic naikot doclinod ly aioxinatoly zo%, and South Koioa was tho only nation to soo an incioaso in PE
activity (cc 1/,c :. Docioasing doal valuos in loth India and China layod a laigo ait in causing that
doclino. In this iooit, wo'll oxloio India's iolo in that tiond and tako an in-doth look at tho countiy's changing
iivato oquity scono.
Ono ol tho nain ioasons loi tho doclining invostnont in tho Indian iivato oquity industiy is that LPs aio showing
noio caution whon allocating lunds. In zoz, thoio woio lunds with a nandato to invost in India, lut tho total
lund valuo allocatod was only aiound S lillion, down lion S; lillion in zo (soo soction loi dotails. What's
noio, LPs aio loconing incioasingly icky alout tho lund nanagois thoy woik with.
Looking closoly at tho Indian PE scono, zoz has loon an uncoitain yoai, loth olitically and ocononically. Tho yoai
logan with widosioad iotosts against coiiution and saw continuing contiovoisy ovoi issuos ianging lion tho
Mahaiashtia iiiigation scandal to tho dolato ovoi loioign diioct invostnont (FDI in tho iotail and aviation
industiios. Fuithoi huidlos woio intioducod, such as tho iotiosoctivo tax anondnonts on tho contiovoisial
Vodalono caso, which iaisod concoins anong invostois. Also, discontont ovoi tho oicotion that tho govoinnont
lacks a cloai olicy ioad na has inovitally lod to concoins alout India's attiactivonoss as an invostnont dostination.
Thioughout tho yoai, tho valuo ol lunds invostod in India thiough iivato oquity doclinod ly sono o%. Although
tho nunloi ol doals actually ioso lion doals in zo to doals in zoz, tho tiond towaids an ovoi-snalloi doal
sizo noant that tho valuo ol lunds ut to woik ovoi tho yoai diood.
Poge 4
1/,c : Cveroll, globol lnveslmenl ocllvlly ln 2012 wos muled, wllh slgns ol growlh only
Moles: Excludes oddons, loonloown lronsocllons ond ocqulslllons ol bonkrupl ossels, bosed on onnouncemenl dole, lncludes onnounced deols lhol ore compleled or
pendlng, wllh dolo sub|ecl lo chonge, geogrophy bosed on lhe locollon ol lorgels
Source: Deologlc
ln Morlh Amerlco
P P PZ P8 PP 00 01 02 03 04 0 0 0Z 08 0P 10 11 12
30 32
4

112
P8
8
110
133
24
2P
P
8
18
Z3
188
182
18
CAGk CAGk
0 Morlh Amerlco
2 Europe
24 AsloPoclllc
23
1P
3
33 2 RCV
(JJ-J2} (09-J2}
0
200
400
00
$800B
Globol buyoul deol volue
Poge
In toins ol oxits, zoz was a good yoai. Tho nunloi ol oxits incioasod signilicantly oxits (valuod at
aioxinatoly S; lillion u lion 88 oxits in zo (valuod at Sq. lillion. Financial soivicos saw tho liggost
chango, with a livolold giowth in oxit valuo, lion So nillion in zo to sono Sz lillion in zoz. A nunloi ol
high-iolilo oxits diovo this chango: Cailylo's S. lillion oxit (in two hasos lion HDFC, Tonasok's Sz nillion
oxit lion ICICI and Wailuig's Sqoo nillion oxit lion Kotak.
Ovoiall, zoz nay lo dosciilod as a yoai ol caution loi India's PE industiy. In zo, wo saw an incioaso in activity
with ont-u donand loi caital altoi a long hiatus in invostnonts. Oui iosoaich oints to a natuiing naikot, with
ionotois giadually changing thoii attitudos towaids iivato oquity as a souico ol caital and PE liins giowing
incioasingly caiolul alout tho doals thoy nako. Moioovoi, tho iogulatoiy lianowoik is inioving, as wo will
discuss latoi on.
Wo loliovo that signs oint to a ositivo lutuio loi India's iivato oquity industiy in tho nodiun toin. PE is
incioasingly soon as a ciodillo souico ol ationt caital, and tho dynanic lotwoon invostois and ontioionouis is
natuiing and loconing ono ol tiust. Dosito sono ionaining issuos, wo soo causo loi otinisn in tho yoai to cono.
1/,c : ln AsloPoclllc, oddressed volue decllned by 21 lo $48 bllllon, volues ln oll geogrophles
Moles: lnveslmenls wllh onnounced deol volue only done ln APAC [GC, SEA, AMZ, )opon, Soulh Koreo ond lndlo|. lncludes only closed deols, deols ln ogreemenl ln prlnclple or
dellnlllve ogreemenl slolus. Does nol lnclude brldge loons, lronchlse lundlng seed,R&D ond concepl deols. Excludes oll non PE , VC deols [such os M&A, consolldollon, ocqulslllon|.
Excludes deols ol volue less lhon $10 mllllon. Excludes reol eslole, holels & lodglng ond lnlroslruclure [olrporls, rollrood, hlghwoy, olher heovy lnlroslruclure|. Excludes lorge
domesllc lronslers lrom SVF lo governmenl [such os ClC lnvesllng ln Bonk ol Communlcollons|. GC lncludes Chlno [PRC|, lolwon, Hong Kong ond Mocou, SEA [Soulheosl
Aslo| lncludes lndoneslo, Moloyslo, Phlllpplnes, Slngopore, lhollond ond Vlelnom.
Source: A:ior Ver|0re Copi|oI )o0rroI [dolo exlrocled on )onuory 22, 2013|
were down, excepl ln Soulh Koreo
APAC deol volues Addressed morkel
0
20
40
0
$80B
2002
P
2003
1
2004
18
200
31
200
0
200Z
Z3
2008
4
200P
3
2010
3
2011
1
2012
Auslrollo &
Mew Zeolond
lndlo
Greoler
Chlno
Soulh Koreo
Soulheosl Aslo
)opon
48
142
2J%
3P2 Z 38 413 138 141 20 30P 4 Z42 18
CAGk
(JJ-J2}
18
18
24
18
3Z
Mumber
ol deols
Poge
In zoz, vontuio caital (VC and iivato oquity lunds woio noio cautious alout tho soloction ol thoii invostnonts
and loss willing to ay outsizod valuations. Invostois also logan to donand a cloai oxit ioad na lion tho stait,
which iosultod in noio nonoy connittod thiough oaily-stago invostnonts.
Tho yoai logan on a high noto, with otinisn alout tho incioasod doal llow and tho gonoial lutuio ol tho PE
naikot. Moio than hall ol thoso suivoyod loi last yoai's iooit loliovod that doal activity would incioaso, indood,
o% ol iosondonts lacod giowth at z% oi noio. Howovoi, that otinisn was nislacod. Thioughout zoz, tho
slowdown in tho Indian oconony causod incioasing concoin loi GPs. Fivo issuos staunchod doal llow.
Fiist, tho logjan in India's olitical landscao, with litlul attonts at ioloin, woiiiod invostois. Socond, tho high
inllation that logan in zo continuod loi nost ol zoz. Whilo it aoaiod to lo stalilising ly lato zoz, avoiago
inllation was ;.% duiing tho yoai. Thiid, low Indox ol Industiial Pioduction giowth, which was nogativo in sono
nonths (o.% in Aiil, nogativo .8% in Juno, nogativo o.z% in July, causod concoin. Fouith, tho woaknoss ol tho
iuoo, which hit a histoiic low ol INR ; to tho US dollai, alloctod invostois' willingnoss to connit.
Finally, iogulatoiy uncoitainty was an issuo thioughout tho yoai and layod a laigo ait in scaiing invostois away
lion India. Tho thioat ol iotiosoctivo tax on loioign invostois that had takon contiolling stakos in Indian
conanios iovokod widosioad dolato. This was conoundod ly tho iosoct ol tho govoinnont inosing a
caital gains tax on PE invostnont iotuins. In an onviionnont chaiactoiisod ly nounting iossuio to oxit (with
taigot IRRs in tho high toons, tho ossilility ol a caital gains tax was a causo ol nogativo sontinont anong
invostois. At tho loginning ol zoz, tho Indian iivato oquity naikot had soonod to lo on an uwaid tiajoctoiy, lut
ly nid-yoai, tho ioad ahoad soonod incioasingly luny.
Dosito thoso sotlacks, thoio is no doult that iivato oquity has locono a viallo souico ol ationt caital in India.
Tho nunloi ol doals in zoz giow ly sono q% lion zo, indicating that noio and noio ionotois and
ontioionouis aio conloitallo with tho idoa ol PE invostnont.
That said, India lost its standing as tho lastost-giowing iivato oquity naikot in Asia, doclining at a iato ol o% (cc
1/,c :. In zo, PE invostnonts ioachod tho oquivalont ol o.8% ol GDP, accoiding to Euiononitoi. In zoz,
this liguio diood to o.%. This oicontago is highoi than thoso ol China (o.zo% and Biazil (o.zo%, though
lowoi than thoso ol noio dovolood naikots.
Key Irends |er PE
Thoio aio a low koy ioasons loi tho dio in invostnonts, nostly linkod to India's widoi linancial and olitical
landscao. Tho doclino ol caital oxansion lans acioss industiios liought alout a docioaso in tho donand loi
giowth caital. Additionally, nany laigo soctoisliko inliastiuctuio, onoigy and toloconsulloiod duo to
inadoquato olitical nonontun and saw invostnonts alnost conlotoly diy u. Ongoing iogulatoiy uncoitainty
conoundod this iollon.
An ovoiviow ol zoz indicatos tho onoigonco ol loui inoitant tionds, which will shao tho lutuio dovolonont ol
tho iivato oquity saco:
2 Cvo|vov o| ||o ||uu| || |u|uscupo
Poge Z
Fund-iaising activity has slowod, and LPs aio doing thoii diligonco with gioat caio loloio connitting lunds to
India. Tho total lunds nandatod loi invostnonts in India woio S. lillion in zoz, which is loss than hall ol tho
ioughly So. lillion connittod in zo.
Eaily-stago giowth and vontuio caital aio laying a ciitical iolo in doal naking. Tho nunloi ol oaily- stago doals
that woio loss than So nillion noaily doullod lion z doals in zo to zqq doals in zoz. This
sulsot now accounts loi alnost hall ol total doal voluno (qq%, u lion zq% in zo and o% in zoo.
Invostnont is iising in consunoi soctois, aiticulaily in hoalthcaio. Invostnonts in hoalthcaio noaily tiilod
ovoi tho ast yoai, iising lion So.qo lillion to noaily S. lillion in zoz. Tho nunloi ol doals also ioso ly o%,
with qq doals nado in tho soctoi in zoz.
Tho iossuio to oxit continuos to luild. Though oxits giow slightly in zoz, thoio is a giowing lacklog ol
invostnonts looking to oxit, nainly livo-yoai vintago oi oldoi lunds. As long as caital naikots ionain
unattiactivo and invostois continuo to ioloi IPOs as a way to oxit, this lacklog will continuo to giow.
|ssues Ie wcIch n 2013

