2008-ICICI_Indian PE Opportunity

8/6/2019 2008-ICICI_Indian PE Opportunity

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Private & confidential

The Indian Private Equityopportunity

April 2008


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Private & confidential2

The Indian Private Equity opportunity

Second fastest growing major economy in the world, projected to grow at8% p.a. until 2020

Projected to be 2nd largest global economy by 2050

Favourable demographics, consistent policy decisions and domestic

consumption driven economy

Indias GrowthPotential

Developmentof Private

Equity in India

Private equity investment in India has increased 28x fold from 2003-2007

In 2007, US$14.2 billion of private equity transactions were completed

Increased diversification by both industry and types of investment

Overview ofICICI Group

One of Indias pre-eminent financial institutions

Relationships with a broad range of corporates across all sectors

One of the largest India-focused private equity funds


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Overview of ICICI Group


Development ofPrivate Equity

in India

Overview ofICICI Bank


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One of Indias pre-eminent financialinstitutions

ICICI Bank Ltd

1. As at 24-March-2008.2. As at 31-December-2007.

One of Indiaslargest PEfirms

AUM >US$2bn

Completed55+transactions

One of thelargestprivate sector

generalinsurer

iAAA rated byICRA

Indias no.1private lifeinsurer

AAA rated byFitch

One of thelargest assetmanagers

AUM ofUS$17.6 bn2

Leadingequitybroking

house

Leader infixed incomemarket

Largest private sector bank in India

$22 billion market cap

$94 billion of assets2

18 international locations

First Indian company listed on the NYSE

Listed in ForbesAsias 50 Fab Companies 2007

Completed Indias largest equity issuance of US$4.3billion

ICICI Ventures ICICI LombardICICI PRU Life

Insurance

ICICIPrudential

AMC

ICICISecurities


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Indias growth potential



in India



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Indian economy : some statistics

India is one of only 3 countries in the world to have built its own

supercomputer

11 out of every 12 diamonds in the world are polished in India

One of every 6 motorbikes in the world is manufactured in India

220 of the Fortune 500 companies source software from India India is one of only 6 countries in the world to have satellite launch

capabilities

One out of every 10 new mobile phone users in the world is an Indian

India has the largest film industry in the world

India has one of the largest television networks in the world, with over300 channels and 500 million TV viewers

50 percent of the worlds tea is produced in India

Source : Economic Survey, Ministry of Agriculture, Government of India, report byinvestment commission of India


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2nd largest economy in the world by2050

Indian GDP grew at an average of14.9% p.a. in US$ terms in the 3 years to 2006. (8.6% in real terms)2

Projected to grow at 8% p.a. in real terms until 20201

Indias GDP (US$ terms) expected to surpass that of the US by 20501

6069

059 5

,

, 0

,6 2

200 200 2005 2006 200 200 2009

India GDP (US$ billions)2

Actual Estimate / Forecast

CAGR: .9%

CAGR: . %

. Source: Goldman Sachs Research Indias Rising Growth Potential, Jan-200 .2. Source: Goldman Sachs Economic Research.


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Key growth drivers

Requirement of US$475 billion ofinfrastructure investments from 2007 to 2012

40% to be funded by private investors

Policy initiatives to attract investments in core infrastructure projects related to power,transportation, etc

InfrastructureInvestment1

LargePopulation

Large young population (46% between the age group of 20-40) driving consumption

Underleveraged economy with consumerLoan/GDP ratio at 8% as compared to 50%plus in developed markets

Indian consumer spending projected to grow from US$425 billion to USD$1.8 trillionby 2025

Real estate still an under owned asset class with mortgage/GDP ratio at approximately5% compared to 50% for developed countries

1. Source: Smith Barner Research,Goldman Sachs and planning commission2. Source: [FICCCI], Min of External Affairs., Mckinsey Report: The Bird of Gold-The Rise of Indias Consumer Market3. Source: Asia Pacific IT Services Market and Forecast, 200 -2011 report by Springboard Research4. Source : FICCI- E&Y study

Globalisation3

Sustainable competitive advantage in outsourcing - IT/ITES projected to grow at circa19% per annum until 2011

Knowledge driven businesses such as design activities and KPOmoving up the valuechain

Cross border M&A activities to give a more global outlook


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Beneficial backdrop for growth

Source: IMD would competitiveness report to 2005

Strong and proactive regulators

RBI/SEBI

India complies with BIS 26 norms of best

practices for supervisory criteria, country

risk and convertibility Gross NPAs lower than those of

comparable nations

The Regulatory Framework Liquid and deep financial markets

Integrated financial markets

Increasing stability and breadth of the

public markets

Advanced settlement systems

Pro Growth Policies

Liberal FDI policies across major sectors

Forex reserves can be used for

infrastructure projects

Mature political economy with

development as its core agenda

Government focus on reforms

The Banking RegulationAct to be

considered for amendments

Labor and legal reforms to be taken up

proactively

External sector reforms roadmap in line

with WTO agreements


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Key risks

General Elections: Populists measures may take its toll on fiscal discipline

Continuance of the structural and fiscal reforms agenda

Adequate attention to Infrastructure to support 8% GDP growth requirement to develop a vibrant debt market

