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Current Scenario
Revival in deal activity in the country More than double the transactions in first five months as compared to same period last year
Jan May 10 No of deals Value of deals 439 USD 30 bn Jan May 09 179 USD 8 bn
Rebound linked to recovery of Indian and global economy Active sectors Telecom, Pharma, Cement, FMCG
M&A Deal Value - Volume 5 Month Trend 14 12 10 8 6 4 2 0 3 13 89 56 60 68 8 44 1 1 Mar-10 Value Apr-10 Volume May-10 100 80 60 40 20 0 Jan-10 Feb-10
Number of deals
Top 5 M&A Deals - 2010 Acquirer Bharti Airtel Abbott Labs Target % Stake USD mn Zain Africa 100% 10,700 Domestic 100% 3,720 Formulations Business of Piramal Healthcare Solutions KBL European 100% 1,863 Private Bankers Aircel's 17500 100% 1,787 telecom towers Zinc business of 100% 1,340 Anglo American Plc
Private Equity
Deal Summary - 2008, 2009 Deal Summary Total Private Equity Volume Value (USD bn) 2008 2009 2008 2009 312 260 10.59 12.05
Private Equity
Top 5 PE Deals - 2009
Private Equity
Deal Summary - Jan - May 2010 Deal Summary Total Private Equity Volume 2010 Value (USD bn) 2010 122 4.02
PE Deal Value - Volume 5 Month Trend 50 40 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
40 30 20 10 0 29
Jan-10
Feb-10
Mar-10 Value
Number of deals
1.37
Private Equity
Top 5 PE Sectors Sector Real Estate & Infrastructure Management Banking & Power & Energy Telecom Cement Volume USD mn % 14 20 4 1 2
Top 5 PE Deals Acquirer Investee % Stake Quadrangle Capital Tower Vision India NA Unnamed Investors GMR Infrastructure Ltd Unnamed Investors Yes Bank Temasek Holdings GMR Energy Ltd GNVF, IDBI, IFCI, Gujarat State etc Petroleum Co NA NA NA 5% USD mn 300 298 225 200 211
13 18 8 7 6
10
Positive Trends
Higher degree of homogeneity across markets due to globalization Marginal costs of set up in new markets Brand identity recognizable across markets Market dynamics favour fewer players economies of size and scale Recent examples Bharti Zain, GTL Tower deal
11
Positive Trends
Promoters recognise strengths and weaknesses and willing to adapt No stigma attached to alienation of stake in companies Ability to gauge time to encash vs carry on Recent examples Ranbaxy, Piramal, Wockhardt, Tata Docomo
12
Positive Trends
Reliable standards of accounting transition to IFRS Higher levels of transparency and corporate governance
Increase in number of players in the financial intermediary market Emergence of investor classes with different risk appetites
Angel investors, VC, PE, FIIs, Domestic cos, Foreign cos, Retail investors
13
Positive Trends
Clarity in tax provisions relating to slump sale Incorporation of M&A provisions in direct and indirect taxes
14
Roadblocks
Greater flexibility to be shown by Indian promoters Need for consolidation not fully recognized
Lack of clarity on stamp duty liability 80IA provisions not conducive to mergers and acquisitions
15
Roadblocks
Direct listing of Indian shares on foreign exchanges not allowed Indian companies not allowed to merge with foreign companies Foreigners individually not permitted to invest in Indian shares Restricts usage of Indian shares as currency for deals
Increasing protectionism
Governments keen on retaining national identity of iconic companies Increasing use of capital controls to regulate flow of foreign capital
16
Roadblocks
Appointed date of merger vs actual date of merger Purchase method of accounting valuation of intangibles and off balance sheet items and residuary goodwill
Marked departure from Indian GAAP no comparability pre and post IFRS
17
Wishlist
Few norms contribute to volatility and subjectivity in fin statements Accounting for FCCBs Lease Equalization vs Inflation Fair degree of subjectivity in fair valuation norms
18
Wishlist
Indian companies to be allowed to merge with foreign companies Capital controls to be lifted on the Indian rupee Listing on foreign exchanges to be allowed and vice versa Permit accounting and reporting in functional currency
19
Wishlist
Tax liability only on encashment - not on exchange or conversion Tax benefits to continue in case of mergers Clarity on treatment of depreciation post transaction Introduction of group relief Introduction of anti-abuse provisions like CFC and thin capitalization rules
20
Wishlist
Strengthen norms on independent directors and corp governance Suitable amendments in listing agreement Provisions to eliminate conflicts of interest in cases where management also holds majority shares
21
Thank You
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