Although thoso issuos cioato sono causo loi concoin, wo havo ioason to loliovo that tho lundanontals ol tho Indian
PE naikot aio sound. Tho LPs and GPs wo havo intoiviowod unaninously loliovo in tho long-toin otontial ol
iivato oquity in India and in India's giowth stoiy. Whilo tho oconony nay havo slowod down, GDP continuos on
its uwaid tiajoctoiy, liinging continual incioasos in tiado llows, industiial ioduction and consunoi sonding.
India's niddlo class giows ly tho day, ushing noio and noio housoholds alovo tho lasolino loi additional
sonding and cioating a thiiving uoi niddlo class, with laigo disosallo inconos.
1/,c : VC ond PE deol volue decllned by 30 lrom 2011, lo $10.2 bllllon, ollhough deol volumes
Annuol VC,PE lnveslmenls ln lndlo
Source: Boln PE deols dolobose
remolned robusl
Mumber
ol deols
0
10
1
$20B
2000
1.2
2001
0.P
2002
0.
2003
0.
2004
1.
200
2.
200
Z.4
200Z
1Z.1
2008
14.1
200P
4.
2010
P.3
2011
14.8
2012
10.2
280 21 380 110 31 1 Z8 Z3 18 2P 4P4 448
-30%
Poge 8
To gain a lottoi oisoctivo on what thoy oicoivo to lo tho nain inodinonts to giowth, wo suivoyod koy industiy
stakoholdois and askod thon to idontily tho challongos loi iivato oquity in zo. Tho iosults aio sinilai to last
yoai's lindings (cc 1/,c ::.
Concern about returns. Not all invostnonts havo gonoiatod tho iotuins oxoctod ol thon. This is aiticulaily
tiuo ol invostnonts nado duiing tho loon yoais ol zooq thiough zoo;, which aio now ioaching natuiity.
Thoii oiloinanco is causing concoin anong LPs.
Expectations mismatch over asset vaIuations. Dosito tho tiond towaids noio ioalistic valuations, GPs loliovo
that high-quality doals aio still iicoy and will ionain so.
Sustained pressure on exits. This yoai, iossuio to oxit was iankod ly GPs as tho liggost challongo thoy laco. Tho
nunloi ol oxits nay havo incioasod in zoz, lut thoio is still sono distanco to go, nany invostnonts lion
zooo and zoo; havo oxcoodod thoii livo-yoai holding oiiod. Although tho widoi ocononic contoxt no doult
layod a iolo in inoding oxits, tho GPs wo soko to agioo that sono invostnonts nado duiing that tino woio
not lasod on sound lundanontals.
VaIue creation. Indian ontioionouis aio not lully oon to having PE lunds activoly aiticiato in thoii
conany's stiatogy and ooiations, and PE lunds continuo to got ooitunitios to acquiio only ninoiity stakos.
Macroeconomic environment. India's oiloinanco in GDP giowth, inllation and othoi ocononic lactois woio
disaointing thioughout zoz. As a iosult, nacioocononic lactois" iolacod non-suoitivo iogulatoiy
onviionnont" on invostois' list ol to livo concoinsa chango lion tho iioi yoai. Whilo tho olicy lianowoik
ionains uncoitain and continuos to dotoi invostnont, govoinnont ioloins onlaikod on towaids tho ond ol
zoz havo dono a lot to disol loais.
1/,c :: Dllllcully ln exlllng ond mlsmolch ln voluollons remoln lhe blggesl chollenges ond
Rollng ol chollenges ond borrlers lo VC,PE lnduslry ln lndlo
Cr o :coIe ol 1 |o , where =very impor|or|, 1=Ieo:| impor|or|
borrlers lo lhe VC ond PE lnduslry
0
1
2
3
4
Chollenges
lo exll
Mlsmolch ln
voluollon
expeclollons
Volollle
mocro
economlc
loclors
lough
compellllve
envlronmenl
Bod
corporole
governonce
Mon
supporllve
regulolory
envlronmenl
Dllllcully
gelllng
occess lo
copllol
Dllllcully
generollng
volue lrom
porllollo
componles
nwllllngness
ol promoler
lo sell sloke
nwllllng
ness ol
promoler
or CEC lo
sell sloke
Llmlled
ovolloblllly ol
lnveslmenl
prolesslonols
2011 Mexl 2 yeors 2012
Poge P
Fundrcsng
edcy's bcse|ne: 5Icb|e buI s|ewng
Last yoai nay havo soon considoiallo activity in tho llow ol invostnonts, lut tho docioaso in tho nunloi ol oxits
(which wo oxloio in noio dotail latoi on has had an undoniallo inact on lund-iaising. LPs aio giowing
inationt, tho iossuio is nounting on PE lunds to nako iolitallo oxits and tho not olloct is that gonoial
onthusiasn towaids India as an invostnont dostination has wanod.
Glolally, aiound o; lunds iaisod aioxinatoly Szo lillion in zoz, accoiding to UK iosoaich liin Pioqin. But a
closo oxanination ol tho iosoaich iovoals that ol that total, only aiound S lillion was nandatod loi invostnont in
India, whoioas tho sun nandatod loi India in zo was S; lillion a sulstantial dio and an indicatoi ol tho
chango in glolal attitudos towaids India (cc 1/,c :. It's laii to assuno that GPs that havo nonoy aio holding
lack to soo how tho cuiiont cio ol invostnonts laios in tho coning yoai. As India's PE soctoi natuios, thoio is no
doult that LPs aio loconing noio soloctivo with thoii invostnonts.
Ono asoct ol lund-iaising that stayod constant ovoi tho last two yoais is tho iooition ol lunds iaisod ovoisoas,
which ionains at alout 8o%. This liguio has not changod signilicantly sinco tho oaily days ol iivato
o /| |uop|| po|spoc|vo o| ||uu| ||, |ov u|u ovo|
||o ||o|uouu|o |o|u
1/,c : Funds ollocoled lo lndlo decllne, LPs conllnue lo volue exll ond lrock records ol GPs
Mole: Funds ollolled lo lndlo ore bosed on lhe rollo ol lnveslmenl ln lndlo vs olher locus counlrles or reglons, cumulollve over losl llve yeors
Sources: Preqln dolobose, Boln lVCA VC,PE reseorch survey 2013 [n=4|
Funds ollocoled lo lndio decline
Irock ond exil records ol GPs ore lhe mosl
imporlonl loclors lor lund-roising
0
10
20
30
$3B
Funds rolsed
2011
12
Z
2012
2
3
lmporlonce ol loclors lor lundrolslng
0
1
2
3
4
Exll
record
lrock
record
Cuollly ol
lnveslmenls
mode
leom Ablllly lo
odd volue
Seclor
specloll
sollon
Funds ollocoled lo lndlo
Amounl closed by lunds slollng lndlo os o locus
In zo, lunds with a nandato to invost in India anong othoi googiahios iaisod Sz lillion. Ol this anount, only So. lillion was socihcally allocatod to India. In zoz, lunds
with a sinilai nandato iaisod sono Sz lillion, howovoi, a ioasonallo ostinato suggosts that only S. lillion ol that anount will lo allocatod oxclusivoly to India.
Poge 10
oquity invostnont in India, and thoio aio no indicatois that it will iniovo soon. India's conlox iogulatoiy
lianowoik and logal syston noan that donostic lunding conos only thiough high-not-woith individuals oi
institutions. Convontional souicos ol PE caital, such as insuianco conanios and onsion lunds, aio still not
allowod undoi Indian iogulations to iovido caital to PE, VC oi othoi altoinativo assot classos. As a iosult, lunds
that invost in India ioloi to iaiso nonoy ovoisoas to avoid conlications with Indian law ovoi disuto ailitiation,
taxation and iodontion.
Finally, it's noticoallo that LPs aio incioasing thoii sciutiny ol GPs' tiack iocoids loloio dociding to connit lunds.
Tho najoiity ol oui suivoy iosondonts highlightod tho challongos thoy laco in linding GPs with a tiack iocoid ol
succoss. Whon LPs woio askod to iank tho lactois that inlluonco thoii docision naking whon connitting lunds to a
GP, tiack and oxit iocoids woio on to, lollowod ly tho quality ol invostnonts and tho GP toan.
2013 cnd beyend
Ovoiall, tho iosocts loi lund-iaising in zo look ositivo. Whon it conos to diy owdoi, thoio has loon a distinct
yoai-ovoi-yoai iniovonont. PE lunds ontoiod zo with S lillion loi invostnontnoaily ono-thiid loss than tho
S; lillion that ionainod in Januaiy zozaccoiding to Pioqin. This doclino in caital ovoihang is undoultodly
good nows, lut it's woith noting that tho undoilying ioason loi this doclino is not, as ono night hoo, tho iosult ol
incioasod invostnonts, lut iathoi a ioduction in tho valuo ol inconing lunds.
Whilo zo undoultodly osos challongos loi PE liins, iaising caital is not likoly to lo ono ol thon. Tho najoiity
ol GPs wo suivoyod iankod dilliculty in iaising caital" sovonth anong challongos, lai lolow concoins such as
dilliculty in oxiting" and nisnatch in valuations" (as discussod in soction z. What layois looking to iaiso lunds
nood to acknowlodgo, howovoi, is that LPs aio loconing noio soloctivo and conotition is giowing noio intonso.
GPs will nood to dilloiontiato thonsolvos on iotuins in oidoi to attiact invostnont. Thoy will also nood to iovo thoy
can dolivoi ly dononstiating a quality tiack iocoid in invosting and oxiting.