Adequate investments in developing talent pool to meet the risingdemand

Policy

High Energy Prices: Oil imports constitute more than 40% of Indias totalimports

Stronger Currency: Adverse impact on exports

Global

Latest figure of 5.9% is above the 4.5%-5% target of the RBI

Monsoons: Agriculture economy is exposed to this annual risk factorInflation


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Development of Private Equity in

India



in India



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Growth of asset class

Number of deals increased 10 fold since 2003; value of deals increased 28 fold to US$14.2 billion

Total private equity investments expected to be $20 billion by 2010

Source: Venture Intelligence

Value and Number of Number of Deals

S bln

S bln

S bln

S blnS bln


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Top Private Equity destination in Asia

Annual Growth in Private Equity Investments (1 8-2007)

72

2

2

10

India Australia Z Greater hina outh Korea apan

Australia Z 2

ource: Thomson Financial, AV

, Venture Intelligence

From 1998 2007, India was the fastest growing private equity market inAsia

In 2007, India was the largest market for private equity investments in Asia (ex.Australia)


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Uptick in ticket size in sync withvaluation

Average Deal Size (2007) India Average Deal Size

$227m

$ 7m

$47m $37m

Malaysia Korea India hina (Incl

ong Kong)

$ m

$22m

$ m

$2 m

$47m

2003 2004 200 200 2007

Source: Thomson Financial, AV J, Venture Intelligence


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Increasing diversification acrossindustry

Proportion ofnon-

InformationTechnologydeals has risenfrom 19% in2003 to 76% in2007

Growth ininvestment intoManufacturing,FinancialServices andMedical andHealth

I.T. &

ITES5 %Financial

Svcs. 3%

Manufacturing

3%

Other

35%

Financial

Svcs.1.0%

I.T. &ITES24%

Financial Svcs. 13%

Manufacturing

1 %

Other

33.1%

I.T. & ITES7%

Financial

Svcs. 28%

Manufact.

12%

Other3 %

Medical &

Health 7%

Medical &

Health 3%

Source: Venture Intelligence.

Number ofDeals

2003 2007

I.T. &ITES31%

Manufacturing 0.1%

Other

8%Value ofDeals

Energy & Contr. 8%

Energy & Contr. 11%


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Growth Across Segments

Number ofDeals

Value ofDeals

2003 2007

Most significantinvestmentcurrently ingrowth /expansionsegments

PIPE dealsform a

significantportion

1. Includes infrastructure

Source: Venture Intelligence

Buy Out 5%

VC 47%

Growth/Expansion

37%

PIPE 11%Buy Out 2%

VC 24%

Growth/Expansion 51%

PIPE 1

%

Buy Out1 %

VC 28%

Growth/Expansion

1

%

PIPE3 %

Buy Out5%

VC 4%

Growth/Expansion48%

PIPE30%

Other 4%

Other 14%


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Evolving exit routes

1. Source : Venture Intelligence

1

IPOs IPOs IPOs

Other Other

Other

Transactionvalue of PE

exits

Number ofIPO exits

$ . bn $ . bn $1. bn

1 1 1

Largest ExitsBy Actis, CVCfrom Daksh e-

services

Warburg Pincusfrom Bharti Tele

CVC fromSuzlon energy


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Key differences to Western privateequity model

Limited use ofleverage

Most Indian banks unwilling to provide cash flow based financing

Ability to achieve attractive returns without gearing

Limited buy-out activity

Many companies are family owned

Shareholders reluctant to give up a control of their fast-growing

companies

Focus on making minority investments (10-20%) by providing growth/expansion capital

Typically provides private equity investors with board seats and veto /blocking rights

Significant PIPE activity in the Indian Private Equity market


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Current dilemma facing investors

Very rapid expansion in number

of India-focused funds

Risen from 8 in 1995, to

300+ in 2007

Current PE Market

Large number of first time funds

~15 India-dedicated private

equity funds with at least one

fund vintage

Evaluating managers without

track records

Gaining access to the best funds

Selecting funds from a broaduniverse

Rationale for Fund of Funds Product

Investor Dilemma


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DisclaimerThis document and the information contained herein are strictly confidential and are meant solely for the selected recipient to whom it has been specifical ly made

available. This document may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any

form, without prior written consent of ICICI Bank.

This document is given only by way of information and is subject to change without notice. The information provided herein is not an offer or sol icitation for any

application or subscription for any products or services and is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use

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REPRESENT THAT ICICI BANK PROVIDES ANY PRODUCTS O R SERVICES IN ANY JURISDICTION WHERE IT IS NOT LICENSED OR REGISTERED OR

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ICICI Bank or are not acting as your advisor or in a fiduciary capacity in respect of the contents of this document, and accepts no liability nor responsibility whatsoever

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verification and amendment and such information may change materially.

Any investment in any fund/securities etc referred or alluded to in this presentation should be solely on the basis of the fund's/ securities Offering Memorandum and the

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The above mentioned is not a complete l ist of the risks and disclosures and other important disclosures may be involved in avail ing of the products and services

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Thank You

Amit Ratanpal

email:[email protected]

Mobile: +91-9820039025

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