That noans nowconois aio likoly to laco challongos. Fiist-tino lund-iaisois aio ontoiing a woild in which othoi
GPs havo a hoad stait, sono GPs nay alioady lo on thoii thiid iound ol lund-iaising. In zo, a lack ol a iovon
tiack iocoid will nattoi noio than it did in iovious yoais.
Moio ostallishod layois laco challongos too. Evon il thoii liist and socond lunds havo soon ioasonallo succoss in
doloynont, that will not lo onough to convinco invostois. It's tho all-inoitant tiack iocoid on oxits that will lo
ciitical and, as this iooit oxloios in noio doth latoi, oxiting will continuo to oso challongos in zo. Tho
iossuio to oiloin is only going to incioaso.
Whon it conos to tho lalanco lotwoon donostic and loioign invostnont, thoio aio low signs ol chango in tho status
quo. Tho ocononic ioloins ol zoz did not ioduco tho stiingont iogulations on PE invostnonts, and waiting loi
allluont individuals in India to tako action is unlikoly to ush donostic invostnont highoi. Oui intoiviow
iosondonts conliinod that zo will continuo to soo tho najoiity ol invostnonts coning lion outsido India, with
two-thiids coning lion loioign diioct invostnont (FDI and loioign vontuio caital invostnont (FVCI. Within tho
% to zo% ol lunds oiiginating in India, institutional invostois aio oxoctod to contiiluto to a highoi shaio ol
lund-iaising as noninstitutional invostois, such as high-not-woith individuals, ioduco thoii invostnont in India
(cc 1/,c ::.
Poge 11
Dec| mckng
edcy's bcse|ne: CenservcIve cnd uneven sgns e| grewIh
Tuining to doals, sono intoiosting tionds aoaiod in zoz. Whilo tho GPs wo suivoyod iooitod iocoiving an
avoiago ol 8o invostnont nonoianduns lion otontial invostoosa lig incioaso lion tho avoiago ol oo
iooitod in zotho voluno ol doals giow only slightly, lion doals in zo to doals in zoz. At q%, this
incioaso is voiy low and in lino with tho ovoiall caution tho naikot has soon thioughout tho yoai. What's noio, this
slight incioaso in doal voluno did not sto tho valuo ol invostod lunds lion docioasing o%, lion Sq.8 lillion in
zo to just So.z lillion in zoz. Pionotois woio unwilling to divost, lacod with what thoy considoiod to lo low
valuations, and stiugglod to lind connon giound with lunds, whoso concoins ovoi iogulation luollod thoii
ioluctanco to invost in olovatod valuations.
Tho dio in total lunds invostod had a signilicant inact on avoiago doal sizo, which docioasod lion Sz8 nillion in
zo to S8 nillion in zoz (cc 1/,c ::. Howovoi, a closoi look shows a noio conlox ictuio and iovoals tho
iolo that oaily-stago giowth and vontuio caital havo layod in doal naking in zoz. Botwoon zo and zo, tho
nunloi ol oaily-stago doals that woio loss than So nillion noaily doullod, lion z doals in zo to zqq doals in
zoza cloai sign ol tho incioasing iolo that such doals aio laying in tho iivato oquity scono. Onco thoso oaily-
stago doals valuod at loss than So nillion aio takon out ol tho ictuio, avoiago doal sizo ionains ionaikally
consistont lion zo onwaid.
1/,c :: Domesllc lundlng ls expecled lo decreose ln shore
>80% ol lunds conlinue lo come lrom loreign sources
GPs ond inslilulionol inveslors lo increose shore
in domeslic lunding
How hos your Irm routed Iunds Ior nvestment n ndo n the
lost two yeors? How do you epect thot to chonge?
Whot hos been your cheI domestc source oI coptol n ndo
n the lost two yeors? How do you epect thot to chonge?
Sources ol lundlng
0
20
40
0
80
100
Domesllc
lnveslmenl
Forelgn venlure
copllol
lnveslmenl
Forelgn dlrecl
lnveslmenl
Forelgn
lnslllullonol
lnveslmenl
Losl 2 yeors Mexl 2 yeors
Domesllc sources ol lundlng
20
40
0
80
100
0
lndlon
lnslllullonol
lnveslors
lndlon
nonlnslllullonol
lnveslors
Generol
porlners
ol PE llrms
Poge 12
Oui intoiviows suggost that tho avoiago PE doal sizo is likoly to incioaso iathoi than docioaso in zo loi nultilo
ioasons. Econonic giowth continuos at a signilicant iato, dosito unoaso ovoi tho zoz slowdown, and will
inovitally owoi giowth in invostnonts. As tho PE scono natuios, lollow-on invostnonts will giow, ushing u
avoiago doal sizo. And in an incioasingly uniodictallo onviionnont, invostois aio likoly to stick to liggoi liins
that olloi loss iisk.
Tho So nillion doclino in avoiago doal sizo was acconaniod ly a dio in nogadoals in zoz. Tho to z doals
nado u only Sq. lillion, as oosod to S. lillion in zo, and tho avoiago doal sizo at tho to diood ly noaily a
quaitoi, to S; nillion (cc 1/,c :4. Tho vast najoiity ol thoso nogadoals woio loss than Szoo nillion.
Indood, only two doals woio ol signilicant sizoBain Caital's S lillion invostnont in Gonact and Lodha
Dovolooi]Voinado Tiust's Soo nillion invostnont in Jawala Roal Estato. In aiallol, tho nunloi ol snalloi doals
(loss than So nillion ioso ly qo% in zoz, lion zoo doals to ; doals.
A closoi look at invostnonts ol loss than So nillion shows signilicant giowth in tho hoalthcaio, IT and IT-onallod
soivicos (ITES soctois (cc 1/,c :. Ol tho oo doals valuod at loss than So nillion, ovoi hall woio in IT and
ITES. Education is also a giowing saco in this doal-sizo liackot, with q snalloi invostnonts ovoi tho couiso ol tho
yoai. Moio than qo% ol hoalthcaio doals (zo doals out ol qq woio valuod at loss than So nillion as woll.
Within tho IT and ITES soctoi, tho S lillion doal stiuck ly Bain Caital and GIC ovoi Gonact signilicantly
incioasod tho total sun invostod. But tho soctoi has also soon a nunloi ol doals with snall liins ooiating in nicho
sognonts, such as o-connoico and onlino soaich ongino soivicos.
1/,c :: Averoge deol slze dropped shorply ln 2012 due lo lhe lncreosed volume ol VC deols,
Mole: VC deols ore dellned os eorlysloge deols wllh deol volue <$10M
Sources: Boln PE deol dolobose, Boln lVCA VC,PE reseorch survey 2013 [n=4|
Averoge deol size lor PEJVC deols hos dropped
lrom 528 million in 20JJ lo 5J8 million
45% ol respondenls expecl deol size lo sloy sloble while
43% expecl deol size lo increose by more lhon J0%
How do you epect overoge deol sze to
chonge over the net 2 yeors?
bul GPs predlcl lhol deol slze wlll sloy lhe some or lncreose over lhe nexl lwo yeors
0
10
20
30
$40M
Averoge deol slze
PE ond VC overoge deol slze PE overoge deol slze
28
18
3
31
ol responses
2011 2012
0
20
40
0
80
100
lrend ol overoge deol slze
lncreose slgnlllconlly
[>2|
lncreose somewhol
[102|
Relollvely sloble
[+, 10|
Decreose somewhol
[102|
Decreose slgnlllconlly
[>2|
Poge 13
1/,c : Deol moklng lncreosed ocross heollhcore, ll, ond medlo ond enlerlolnmenl, volumes
Annuol VC,PE lnveslmenls ln lndlo by seclor
Moles: Clhers" lncludes consumer producls, holels ond resorls, reloll, shlpplng ond loglsllcs, lexllles, educollon ond olher servlces, BFSl relers lo bonklng, llnonclol servlces
ond lnsuronce, ocllve lunds ore lunds lhol hove done ol leosl one deol ln lhe menlloned yeor
Source: Boln PE deol dolobose
Mumber
ol deols
Mumber ol
ocllve lunds
surposs 2011 peok
244 2 181
18
238
31 2P 4P4 448 21
202
380
28
1
0
10
1
$20B 8reokdown ol deols
Seclor 2012
10 108
0
P 21
2P 44
48 41
3 1P
13 22
28 14
Z2 34
3 44
Clhers
lelecom
Medlo ond enlerlolnmenl
Heollhcore
BFSl
Energy
ll ond llES
Eng ond conslrucllon
Monuloclurlng
Reol eslole
Iolol 53J 55J
2011
200
2.
200
Z.4
200Z
1Z.1
2008
14.1
200P
4.
2011
14.8
2010
P.
10.2
2012
1/,c :4 Averoge deol slze lor lorger deols ln 2012 dropped lo 2010 levels
Iop 25 deols represenl 46% ol lolol deol volue
in lhe losl 5 yeors
For lhe lop 25, deol sizes in 20J2 dropped bock lo
20J0 levels oller peoking in 20JJ
0
2
4
$B
2008 200P 2010 2011 2012
40 3 4 40 42
ol lolol
deol slze
lolol deol slze ol lop 2 deols
.Z
2.4
4.4
.P
4.3
lop 2 deols by slze ol deol [$M|
Averoge
deol volue
0
20
40
0
80
100
200312 2008 200P 2010 2011 2012
2Z 181 8 1Z4 23 1Z
300
00
>00
100
200
200
300
300
00
0
100
100
200
<0
200300
100
200
0
100
300
00
200
300
>00
100
200
100
200
200
300
300
00
0
100
>00
200
300
Poge 14
Tho najoiity ol doals valuod at loss than So nillion woio nado in tho o-connoico saco and vontuio caital liins,
in aiticulai, layod a iolo hoio, invosting in stait-us in now aioas such as nolilo valuo-addod soivicos. Tho
oicontago ol thoso doals in tho o-connoico saco has noaily doullod, lion z% in zo to z% in zoz.
Last yoai's iooit idontiliod o-connoico as a ciucial tiond in India's iivato oquity scono, and this sulsoctoi
continuos to giow. Alout 8 ol tho zz IT and ITES doals woio nado in tho o-connoico sulsoctoia voluno
giowth ol qq% lion zo. Tho laigost doal in zo was SoltBank's Szoo nillion invostnont in InMoli, a nolilo
advoitising notwoik. In zoz, tho laigost singlo o-connoico doal was Tigoi Glolal and Accol India's joint
invostnont in Flikait, tho livo-yoai-old onlino iotail vontuio. Anothoi notallo invostnont was tho Soo nillion that
Soquoia Caital and SAP Vontuios ut into JustDial, a local hollino and soaich ongino.

Doal sizo in o-connoico ionains snall and, in lact, has giown slightly snalloi sinco last yoai. In zoz, 8% ol
o-connoico doals woio loss than So nillion, u lion ;% in zo. Tho stago ol invostnont has also changod
slightly: In zoz, aiound 8o% ol o-connoico doals woio oaily-stago, u lion ;o% in zo.
Sono qo doals woio nado in tho hoalthcaio soctoi, a dynanic saco that has ovolvod iaidly ovoi tho ast yoai duo to
its iocossion-iool natuio and lioquont nood loi lusinoss guidanco lion invostois. Whoioas invostnonts in
hoalthcaio histoiically locusod on hainacouticals and diagnostics, PE lunds noio iocontly havo locusod thoii
attontion on liontlino iovidois and dolivoiy soivicos. Soction q ol this iooit looks in dotail at tho hoalthcaio soctoi
and oxaninos this tiond in doth.
Financial soivicos has soon littlo chango in invostnont lovols, thoy woio down slightly to So. lillion lion S.
lillion in zo. But ioal ostato, nanulactuiing and inliastiuctuio havo all doclinod signilicantly lion tho high
lovols ioachod in zo. Roal ostato invostnonts havo halvod, lion S.q lillion in zo to S.8 lillion in zoz.
Manulactuiing and inliastiuctuio invostnonts havo collasod, lion Sz.q lillion and S. lillion, iosoctivoly, in
zo to So.o lillion and So.8 lillion in zoz. Thoso iolloct iollons in India's inliastiuctuio saco in gonoial, with
lowoi contiacts awaidod and tho thioat ol govoinanco issuos naking invostois waiy ol connitting. Tho GPs wo
soko to attiiluto this slowdown in India's inliastiuctuio saco to ooi valuations and a wishy-washy"
govoinnont that is unwilling to tako tho nocossaiy stos to iniovo nattois.
Incioasingly, India is sooing now invostois. Tho nunloi ol activo lunds incioasod loi tho socond yoai in a iow,
iising lion zoz lunds in zoo to z8 lunds in zoz. In zoz, this was diivon ly a shai incioaso in tho nunloi ol
now lunds (cc 1/,c ::.
Tho incioasing ovoila lotwoon vontuio caital and iivato oquity invostois that wo saw in zo continuod to giow.
Doal sizo alono is no longoi tho iodictoi it onco was. Snall doals that would ioviously havo loon within VC
aianotois now soo conotition lion loth VC and PE layois. Estallishod PE layoi Accol India has invostod
alout Szo nillion oach in onlino vontuios BookMyShow and Myntia. On tho lli sido, Soquoia Caital, a vontuio
caital lund, has aiticiatod in nultilo consoitiuns, invosting noio than So nillion, with invostnonts
including Manauian Financo & Loasing and July Systons.
Whon it conos to valuations, lunds havo locono noio consoivativo alout tho ontiy nultilos ol thoii invostnonts.
Avoiago EBITDA nultilos on noigoi and acquisition tiansactions in India woio alioady dioing last yoai, lion a
high ol zo tinos EBITDA in tho oiiod lion zooo to zoo8 to tinos EBITDA in yoais zoo and zo. Tho zoz
nultilo was ovon lowoi, oight tinos EBITDA, diivon ly a doclino in nultilos loi consunoi stalos and tho
linancial soivicos soctoi (cc 1/,c :.
Although valuations havo diood signilicantly lion zoo; lovols, thoio aio ioasons to loliovo this dio will not
continuo. As caital naikots show signs ol iniovonont, ionotois aio likoly to oxoct highoi nultilos.
Poge 1
1/,c :: lhe number ol ocllve lunds lncreosed ln 2012
Mole: For lhe lell chorl, o lund ls clossllled os new ll ll hos nol done ony deol ln lhe precedlng yeor. For exomple, new lunds lnclude lunds lhol conducled o deol ln lhe currenl yeor
bul were lnocllve losl yeor
Aclive lunds 2008-20J2 Funds invesling lirsl lime in lndio
0
100
200
300
2008 200P 2010 2011 2012
2
181
202
238
28
Mumber ol VC,PE llrms conducllng deols ln lndlo
Exlsllng Mew
00 Slorlups
24,Z lechles, lrodeBrlels,
Cucumberlown,
rbonpollon lechnologles,
berlobs, VollelKll,
ZlpDlol Moblle Solullons
<$10M
Flrsl Llghl lndlo
Accelerolor Fund
ModRol Gomes <$10M
)ode Mognel ld8on <$10M
Lholse lnveslmenls Lumox Anclllory $1M
Srl|on Copllol Consumerdoddy.com <$10M
Fund lnveslmenls Deol slze
1/,c : lnveslmenl horlzons ore unllkely lo chonge much
Moles: Eqully conlrlbullon lncludes conlrlbuled eqully ond rollover eqully, bosed on prolormo lrolllng EBllDA, lor APAC, bosed on M&A lronsocllons where lhere ls o
lronsocllon volue ond excludes exlremes mulllples [<1 or >100|
Sources: S&P Copllol lC LCD [os ol 1Z Dec 2012 lor APAC|, Boln lVCA VC,PE reseorch survey 2013 [n=4|
lnveslors' negolive oullook led lo o shorp
decline in voluolions in 20J2
lnveslmenl horizons ore expecled lo
remoin similor lo previous yeors'
Whot wos the overoge nvestment horzon oI your deols?
EBllDA mulllple on lndlo M&A lronsocllons
[welghled by lronsocllon volue|
ol responses
0
10
20
30
40/
Drlven by very hlgh
mulllples lor molerlols seclor Mo|orly drlven
by decllne ln
mulllples lor
consumer sloples
ond llnonclol
servlces seclors
00 02 04 0 08 10 12
P.3
.
.4
38.2
Z.
18.
22.1
1Z.0
2.
11.2
14.2
1.P
8.4
01 03 0 0Z 0P 11
0
20
40
0
80
100
<3 yeors
3 yeors
Z yeors
> Z yeors
Poge 1
Oui suivoy shows that alout o% ol GPs oxoct valuations to stay stoady, dosito tho lact that ;% lool that cuiiont
valuations aio inllatod (cc 1/,c :. Tho lack ol quality assots shows no signs ol changing and will continuo to
koo valuations at thoii cuiiont lovols. Ono consoquonco woith noting, howovoi, is that tho aucity ol doals
involving quality assots has continuod to nako thoso assots iicoy.
Whon it conos to holding tino, alout hall ol GPs oxoct tho cuiiont holding oiiods ol thioo to livo yoais to
continuo, whilo aiound a thiid oxoct holding oiiods to iiso slightly.
Tho najoiity ol PE doals continuos to involvo ninoiity stakos, iollocting tho nascont stago ol India's iivato oquity
naikot. Howovoi, oui last iooit iodictod that this would giadually chango, and wo aio sooing this loino out. Tho
oicontago ol doals acquiiing ninoiity stakos has diood lion % in zo to 8o% in zoz (cc 1/,c :.
Oui suivoy shows that PE iactitionois aio likoly to incioaso tho nunloi ol instancos in which thoy acquiio a
contiolling stako, indicating a chango in tho iolationshi lotwoon invostois and ontioionouis.
Tho iooition ol lato-stago doals also continuod to doclino, lion aiound o% in zoo to zoo to % in zoz, and
tho tiond is oxoctod to continuo. Tho choinoss ol tho caital naikots had a knock-on olloct on iivato oquity,
causing a lig dio in io-IPO doals and naking sovoial ontioionouis chooso to doloi thoii IPOs.
Tho nunloi ol luyouts docioasod, lion z tiansactions in zo to tiansactions in zoz (cc 1/,c :c.
Howovoi, noio than oo% ol suivoy iosondonts loliovo that luyouts will nost likoly soo an incioaso in zo, citing
changing attitudos ol ionotois and tho slowoi iato ol giowth in tho oconony as lactois loi this giowth. Oui
intoiviows suggost that nany stakoholdois loliovo nost Indian luyouts so lai havo not loon gonuino, as ionotois
1/,c : Currenl voluollons ore roled os hlgh by mosl, however, o decllne ln voluollons ls nol
Approximolely 75% ol GPs lerm currenl voluolions os high GPs ore divided on lulure lrends ol voluolion
Whot s your opprosol oI the voluoton oI
potentol torgets n ndo?
How do you see the voluoton oI
potentol torgets n ndo trendng?
ol responses ol responses
0
20
40
0
80
100
Voluollon
Allrocllve
Folr
Hlgh
Very hlgh
0
20
40
0
80
100
Voluollon lrend
Decllnlng
Sloylng sleody
lncreoslng
expecled by mony
Poge 1Z
1/,c :c
Mole: Reol eslole deols excluded ln lhe obove onolysls
5hore ol eorly-sloge deols hos olmosl
doubled lrom 20JJ lo 20J2
8uyoul ond secondories will increose
Whot types oI nvestments hos your Irm mode n the lost 2 yeors?
How do you epect ths to chonge n the net 2 yeors?
lype ol lnveslmenl Mumber ol VC, PE deols ln lndlo
2008 200P 2010 2011 2012
Eorlysloge deols hove become more populor, buyouls ond secondorles wlll lncreose
ln lhe lulure
0
20
40
0
80
100
Lole
sloge
Growlh
sloge
Eorly
sloge
Buyoul
PlPE
Clhers
Secondorles
Buyoul
PlPE
PrelPC
Growlh
copllol
Seed lundlng
0
20
40
0
80
100
1/,c : Mosl deols conllnue lo be lor mlnorlly slokes, however, mo|orlly slokes ore predlcled lo
Moles: lncludes only lhose deols where sloke slze ls known, reol eslole deols excluded ln lhe obove onolysls
More lhon 80% ol deols ore minorily sloke,
bul mojorily slokes increosed in 20J2
Ihough minorily slokes will conlinue lo
dominole, mojorily slokes will goin shore
How much stoke do you hove or ntend to
hove n your portIolo compones?
ol respondenls Mumber ol lnveslmenls by sloge
0
20
40
0
80
100
2008 200P 2010 2011 2012
20
<2
>Z
0Z
0
20
40
0
80
100
Losl 2 yeors
>0
20
102
<10
Mexl 2 yeors
become more populor
Poge 18
havo continuod to iun tho lusinossos altoi handing ovoi contiolling stakos. Howovoi, this tiond is loginning to
chango. Laigoi liins aio loading tho way, with lanilios such as tho Singhs ol Ranlaxy agiooing to iolinquish contiol
and livo oll nonoy in tho lank, and GPs loliovo this tiond will tiicklo down to snalloi lusinossos, ovontually.
Socondaiios aio also slatod to incioaso. In tho oaily days ol India's iivato oquity scono, socondaiy luyouts occuiiod
whon lunds woio unallo to noot tho ioquisito doal sizo without luying out tho oldoi lund's stako.
This is no longoi tho caso, instoad iivato oquity layois aio taking tho initiativo. Indood, Goldnan Sachs has iaisod
a S lillion lund (Vintago Fund VI, locusing oxclusivoly on tho socondaiy naikot. In oui suivoy, sono GPs
conliinod that thoy havo loon aioachod ly othoi lunds to luy out thoii oitlolio liins, whilo othois statod that
thoy havo lookod at tho oitlolios ol othoi lunds and oxloiod a socondaiy uichaso. And in thoii oinion,
socondaiy giowth is likoly to lo loostod ly tho lack ol IPOs and iinaiy oxits.
Finally, tho nunloi ol doals channoling iivato invostnont in ullic oquity (PIPE loll, lion ; doals in zo to o;
doals in zoz. Nonotholoss sono z% ol total lunds invostod woio thiough PIPE doals, ono ol tho highost
oicontagos in tho iocont histoiy ol Indian PE. Oui convoisations with iactitionois suggost that PIPEs in India aio
hoio to stay, as sovoial attiactivo assots aio unallo to lind tho liquidity thoy nood thiough ullic channols.
2013 cnd beyend
Exoctations loi doal activity in zo ionain cautious lut still ositivo. Ol thoso wo intoiviowod, q% oxoct to soo
nodoiato giowth thioughout tho industiy in tho noxt yoai (cc 1/,c :. Tho stos takon towaids inioving
India's logislativo lianowoik havo had a ositivo olloct on iodictions, and GPs loliovo noio doals will lo closod in
1/,c : Respondenls esllmole lhol venlure copllol ond prlvole eqully wlll grow moderolely ln 2013,
VCJPE likely lo grow moderolely in 20J3 PE lunds ore plonning lo increose inveslmenls in lndio
How quckly do you epect the ndon VC/PE ndustry to grow?
How much does your Irm plon to nvest
onnuolly n ndo?
os lunds plon lo lncreose lnveslmenls ln lndlo
ol respondenls ol respondenls
2012 2013 Mexl 13 yeors
0
20
40
0
80
100
0
20
40
0
80
100
Moderole
growlh
[102|
Sleody
growlh
Megollve
Hlgh growlh
[20|
2012
[os per losl
yeors survey|
2013 Mexl 13 yeors
$0M
$200M
$200M
$00M
<$0M
Poge 1P
zo. Piodictions loi tho nodiun toin aio sinilai to thoso nado loi zoz, accoiding to oui suivoy, with oo% ol
iosondonts lolioving tho industiy will witnoss nodoiato giowth. Howovoi, lowoi iosondonts oxoct high-giowth
liguios (o% to z%.
Whon askod alout thoii own intontions loi invosting in zo, only % ol thoso wo soko to lan to invost lotwoon
So nillion and Szoo nillion, whoioas loi tho nodiun toin (ol thioo to livo yoais, this oicontago loas to %.
Noaily hall ol tho iosondonts (q% aio looking to invost loss than So nillion in zou lion % in zoz.
Wo iodict that giowth will continuo in hoalthcaio and consunoi ioducts. Hoalthcaio, as wo notod oailioi, is a
iocossion-iool liold, with giowth iodictod at noio than % as inliastiuctuio and insuianco onotiation iatos
iniovo. Consunoi ioducts havo shown sono iosilionco in tioullod ocononic tinos, and thoio's a distinct
incioaso in invostnonts in lood and lovoiagos ovoi tho last two to loui yoais. Wo loliovo also that oducation will
continuo its uwaid tiajoctoiy and attiact incioasing lovols ol invostnont. Howovoi, tolocon and ioal ostato aio
likoly to ionain low on invostois' list ol iioiitios (cc 1/,c ::.
Ono coitainty is that tho Indian naikot will continuo to lo hoavily intoinodiatod, and lund notwoiks and lanks aio
likoly to lay a signilicant iolo in doal souicing (cc 1/,c ::. Having said this, nost PE iactitionois wo
soko to agiood that thoy will woik haidoi to souico doals. This ontails ostallishing a closo and coidial iolationshi
with ontioionouis and ongaging with thon as oaily as ossillosonotinos ovon loloio tho ionotoi staits
thinking alout iaising VC oi PE caital.
Oui suivoy iovoals that ontioionouis aio incioasingly looking at valuation, lollowod ly liand and soctoi
oxoiionco, whon choosing a aitnoi loi PE lunding (cc 1/,c :4. As Indian ontioionouis giow savvioi,
thoio is incioasing iossuio on PE lunds to dovolo soctoi oxoitiso. Nonotholoss, LPs iocogniso that tho Indian
naikot is still not doo onough loi socialisation in all soctois.
1/,c :: Bolh consumer ond reloll ond heollhcore seclors ore expecled lo drow lhe mosl lnleresl
Which seclors ore expecled lo ollrocl inleresl lor PEJVC inveslmenls in lndio in lhe nexl 2 yeors?
o .oo| o| ! !o ., v| .=v, jo!o!, !=|o.! jo!o!
0
1
2
3
4
Consumer
& reloll
Heollhcore BFSl ll,llES
[excludlng ecom|
Monuloclurlng Medlo &
enlerlolnmenl
lnlro Ecommerce Reol eslole lelecom
Seclor lmporlonce bosed on survey responses
Mexl 2
yeors
Poge 20
Thoso wo intoiviowod woio awaio that a lund locusing on nicho soctois would lind it dillicult to naintain a iolust
iolino. Tho onus is thoioloio on PE iactitionois to cono u with innovativo ways ol dilloiontiating thonsolvos
to ontioionouis.
In tho lutuio, lunds oxoct to sond an incioasing anount ol tino on tho doal closuio iocoss. Invostois iooitod
that aiound o% ol doals took lotwoon thioo and six nonths to closo and anothoi o% took noio than six nonths.
This is ovidonco ol an incioasing locus on connoicial diligonco acioss nultilo aianotois.
Howovoi, naikot oinion is dividod on tho lovol ol conotition that is likoly in tho coning yoai. Aiound a thiid ol
suivoy iosondonts loliovo that tho oxisting conotitivo intonsity will continuo, citing tho cuiiont caital ovoihang
and lack ol conolling doals. Alout qo% suggostod that zo will actually soo a docioaso in conotition, stating
that sovoial GPs no longoi havo caital to invost and aio unlikoly to lo allo to iaiso noio. As tho doals lion tho zoo;
to zoo8 loon oiiod cono closoi to oxit oints, tho nunloi ol lunds in tho Indian naikot will alnost coitainly
shiink. Conotition lion caital and dolt naikots is also likoly to altoi tho scono, as cuiiont naikot conditions
staliliso. Tho lack ol quality and ioiiotaiy doals loads us to loliovo that conotitivo intonsity will continuo at its
zoz lovol thioughout zo.
Finally, oui suivoy inloins us that tho linancing otions usod ly lunds aio unlikoly to chango ly nuch, as stiaight
oquity and convoitillo instiunonts continuo to account loi ovoi o% ol lunding. Convoitillos nay incioaso thoii
shaio slightly, and wo also loliovo that nozzanino loans will aoai noio lioquontly as a linancing otion in tho
noxt two yoais.
1/,c :: Fund nelworks ond bonks conllnue lo be deol sources, deol closlng durollon ls sel
Mole: Bonks lncludes boullque, your llrm lncludes MD, odvlsers, porllollo componles, elc.
Funds will conlinue lo depend on lheir
nelworks ond bonks lor deol llow
Deol closing durolion will increose
os lunds become more coulious
Whot ore the sources oI deols?
How do you epect ths to chonge?
Whot hos been the typcol duroton (Irom deol orgnoton to closure)
Ior your Iund? How do you epect ths to chonge n the net 2 yeors?
Source ol deols Closlng durollon
lo lncreose
0
20
40
0
80
100
Your llrm
Bonks
Accounllng llrms
LPs
Clhers
0
20
40
0
80
100
<3 monlhs
3 monlhs
12 monlhs
>1 yeor
Poge 21
PerI|e|e mcncgemenI
edcy's bcse|ne: An ncrecsng|y ccIve re|e |rem nvesIers
Tho iolo that invostois lay shows tho dilloionco lotwoon India's iivato oquity scono and thoso ol noio dovolood
naikots. In India, PE invostois can lo soon laying an advisoiy iolo, nonitoiing thoii invostnonts oiiodically
thiough channols such as loaid aiticiation, nanagonont inloination systons and iogulai udatos lion sonioi
nanagonont. Boyond this, thoii aiticiation is on a noods" lasis and is gonoially initiatod ly tho ionotoi. Tho
PE invostois wo soko with loliovo thoy add valuo to thoii oitlolio conanios ly naking iniovononts in tho
conany's coioiato govoinanco, vision and stiatogy, and linancial docision naking (cc 1/,c :. Until
iocontly, this has loon at odds with tho suoit ontioionouis havo lookod loi lion thoii PE invostois, which was
iostiictod iinaiily to gaining custonoi accoss and sooking guidanco on donostic and intoinational oxansion
lans. Howovoi this nisnatch in oxoctations is staiting to chango, with loth sidos having a lottoi undoistanding
ol tho othoi's oint ol viow.
Whilo invostois loliovo that ontioionouis aio changing thoii attitudos towaids iivato oquity suoit, thoio is
nonotholoss a continuod nisnatch in tho suoit olloiod ly PE and tho suoit that is accotod. Tho invostois wo
soko with loliovo thoio is a ga to liidgo in such aioas as oxocutivo coaching, ooiational iniovononts and oo-
day lluoiints.
1/,c :4
GPs ore divided on compelilive
inlensily
Voluolion is mosl imporlonl lo enlrepreneurs
voluollons ond brond
How hos compettve ntensty Ior
deols n 20T2 chonged Irom 20TT?
Whot ore the key crtero Ior on entrepreneur whle seekng PE Iundng?
Whot s the mportonce oscrbed to these Ioctors by entrepreneurs?
ol respondenls
0
1
2
3
4
0
20
40
0
80
100
Score bosed on survey responses
Cr o :coIe ol 1 |o , where =very impor|or|, 1=Ieo:| impor|or|
GPs ore dlvlded on compellllve lnlenslly, enlrepreneurs conllnue lo look lor molchlng
Compellllon
lnlenslly
lncreosed
lnlenslly
decreosed
Mo slgnlllconl
chonge
Voluollon Brond Seclor
experllse ond
experlence
Relerrols
lrom
olhers
Melwork
ol lund
lrock record
[posl
lnveslmenls|
Poge 22
Thoio's no doult that tho iolo ol tho PE invostoi is ovolving. Funds aio coning to ioaliso that thoy havo insulliciont
landwidth to nanago thoii oitlolio conanios whilo continuing to souico and conduct duo diligonco on now
doals. Ovoi tho ast yoai, wo'vo soon noio and noio lunds luilding ooiating toans as tho ioalisation hits that
achioving giowth and iolit in thoii oitlolio conanios is not oasy. Thoso ooiating toans aio also noodod to
handlo tho iaidly giowing unoxitod oitlolio that nost PE and VC liins aio lacing.
In addition, ionotois aio oxocting invostois to add valuo, iathoi than just injoct cash, and aio noio oon to
invostois taking an activo iolo in tho conany. In oui suivoy, anong tho lunds that cuiiontly don't havo an ooiating
toan, sono o% considoiod utting ono togothoi, and ol this giou, noaily hall lolt it was an innodiato iioiity.
2013 cnd beyend
Pionotois' undoistanding ol iivato oquity's valuo ioosition is likoly to iniovo in tho noxt yoai, accoiding to
oui suivoy iosondonts. An ovoiwholning o8% agiood that Indian ontioionouis and ionotois will locono
noio convoisant with PE's advantagos ovoi tho noxt two yoais (cc 1/,c ::.
Whon soaking with ontioionouis alout oitlolio nanagonont, wo lound that nany would liko to soo noio
claiity on lost iactico loi how lunds ongago with thoii invostnont conanios. Thoio aio ositivo signs ol a novo
towaids this claiity:
1/,c : Promolers need PE lunds lo help wllh corporole governonce, slroleglc vlslon ond
Pleose role how lmporlonl ls ll lo help porllollo componles ln lhe lollowlng oreos: (Cr o :coIe ol 1 |o , where =very impor|or|, 1=Ieo:| impor|or|)
Pleose role lhe openness ol lndlon promolers ln seeklng ond occepllng help: (Cr o :coIe ol 1 |o , where =very oper, 1=Ieo:| oper)
lmporlonce lo porllollo compony Cpenness ol promolers
Areos where promolers
seek help oclively
0
1
2
3
4
Corporole
governonce
Vlslon ond
slrolegy
Flnonclng
declslons or
occess
Execullve
coochlng, lolenl
ocqulslllon ond
hlrlng declslons
Cperollons
lmprovemenl
100doy
[poslclose| plons
M&A ond
lnlernollonol
exponslon
Cuslomer
occess
llnonclol declslons
Poge 23
Piivato oquity lunds aio incioasingly using diligonco lindings and iooits to shaio thoii valuo-cioation
lluoiint with nanagonont. Indood, diligonco iooits aio incioasingly usod as stiatogic docunonts and at
tinos ovon as tho lasis loi a oo-day lluoiint".
Funds aio taking incioasing caio to align thoii oxoctations loi valuo addition with thoso ol nanagonont. Tho
lost oxanlos ol this aio lunds that aio outlining tho aioas in which thoy oxoct to onhanco valuo (coioiato
govoinnont oi stiatogy, loi oxanlo and giving cloai oxanlos ol how thoy havo addod valuo with ast
invostnonts. In iotuin, thoy aio donanding that tho nanagois ol thoii invostnont conanios lo u liont alout
thoii oxoctations lion lundois.
Funds aio incioasingly sooing tho nood to dononstiato innodiato inact, loi oxanlo, ly shaiing custonoi
contacts. In this way, thoy luild tiust lion tho stait and conlidonco, on loth sidos, alout tho outcono ol tho
lunding iolationshi.
ExIs
edcy's bcse|ne: An upwcrd Irend
Tho yoai zoz has witnossod a signilicant incioaso in tho nunloi ol oxits. Altoi nany yoais ol low oxit iatos
conaiod with now doals, tho nunloi ol oxits iosolion 88 oxits in zo to oxits in zozwith a total valuo ol
So.8 lillion, u lion Sq. lillion in zo (cc 1/,c :.
1/,c :: GPs ore hopelul lhol promolers wlll goln o beller underslondlng ol PE's lundlng proposlllon
GPs view promolers' underslonding ol PE os loir
68% ol GPs expecl promolers lo underslond
PE lunding beller over lhe nexl 2 yeors
How well do ndon promoters
understond PE Iundng proposton?
Do you thnk ndon promoters' understondng oI PE Iundng proposton
vs--vs other sources oI Iundng s lkely to evolve over net 2 yeors?
ol responses ol responses
nderslondlng PE proposlllon
Exlremely
good
Low
Averoge
Good
Mexl 2 yeors
Yes
Mo slgnlllconl
chonge
Mo
0
20
40
0
80
100
0
20
40
0
80
100
Poge 24
Tho nost oulai oxit iouto loi loth vontuio caital and iivato oquity invostnonts in India continuos to lo
thiough ullic naikot salos, including IPOs (cc 1/,c :. Whilo tho iooition ol doals oxiting thiough
ullic naikots ionainod tho sano at alout qo%, tho oicontago ol tho total oxit valuo alnost doullod, lion z% in
zo to q8% in zoz. A signilicant chunk ol this IPO oxit valuo was tho S;o nillion oxit lion Bhaiti-Inliatol ly
Goldnan Sachs, Tonasok and Macquaiio.
Pait ol this incioaso nay lo attiilutod to tho lact that nany IPOs ol PE-lackod conanios duo to occui in zo woio
doloiiod and showod u in zoz liguios. In addition to tho ullic naikots, ionotoi luylacks and socondaiy salos
woio also oulai oxit ioutos. Togothoi, socondaiy and luylack doals accountod loi % ol oxit voluno, and zoz's
laigost oxit, Gonoial Atlantic and Oak Hill Caital's S lillion oxit lion Gonact, was via a socondaiy salo.
Ono laco whoio oxits llossonod in zoz was tho linancial soivicos soctoi. Financial soivicos invostnonts iooitod
a livolold incioaso in oxits, lion So. lillion in zo to Sz. lillion in zoz, with a nunloi ol high-iolilo oxits.
Cailylo's S. lillion oxit lion HDFC lod tho way, lollowod at a distanco ly Wailuig's Sqoo nillion oxit lion Kotak
and Tonasok's Sz nillion oxit lion ICICI (cc 1/,c :. Many ol thoso loading oxits woio a aitial oll-
loading ol stako acquiiod lotwoon zoo and zoo; thiough shaio salos, as conanios novod to cash in on tho
iosuigonco ol tho Indian stock naikot in oaily zoz.
1/,c : Exlls lncreosed by oboul 30 ln 2012
Moles: Clhers" lncludes consumer producls, holels ond resorls, reloll, shlpplng ond loglsllcs, lexllles, educollon ond olher servlces, llES ls lnlormollon lechnology enobled servlces,
BFSl ls bonklng, llnonclol servlces ond lnsuronce
Source: Boln PE exlls dolobose
VC,PE exlls ln lndlo
Mumber
ol exlls
0
2
4
$8B
200Z
3.0
2008
4.4
200P
2.1
2010
.
2011
4.1
2012
.8
81 42 8 123 88 11
BFSl
ll & llES
lelecom
Reol eslole
Heollhcore
Monuloclurlng
Shlpplng & loglsllcs
Conslrucllon,reloll
Englneerlng & consl.
Energy
Medlo & enlerlolnmenl
Clhers
Poge 2
2013 cnd beyend
Whilo oxits nay lo on tho iiso, a signilicant iooition ol tho lunds invostod lotwoon zoo and zoo; aio still loing
hold. As wo ontoi zo, India has iotuinod So lillion ol tho aioxinatoly S8 lillion total caital invostod sinco
zooo (cc 1/,c :. By conaiison, China has iotuinod S; lillion out ol tho So lillion invostod sinco
zooz, a signilicantly highoi iooition.
Tho vast najoiity ol liins wo soko with loliovo that oxits will incioaso in zo, with a lilth oxocting this incioaso
to lo ovoi z% (cc 1/,c ::c. Taking a slightly longoi oisoctivo, noio than qo% ol iosondonts oxoct oxit
volunos to iiso signilicantly in tho noxt thioo yoais, looking to hoalthy signs such as tho incioasing nunloi ol
socondaiy tiansactions.
Howovoi, such oinions aio lasod on oxoctations that caital naikots will lounco lack, which would incioaso
invostoi aotito loi PE-lackod IPOs. In zo, socondaiy and stiatogic salos will continuo to lo tho iodoninant
nodos ol oxit. But looking luithoi ahoad, tho industiy oxocts IPOs to cono to ioninonco in tho noxt two yoais.
Tho GPs wo soko to oxoct a thioolold iiso in tho nunloi ol IPO oxits lotwoon now and zoo.
Anid tho uncoitainty that wo soo at a glolal nacioocononic lovol, tho only coitainty ahoad is that caital naikots
will continuo to lluctuato. Tho iossuio on GPs to oxit will only giow in tho coning yoai. Tho GPs wo soko with
agiood that thoii iioiity is to got out ol doals, iathoi than wait loi tho oiloct valuation. Howovoi, this uts thon in
a dillicult situation. On tho ono hand, an incioasing oitlolio ol invostnonts that thoy aio unallo to oxit will
signilicantly woakon thoii osition with LPs, lut on tho othoi hand, accoting intoinal iatos ol iotuin (IRR lolow
what night lo considoiod an accotallo huidlo iato will nako it voiy dillicult to justily thoii invostnont hilosohy
loi tho noxt iound ol lund-iaising. How liins will jugglo thoso conoting concoins in zo ionains to lo soon.
1/,c : Prelerence lor slroleglc ond secondory soles lncreosed ln 2012
Mode ol PE exils (2007-20J2} Iop exils in 20J2
Mole: Cnly exlls wllh known lronsocllon volue ore shown here
Source: Boln PE exlls dolobose
Exll mode by PE llrms [number ol deols|
200Z 2008 200P 2010 2011 2012
0
20
40
0
80
100
S
l
r
o
l
e
g
l
c

s
o
l
e
S
e
c
o
n
d
o
r
y

s
o
l
e
P
u
b
l
l
c

m
o
r
k
e
l

s
o
l
e

[
l
n
c
l
.

l
P
C
s
|
B
u
y
b
o
c
k

lorgel Flrm exlllng
Volue
[$M|
Roule
Genpocl
Generol Allonllc,
Cok Hlll Copllol Porlners
1,100 Secondory
Houslng Developmenl
Flnonce Corp [HDFC|
Corlyle Aslo Porlners ll 841 Publlc morkel
Bhorll lnlrolel
Goldmon Sochs, lemosek,
Mocquorle, lndlo Eqully Porlners,
AlF Copllol, KKR,
lnveslmenl Corporollon ol Dubol
Z3
Publlc morkel
[lPC|
Declslon Resources Provldence Eqully 3 Slroleglc
Lodho Group Deulsche Bonk 1P Slroleglc
lClCl Bonk Kolok, lemosek Holdlngs 2PP Publlc morkel
HDFC Corlyle 2Z Publlc morkel
Kolok Mohlndro Bonk Vorburg Plncus 2P0 Publlc morkel
Kolok Mohlndro Bonk Vorburg Plncus 1Z0 Publlc morkel
Ponchshll Reolly lREC & Merrlll Lynch 141.8 Buybock
Poge 2
1/,c :lndlo hos relurned $30 bllllon ol lhe $8 bllllon lolol copllol lnvesled slnce 2000
Sources: Boln PE deols ond exlls dolobose
Exlls lnveslmenls
2004
0
10
1
$20B
0.
1.
3.Z
2.
2.0
Z.4
1.3
1Z.1
3.
14.1
2.1
4.
.1
P.3
4.1
14.8
.8
10.2
200 200 200Z 2008 200P 2010 2011 2012
lolol PE lnveslmenls ond exlls
0
30
0
$P0B
lolol
[2000presenl|
30.1
84.Z
Aboul $4 bllllon
ol copllol deployed
ln 008 wlll be
opproochlng exll
wllhln lhe
nexl 13 yeors
1/,c ::c Exlls lo lncreose slgnlllconlly, wllh lPCs golnlng os lhe lovoured mode ol exll
5igniliconl increose in exils expecled lPOs lo increose over 2 yeors
Do you epect the number oI VC/PE ets to
ncreose or decreose n the Iuture?
Whch modes oI et ore epected to be most
common n the Iuture?
ol responses ol respondenls [mulllple responses ollowed|
0
20
40
0
80
100
Decreose
Relollvely
sloble
lncreose
somewhol
[102|
lncreose
slgnlllconlly
[>2|
10
20
30
40
0
Secondory
soles
Slroleglc
soles
lPC Promoler
buybock
Poge 2Z
5ummcry cssessmenI
Whilo iivato oquity invostnonts nay havo soon an ovoiall doclino in zoz, tho hoalthcaio soctoi has onoigod as a
soctoi ol giowth. Tho invostnonts in hoalthcaio alnost tiilod ovoi tho ast yoai, iising lion So.qo lillion in zo
to aioxinatoly S. lillion in zoz. Tho nunloi ol doals also ioso ly o%, with qq doals nado acioss tho soctoi in
zoz. All in all, India's dynanic hoalthcaio soctoi ionisos to lo an aioa ol oxansion in zo, with high otontial
loi loth iivato oquity and vontuio caital invostnont.
Tho hoalthcaio soctoi is olton lioadly dolinod to includo dolivoiy contios]iovidoissuch as hositals and clinics,
diagnostics, hainacouticals, nodical dovicos, liotochnology, lilo-scionco conanios and insuianco liinsas woll
as sono hoalthcaio IT and lusinoss iocoss outsouicing (BPO conanios. Foi tho uiosos ol this iooit, wo dolino
hoalthcaio as thoso industiy sognonts iolovant to iivato oquity invostnont: dolivoiy]iovidois, hainacouticals,
diagnostics, liotochnology liins and clinical tiial iovidois. Wo also includo wollnoss-iolatod outlots. Whilo tho
hoalthcaio industiy includos insuianco liins, thoso aio not considoiod to lo within tho scoo ol tiaditional PE
hoalthcaio invostnonts. Likowiso, this iooit considois hoalthcaio IT and BPO as a ait ol tho IT industiy.
Hoalthcaio was tho thiid-laigost soctoi attiacting PE invostnonts last yoai, accounting loi z% ol tho total doal
valuo, with as nany as qo liins naking invostnonts. Many lunds, such as NEA, India Vontuio Paitnois and Aaiin
Caital, choso to nako noio than ono invostnont ovoi tho couiso ol tho yoai. Soquoia Vontuio Caital, Goldnan
Sachs and tho Halcyon Giou woio anong tho lunds that choso to lollow thoii zo invostnonts in hoalthcaio
with additional doals in zoz.
Closoi analysis iovoals that tho dolivoiy sognont has diivon tho lulk ol hoalthcaio invostnonts, accounting loi
oo% ol tho total lunds invostod. Not only has tho voluno ol doals loon high, lut sono doals havo loon ol signilicant
sizo, with S8o nillion invostod in Manial Hoalth Entoiiisos ly India Valuo Fund Advisoi (ovoi a oiiod ol loui
yoais and So nillion invostod ly Advont Intoinational in CARE Hositals.
Giowth in India's hoalthcaio soctoi has its ioots in a nunloi ol lactois, lion ovoi-iising donand to govoinnont
suoit. It is a viliant saco and ono that holds nany attiactions loi loth ionotois and invostois. In this soction
ol tho iooit, wo iovido oui oisoctivos on tho hoalthcaio soctoi, outlino tho ooitunitios it iosonts loi iivato
oquity invostois and idontily koy tionds in invostnont in this industiy.
Hec|Ihccre epperIunIes n |ndc
Tho hoalthcaio naikot in India is ostinatod to lo S;8 lillion and has loon giowing at %, on avoiago, lion zoo8
thiough zoz. That said, India is a highly undoionotiatod naikot. Tho Woildlank's zoo ostinatos iovoalod that
India's oi caita sonding on hoalthcaio was So, tiailing China's Szz, and in a lai dilloiont loaguo than in tho
Wost, whoio tho UK sonds S,oo and tho US sonds S8,qoo oi caita. India's iatio ol nino hosital lods oi
o,ooo oolo is a liaction ol thoso in tho Wost ( lods loi tho UK, o lods loi tho US and lags lohind thoso ol
lollow BRIC nations China and Biazil, with qz and zq lods, iosoctivoly (cc 1/,c 4.
In toins ol iolossional stall, India also has a long way to go. India has six hysicians oi o,ooo oolo, whoioas
China has q hysicians and tho UK has z;. India has o nuisos and nidwivos oi o,ooo oolo, conaiod with
China's q, Biazil's oq and tho US's 8 nuisos and nidwivos. This nassivo nood is inovitally diiving giowth, as
India's GDP continuos to iniovo.
^ ||vos||g | |ou|||cu|o
Poge 28
India Biand Equity Foundation suggosts that tho alioady high CAGR loi tho hoalthcaio soctoi is oxoctod to
accoloiato ly zo%, noaning that tho naikot will lo woith Sz8o lillion ly zozo.
Many lactois aio ioolling this iaid oxansion (cc 1/,c 4:. A low koy inlluoncos aio:
Growth in popuIation. India's oulation has incioasod ly .% oi yoai loi ovoi a docado now, and this tiond is
oxoctod to continuo. Tho oulation ovoi tho ago ol is oxoctod to giow ovon lastoi, at aiound z% oi annun.
Increasing incidence ol diseases. Lilostylo disoasos, such as dialotos and hoait disoaso, havo giown at
aioxinatoly % and %, iosoctivoly, in tho last thioo to livo yoais. Tho iovalonco ol thoso conditions shows
no signs ol doclino and is going to ush tho donand loi hoalthcaio highoi.
Increased allordabiIity. India's oi caita disosallo incono is oxoctod to incioaso ly alout .o tinos ly zo;
to aiound Sz,oo oi oison. Tho oicontago ol lanilios countod as high incono" is oxoctod to doullo ly
zoz, u lion zo% in zoo. Hoalthcaio will inovitally soo an incioaso in sonding as lanilios at tho lotton ol
tho yianid novo alovo tho ovoity lino.
Rise in insurance. Hoalth insuianco onotiation is oxoctod to incioaso to zo% ly zo;, u lion % in zoo.
This is still low lut will havo a ioal inact on loth attitudos and sonding whon it conos to hoalthcaio.
1/,c 4 lhe heollhcore lnduslry ls expecled lo grow 20 os lndlo lrles lo colch up wllh
Heollhcore morkel will grow 20%
lndio logs behind Chino ond 8rozil on
key heollhcore melrics
Sources: lndlo Brond Eqully Foundollon, Vorldbonk
lndlo heollhcore
olher developlng nollons
0
100
200
$300B
2008
1
200P
4
2010
2011
Z2
2012E
Z8
2020F
280
JJ%
20%
10
20
30
40
0
2
0
Z
100
12
30
33
P
24 24
2Z
14
18
101
4
10
14
P8
42
0 0
Beds Physlclons Murses
Beds ond doclors per
10,000 people
Murses ond mldwlves per
10,000 people
lndlo Chlno Brozll S K
Poge 2P
Government schemes. Schonos lackod ly contial and stato govoinnonts, such as Aaiogyasii in Andhia
Piadosh, aio naking hoalthcaio soivicos alloidallo to tho laigo soctoi ol Indian socioty lolow tho ovoity lino.
Aaiogyasii was launchod ly tho stato govoinnont in zoo; and iovidos insuianco covoiago woith
INR z,oo,ooo (~S q,ooo oi lanily. It iovidos toitiaiy caio, including qz soloctod nodical iocoduios, and
lioo lollow-u loi lanilios living lolow tho ovoity lino. What this also noans is that hositals aio allo to invost
in inliastiuctuio, nooding only to iocou naiginal costs with tho coitainty that tho lods thoy iovido in socialty
hositals will lo lillod.
Two sognonts aio ciitical to tho hoalthcaio saco in India: hainacouticals and dolivoiy. In zoo, dolivoiy soivicos
and hainacouticals coniisod noio than oo% ol tho So lillion naikot (cc 1/,c 4:.
Tho dolivoiy sognont is tho nost ionising sognont, cuiiontly witnossing high ooiating naigins. Thoso can
ioach 8% to zo% in national chains, whoio naigins aio oxoctod to giow in tho noxt yoai and ioach u to 8% to
o% in othoi sulscalo ontitios (cc 1/,c 44.
Ol tho noaily S. lillion invostod in hoalthcaio in zoz, a najoiity (So.; lillion havo loon lato-stago vontuios.
Howovoi, thoio has loon an incioaso in oaily-stago doals, which could iosont intoiosting ooitunitios whon
thoso lusinossos sook thoii noxt iound ol lunding.
Most doals in tho hoalthcaio soctoi aio cuiiontly ninoiity stakos, and this is oxoctod to continuo in tho yoai ahoad.
Aiound hall ol tho doals loll undoi tho So nillion naik, loth last yoai and in zo (cc 1/,c 4. But zoz has
soon a cloai iiso in scalo doals. Thoio woio loui doals valuod at Soo nillion oi noio, all in tho dolivoiy sulsoctoi:
1/,c 4: Populollon growlh ls sloble ol oround 1., lnsuronce penelrollon lo lncreose lo 20
lndion populolion lo conlinue growlh ol ~J.5% lnsuronce penelrolion expecled lo reoch ~20% by 20J7
Sources: lMF, PVC heollh lnsuronce reporl, 2011, Mocquorle Reseorch heollhcore lnduslry, 2011, Mollonol lnlormollcs Cenler, Euromonllor
lndlo heollhcore
wllh lncreose ln per copllo lncome
Heollh lnsuronce penelrollon Per copllo lncome
0.3
2.0
3.0
CAGk
(07-J2}
0.2
1.Z
3.P
CAGk
(J2-J7}
1. 1.4
0
00
1,000
1,00M
200Z
1,138
2012
1,228
201ZF
1,31
014
yeors
14
yeors
+yeors
0
10
1
20
0
1,000
2,000
$3,000
Penelrollon
20
1
1
Per copllo lncome
2,20
1,30
Z0
201ZF
2010
200
Poge 30
1/,c 44 Prolll pools ore shllllng ocross dlllerenl segmenls
lndlon heollhcore prolll pool [operollng prollls| Iolol prolil=~55 billion
Sources: Boln onolysls, compony onnuol reporls, onolysl reporls
20
10
0
10
20
30
APl DFM MMC
Blolech
Dlslrlbullon
ond reloll
Prlvole
nollonol
Clher prlvole Governmenl
Lobs
CRC
lmporls Domesllc
BPC,llES
lnsuronce
Domeslic
Phormo
DeliveryJhospilols Medicol
devices
~10
141
~20
2230
8
1820
810
13
120
20
810
814
~2
~1
1/,c 4: lhe lndlon heollhcore morkel ls opproxlmolely $ bllllon, wllh dellvery ond phormo
Moles: )n) dolo ls lrom FY10, revenues ol phormo [lndlon,MMCs| ls MAl unlll Aprll 2011, Abboll revenues lnclude Plromol ond Solvoy,
only domesllc revenues hove been consldered lor phormo, Rellgore SRL revenues double ol llrslholl revenues, volues ore bosed on $1=Rs 4, blolech lncludes blophormo,
blolnlormollcs, blolnduslry, bloogrlcullure, revenues ol blolech componles ore globol revenues, blolech lnduslry lncludes exporls
Sources: lBEF, lRDA, Frosl & Sulllvon, Flrslcoll, BMl lndlo Phormoceullcols ond Heollhcore Reporl 2011, Copllol lC heollhcore dellvery dolo, Euromonllor, Boln onolysls
moklng up more lhon 0 ol lhe revenue pool
lndlon heollhcore morkel ln 2010 [$B|
0
20
40
0
80
100
Dellvery
[hospllols, cllnlcs, doclors|
Phormo
lndlon
Phormo
MMCs
Blolech,
llle
sclences
ClC Medlcol
devlces
lmoglng dlognosllcs
Cllnlcol dlognosllc
lnsuronce
BPC
Iolol=565 billion
33.Z 10.4 3.0 4.0 3.1 3.4 1.0 2.0 2.3 2.0
Prlvole
Publlc
Sun Phormo
Clplo
Codllo Heollh
Lupln Lld
Dr Reddy's Loborolorles
Vockhordl
Clhers
Abboll
Ronboxy
[Dollchl|
GSK
Pllzer
Sonoll
Avenlls
Movorlls
lndlo
Clhers
Blocon
Ponoceo
Blolech
Serum
Clhers
)n)
GSK
Clplo
Clhers
lmporls
Domesllc
pro
ducllon
H
o
s
p
l
l
o
l
s
,

d
l
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o
s
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l
o
b
s
,

l
n
d
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p
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n
d
e
n
l
s
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Melropolls
Lol
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s
M
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medlclne
Poge 31
Manial Hoalth Entoiiisos, Quality Caio India, DM Hoalthcaio and Vasan Eyo Caio. Tho avoiago doal sizo in this
soctoi has incioasod lion So nillion to Sz8 nillion ovoi tho ast yoai. In dolivoiy, in aiticulai, tho avoiago doal
sizo has noio than doullod, lion S; nillion in zo to Sqo nillion in zoz. This is nainly duo to tho incioaso in
doals valuod at noio than So nillion, which havo tiilod lion two in zo to six in zoz.
Tuining to invostois, oui iosoaich shows that, ol tho z8 lunds activo in India in zoz, qo invostod in hoalthcaio. A
longoi viow shows that oo lunds invostod in hoalthcaio ovoi tho ast two yoais, and lion this giou, lunds
invostod in loth zo and zoz.
Givon tho iaid oxansion in tho hoalthcaio soctoi, it is not suiiising to noto that vontuio caital lunds havo
aiticiatod activoly in tho saco. Ovoi tho ast two yoais, GVFL invostod in Axio Biosolutions, and Rajasthan
Vontuio Caital nado doals with Fiontioi Lilolino (invosting aioxinatoly S nillion and Inaging Suoi
Consultant (invosting alout S. nillion. Moanwhilo, Soquoia invostod hoavily, with Szo nillion in Moolchand
Hoalthcaio, aioxinatoly S; nillion in Suluilan Diagnostics and alout S nillion in Glocal Hoalthcaio Systons.
Tho intoiost ol local GPs and glolal invostois in Indian hoalthcaio is not suiiising givon tho iocont succoss stoiios
ol valuo cioation in hoalthcaio. Paias Phaina is ono such oxanlo: Actis and Soquoia invostod So nillion in zooo
and oxitod in zoo via a stiatogic salo loi Sqoo nillion that yioldod an oightlold iotuin.
Hoalthcaio continuos to iosont a uniquo ooitunity loi iivato oquity and vontuio caital invostois loi tho
lollowing ioasons:
1/,c 4 Deols volued ol more lhon $0 mllllon hove golned shore ln 2012
>550M deols hove increosed lo 20% ol
lolol heollhcore deols
Iop J0 heollhcore deols in 20J2
200Z 200P 2010 2011 2012
Heollhcore deols by slze
Funds
lorgel compony
Deol slze
[$ M|
Seclor
lndlo Volue Fund
Advlsors
Monlpol Heollh
Enlerprlses
180 [over
4 yeors|
Provlder
Advenl lnlernollonol Cuollly Core lndlo 110 Provlder
Clympus Copllol DM Heollhcore 100 Provlder
GlC [Slngopore| Voson Eye Core 100 Provlder
Holcyon Group Speclolly Hospllol ZZ Provlder
Fldellly Growlh
Porlners
lrlvllron Heollhcore Z
Medlcol
devlces
lFC, MYLlM
[lndlo|
Super Rellgore
Loborolorles

Dlognos
llcs
Goldmon Sochs Mox lndlo 0 Provlder
ChrysCopllol lnlos Phormoceullcols Z Phormo
2008
0
20
0
100
40
80
32 32 2 2P 2P 44
100
200M
0
100M
2
0M
10
2M
<10M
Goldmon Sochs Movo Medlcol Cenlers 4 Provlder
Poge 32
Sound lundamentaIs lor growth. Tho hoalthcaio soctoi iosonts linitod iisk, as nost giowth diivois aio
nacioocononic and inloinod ly highly ioliallo data and tionds. It's ostinatod that India is zo to z yoais
lohind tho US in toins ol tho natuiity ol tho hoalthcaio soctoi, and thoio is giowing conlidonco that India will
lollow tho sano tiajoctoiy as tho US.
EstabIished track record ol vaIue creation. Ovoi tho last livo to sovon yoais, sovoial hoalthcaio lusinossos havo
shown attiactivo giowth and naigin oxansion iocoids.
Recession-prool nature. Givon tho cuiiont uncoitain ocononic clinato, it is not suiiising that PE and VC
invostois havo locusod thoii attontion on hoalthcaio, along with consunoi goods oi soivicos.
Government support. Acioss India, stato govoinnonts aio naking a connitnont to iniovo tho hoalth ol
citizons. Govoinnont suoit has also addiossod a koy issuo: tho cash tiansactions, which nado PE liins
unconloitallo. An iniovod olicy lianowoik and incioasod insuianco onotiation noan tho industiy is
sooing noio whito nonoy, with noatoi tiansactions and a noio suitallo onviionnont loi laigoi invostnonts.
New deIivery modeIs. Rosouico constiaints havo ushod innovations such as shoit stay contios and socialisod
dolivoiy contios thiough socialist hositals liko Vasan Eyo Caio oi Nohiolus, a ional caio unit. As conanios
olloiing thoso now ways ol dolivoiing hoalthcaio soivicos sook to staliliso and scalo u, thoii donand loi caital
is giowing.
VaIue addition ol VC and PE investors. Most hoalthcaio conanios aio iun ly nodical iolossionals oi a lanily
ol doctois, who aio connoicially oiiontod lut olton lack stiatogic vision oi a iolossional nanagonont
aioach. Such liins nay havo linitod lusinoss oxoiionco and aio olton looking loi skills and conotoncios
that can sulonont thoii tochnical knowlodgo: a win-win situation loi iivato oquity invostois.
Track record ol exits. Whilo tho nunloi ol oxits soon in tho hoalthcaio soctoi is in lino with tho ovoiall oxit iato
(q; out ol z88 invostnonts havo oxitod so lai, tho valuo ol thoso oxits is noio ositivo. Ol tho S lillion invostod
into hoalthcaio, Sz.8 lillion has loon iotuinod, an iniovonont on India's ovoiall tiack iocoid ol So lillion ol
iotuinod caital lion tho S8 lillion invostod.
Oui intoiviows with a low hoalthcaio ontioionouis suggost that thoy aio voiy cognizant ol tho valuo ol thoii
aitnoishis with PE and VC lunds. Sono ol tho koy aioas whoio thoy doiivod tho nost lonolit includo hol with
stiatogic lanning, dovoloing tho conany vision, guidanco on how to scalo u and ioaliso tho lull otontial ol
thoii cuiiont latloins, iniovonont in all-aiound oiloinanco thiough signilicant inuts in naikoting and
advoitising, and, linally, suoit loi tho acquisition and tiaining ol nanagonont talont.
All thoso lactois oint to tho inoitant iolo that loth vontuio caital and iivato oquity havo to lay in tho Indian
hoalthcaio soctoi. As tho hoalthcaio soctoi continuos its iaid giowth, wo aio likoly to soo an acconanying iiso in
tho lovols ol PE involvonont.
|nvesIng n hec|Ihccre: rends cnd |uIure euI|eek
Ovoi tino, invostnonts in tho hoalthcaio soctoi in India havo shown stoady giowth. Tho nunloi ol doals has
incioasod ly o% in tho last yoai. Tho total lunds invostod havo tiilod ovoi tho last thioo yoais, lion Sq nillion in
zoo to alnost S. lillion in zoz.
Within hoalthcaio, thoio has loon a novo away lion invostnont in hainacoutical conanios towaids tho
dolivoiy]iovidoi sulsoctoi.
Poge 33
Hoalthcaio invosting in India took oll with hainacouticals, as tho gonoiics ooitunity oonod u ossililitios
lion zoo to zooq and onwaids (cc 1/,c 4:. Howovoi, ly zoo8 this tiond had natuiod, oaking in zoo
whon hoalthcaio invostnonts nado u % ol tho total lunds invostod. Tho yoais zoo to zoo saw sono
invostnont in diagnostics, which has sinco sulsidod. Invostnonts in tho dolivoiy saco logan alout livo yoais ago,
lut it is only iocontly that this intoiost has ickod u.
Alout qo hoalthcaio conanios havo iocoivod invostnont ovoi tho ast livo yoais. Ol thoso, % to zo% havo
iaisod noio than ono iound ol caital, ointing to incioasing conlidonco in tho valuo-cioation otontial ol tho
soctoi. Tho ictuio is also ionising loi oxits. Ol tho S lillion invostod in hoalthcaio, Sz.8 lillion has loon
iotuinod, with an avoiago holding oiiod ol livo yoais loi tho to z doals. Tho liggost oxits in zoz woio Tiivition,
sold ly oPlanot Vontuios and Hoadland Caital, and Aich Phainalals and Sahyadii Hositals, loth sold ly ICICI
Vontuio (tho loinoi sold with IL&FS Invostnont Managois. Ol tho total oxits in zoz, which wo oxloiod in
soction , sovon woio in hoalthcaio. A laigo iooition ol thoso oxits (thioo out ol sovon woio in dolivoiy. Pullic
naikot salos, including IPOs, soon to lo tho nost oulai oxit ioutos, constituting qo% ol hoalthcaio oxits in tho
last thioo yoais. Dolivoiy soons to lo tho oasiost sognont to oxit, whilo wollnoss and nodical dovicos aio still
iolativoly now in vintago.
Hoalthcaio is an industiy cloaily sot to giow in India, and ono in which iivato oquity and vontuio caital can lay
an activo iolo. Entioionouis alioady valuo PE and VC lunds loi tho skills, oxoitiso and notwoik thoy liing to tho
tallo that othoi souicos ol caital aio unallo to iovido. Wo iodict that tho noxt low yoais will continuo to soo
nonontun loi doal activity iiso in this oxciting saco.
1/,c 4: Dellvery ond phormo occounl lor more lhon 0 ol deols
Mole: Clhers lncludes hospllol monogemenl, cllnlcol reseorch ond wellness
Delivery ond phormo moke up more lhon
50% ol heollhcore deols
Heollhcore hos seen successlul exils
0. 0.3 0. 0. 1.3
Heollhcore
deol volue [$B|
Mumber ol heollhcore deols by segmenl Heollhcore exlls
Provlder
Clhers
Phormo
Medlcol
devlces
Dlognosllcs
Blolechnology
Vellness
2004 200 200 200Z 2008 200P 2010 2011 2012
13
22
3P 3P
3Z
2Z
3
2P
44
0
0
40
30
20
10

0
$1,000M
Z0
00
20
113
~1,000
P2
2Z
Phormo
Dellvery,provlder
Dlognosllcs
Medlcol devlces
Clhers
200P 2010 2011 2012
Mumber
ol exlls
3 1Z 4 Z
Poge 34
On tho wholo, zoz was a challonging yoai. Nonotholoss, tho yoai saw nany ositivo signs, lion a wolcono
incioaso in oxits to iniovod iogulatoiy claiity. Poihas nost inoitant, it was a yoai in which loth ontioionouis
and invostois locano noio conloitallo with thoii iosoctivo iolos, a sign that India's iivato oquity naikot is
noving towaids natuiity.
Anong ontioionouis, wo'vo soon an incioaso in thoii willingnoss to ongago with iivato oquity invostois and
accot tho suoit that tiaditionally acconanios this tyo ol lunding. As PE loconos an accotod souico ol
caital, ontioionouis aio waking u to tho otontial ol hands-on suoit lion invostois.
Anong invostois, wo'vo soon a chango in attitudo. As thoii undoistanding ol tho naikot has dooonod, thoy havo
locono noio cautious alout whoio to invost. Funds aio also sooking to dilloiontiato thonsolvos in a naikot that's
still not laigo onough loi ioal socialisation, lut whoio conotition ovoi high-quality doals is giowing.
This iooit ollois lossons loi oach ol tho koy stakoholdois:
GeneraI partners. Fiist, GPs should woik on luilding stiong iolationshis with ontioionouis nuch oailioi in tho
doal cyclo. In lact, notwoiking and iolationshi nanagonont aio noio ciitical in India than in othoi naikots givon
tho cuiiont aucity ol quality doals. Socond, GPs should oxloio ooitunitios to invost with oxisting ionotois oi
to io-u oxisting invostnonts. This would iovido a natuial advantago lion tho stait and avoid unnocossaiy
conotition. Thiid, as wo'vo soon, it's ossontial to laco noio onhasis on holistic diligonco. Fouith, GPs should
tako caio to discuss thoii invostnont thosos and valuo-cioation lluoiint with tho ontioionoui thioughout tho
doal-naking iocoss. A caiolully ioaiod diligonco docunont can act as a dilloiontiatoi with tho ontioionoui,
dononstiating undoistanding ol tho lusinoss and lacilitating agioonont on koy oljoctivos.
Indian entrepreneurs. Ono inoitant oint loi India's lusinossos is to lo oon and tiansaiont lion tho stait. PE
should not just lo soon as a way to accoss cash, lut iathoi thought ol as activist caital, which liings vast oxoitiso,
notwoik and liscal discilino. Entioionouis should also tako caio to agioo on tho ooiating nodol with tho iivato
oquity lundto docido tho lattoi's lovol ol involvonont iight lion tho stait, and align with tho sonioi nanagonont
accoidingly. It is oqually inoitant to undoistand that invostois cono in with a sot oxit tino liano in nind, and it is
lost to align on tho oxit ioad na oaily in tho iolationshi.
Limited partners. Tho koy issuo loi lunds in India is ationco whon lacod with a giowing oitlolio. Thoy nay nood
to ioovaluato thoii oxit otions in sono casos and nako tough calls on tho IRRs that thoy'io looking loi. With tho
incioasing nunloi ol unoxitod invostnonts ovoi livo yoais old, LPs nood to lo oxtionoly icky alout tho GPs with
whon thoy woik, sciutinising thoii oxit and invostnont tiack iocoids. An inoitant losson hoio again is to cioato a
cloai oxit ioad na on all now invostnonts. This should lo an intogial ait ol tho diligonco iocoss.
PubIic poIicymakers. Looking to zo and loyond, thoio is nuch that can lo dono to stinulato iivato oquity
invostnont in India and ionoto ocononic giowth. India cuiiontly ioquiios oxtonsivo caital acioss nultilo
soctois: inliastiuctuio, tolocon and oducation, to nano just a low. Policynakois should ioaliso tho lonolit ol PE
lundinginvolvod and availallo caital with shaiod iisk. Thoy should also iocogniso tho valuo that iivato oquity
can liing to Indian ontioionouis in toins ol oxoitiso and guidanco.
' |up|cu|o|s
Poge 3
Piivato oquity lunding will only giow in India il tho olicy lianowoik is suoitivo. Policynakois nood to lo quick
and docisivo in cioating now logislation. Whon tho govoinnont hositatos, as with tho GAAR caso, conlidonco ovoi
India as a otontial invostnont dostination is inovitally alloctod.
Aait lion this, olicy nakois also nood to considoi ooning u othoi avonuos loi donostic liins to oltain
donostic lunding. Allowing insuianco liins to iovido caital, loi oxanlo, would liing India luithoi in lino with
glolal standaids and nako it oasioi loi now lusinoss to llouiish.
Tho yoai zoz nay not havo loon a loon yoai loi Indian iivato oquity, lut it was a yoai that showod signs ol hoo
loi tho lutuio. Thoio's no doult that iivato oquity invostnont will incioaso in tho coning yoais as India's nood loi
lloxillo caital continuos. Stakoholdois acioss tho industiy nood to woik togothoi with tiust, tiansaioncy and
notivation to cioato a hoalthy invostnont landscao.
Poge 3
Indian Piivato Equity and Vontuio Caital Association (IVCA is tho oldost, nost inlluontial and laigost nonloi-
lasod national oiganisation ol its kind. It ioiosonts vontuio caital (VC and iivato oquity (PE liins to ionoto
industiy in India. It sooks to cioato a noio lavouiallo onviionnont loi oquity invostnonts and ontioionouishi. It
is an inlluontial loiun, ioiosonting tho industiy to govoinnontal lodios and ullic authoiitios.
IVCA nonlois includo loading VC and PE liins, institutional invostois, lanks, coioiato advisois, accountants,
lawyois and othoi soivico iovidois to tho VC and PE industiy. Thoso liins iovido caital loi sood vontuios, oaily-
stago conanios, latoi-stago oxansion and giowth linanco loi nanagonont luyouts and luy-ins.
IVCA's uioso is to suoit tho oxanination and discussion ol nanagonont and invostnont issuos in PE and VC
in India. It ains to suoit ontioionouiial activity and innovation, as woll as tho dovolonont and naintonanco ol
a PE and VC industiy that iovidos oquity linanco. It hols ostallish high standaids ol othics, lusinoss conduct and
iolossional conotonco. IVCA also soivos as a owoilul latloin loi invostnont lunds to intoiact with ono othoi.
IVCA stinulatos tho ionotion, iosoaich and analysis ol PE and VC in India, and lacilitatos contact with olicy
nakois, iosoaich institutions, univoisitios, tiado associations and othoi iolovant oiganisations. IVCA collocts,
ciiculatos and dissoninatos connoicial statistics and inloination iolatod to tho VC industiy.
/|ou| ||uu| ||vu|o |u|, u|u \o||u|o Cup|u| /ssocu|o|
Poge 3Z
Bain & Conany, loundod in ; in Boston, is a loading lusinoss consulting liin with ollicos aiound tho woild. It
hols nanagonont toans and loaids nako tho lig docisions: on stiatogy, ooiations, noigois and acquisitions,
tochnology and oiganisation. Bain consultants havo woikod with ovoi q,ooo najoi liins acioss ovoiy soctoi
glolally including iivato oquity (PE.
Glolally, Bain is tho loading advisoi to tho vontuio caital (VC and iivato oquity industiy and its stakoholdois. Wo
aio not a PE liin and do not havo any shaiod ownoishi oi govoinanco with Bain Caital, givon that wo aio a
soaiato conany.
Bain & Conany naintains a glolal notwoik ol noio than qoo oxoiioncod iolossionals soiving PE clionts. In tho
ast docado, wo ostinato that Bain & Conany has advisod on o% ol all luyout tiansactions valuod at noio than
Soo nillion glolally. Oui woik with luyout lunds ioiosonts ;% ol glolal oquity caital. In India, wo havo a
loadoishi osition in PE consulting and havo ioviowod a najoiity ol tho laigo PE doals that havo cono to tho
naikotnoio than thioo tinos that ol oui noxt conotitoi.
Bain woiks acioss assot classos, including inliastiuctuio, ioal ostato, dolt and hodgo lunds. Wo also woik loi nany
ol tho nost ioninont linitod aitnois (LPs to PE liins, including sovoioign woalth lunds, onsion lunds,
linancial institutions, ondownonts and lanily invostnont ollicos.
Wo havo doo oxoiionco woiking in all iogions ol tho woild acioss all najoi soctoislion consunoi ioducts
and linancial soivicos to tochnology and industiial goods. Wo suoit oui clionts acioss a lioad iango ol oljoctivos:
DeaI generation: Wo hol PE lunds dovolo tho iight invostnont thosis and onhanco doal llow, ioliling industiios,
sciooning conanios and dovising a lan to aioach taigots.
Due diIigence: Wo hol lunds nako lottoi doal docisions ly oiloining diligonco, assossing oiloinanco
iniovonont ooitunitios and ioviding a ost-acquisition agonda.
Immediate post-acquisition: Wo suoit tho uisuit ol iaid iotuins ly dovoloing a stiatogic lluoiint loi tho
acquiiod conany, loading woikshos that align nanagonont with stiatogic iioiitios and diioct locusod initiativos.
Ongoing vaIue addition: Wo hol incioaso conany valuo ly suoiting lovoiagod olloits in iovonuo onhanconont
and cost ioduction and ly iolioshing stiatogy.
Exit: Wo hol onsuio lunds naxiniso iotuins ly idontilying tho otinal oxit stiatogy, ioaiing tho solling
docunonts and io-qualilying luyois.
Firm strategy and operations: Wo hol PE liins dovolo thoii own stiatogy loi continuod oxcollonco, locusing on
assot-class and googiahic divoisilication, soctoi socialisation, lund-iaising, oiganisational dosign and docision
naking, onlisting to talont and naxinising invostnont caalilitios.
LP and institutionaI investor strategy: Wo woik with PE LPs to dovolo lost-in-class PE iogiannos and with
institutional invostois to achiovo otinal oiloinanco ol thoii ovoiall invostnont oitlolio. Toics wo addioss
covoi assot-class allocation, govoinanco and iisk nanagonont, oiganisational dosign and docision naking, PE
oitlolio constiuction and lund nanagoi soloction. Wo also hol LPs oxand thoii aiticiation in PE, including
thiough co-invostnont and diioct invosting ooitunitios.
/|ou| |u| c Coupu|,s ||vu|o |u|, |us|oss
Poge 38
|u| c Coupu|, ||uu |v| ||u
New De|h O||ce
th Flooi, Building 8, Towoi A
DLF Cyloi City, Phaso II
Guigaon, Haiyana, zz ooz
India
Tol: + zq qq 8oo
Fax: + zq qq 8o
www.buin.ccn
Mumbc O||ce
th llooi, Tho Caital, B Wing
Plot No. C ;o, G Block
Bandia Kuila Conlox, Munlai qooo
India
Tol: + zz ooz8 ooo
Fax: + zz ooz8 o
www.buin.ccn
Poge 3P
|o, co||uc|s | |u|s C|o|u| ||vu|o |u|, p|uc|co
G|ebc|: Hugh MacAithui (nugn.nucurtnurQbuin.ccn
EMEA: Giahan Elton (grunun.c|tcnQbuin.ccn
Amerccs: Bill Halloian (bi||.nu||crunQbuin.ccn
AscPcc|c: Suvii Vaina (suvir.vurnuQbuin.ccn
|ndc: Sii Rajan (sri.rujunQbuin.ccn, Aian Shoth (urpun.snctnQbuin.ccn
Ploaso diioct quostions and connonts alout this iooit via onail to buin!ndiuPErcpcrtQbuin.ccn
Acknew|edgemenIs
This iooit was ioaiod ly Aian Shoth, a aitnoi who loads Bain's Piivato Equity Consulting iactico in
India, Sii Rajan, nanaging diioctoi ol Bain & Conany in India, and a toan lod ly Siiwatsan Kiishnan, a
nanagoi in Bain's Now Dolhi ollico.
Tho authois thank tho lollowing loi thoii suoit:
IVCA: Foi tho contiilution ol its oisoctivos and insights to tho iooit
Bain consuIting stall: Kaithik Bhaskaian, Siikunai Rananathan, Piitika Goyal
Bain GIobaI EditoriaI: Elaino Cunnings, Maggio Lochoi, Jitondia Pant
Bain India Inlormation Services: Nooiaj Sothi, Sidhaith Satathy, Shailaja Pathania
Bain India Design: Mukosh Kauia, Sunoot Choia
|o|os
Poge 40
Foi noio inloination, loaso visit www.bain.com
{/ac- 4////cu ,c c,//
8cn & Cempcny s Ihe mcncgemenI censu|Ing |rm IhcI Ihe wer|d's busness |ecders ceme Ie when
Ihey wcnI resu|Is.
Bain advisos clionts on stiatogy, ooiations, tochnology, oiganisation, iivato oquity and noigois and acquisitions. Wo dovolo
iactical, custonisod insights that clionts act on and tiansloi skills that nako chango stick. Foundod in ;, Bain has
q; olhcos in o countiios, and oui doo oxoitiso and cliont iostoi cioss ovoiy industiy and ocononic soctoi. Oui clionts
havo outoiloinod tho stock naikot q to .
W

WhcI seIs us cpcrI
Wo loliovo a consulting hin should lo noio than an advisoi. So wo ut ouisolvos in oui clionts' shoos, solling outconos,
not iojocts. Wo align oui incontivos with oui clionts' ly linking oui loos to thoii iosults and collaloiato to unlock tho lull
Q
otontial ol thoii lusinoss. Oui Rosults Dolivoiy iocoss luilds oui clionts' caalilitios, and oui Tiuo Noith valuos noan
wo do tho iight thing loi oui clionts, oolo and connunitiosalways.

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