Asia’s News Source avcj.com November 26 2013 Volume 26 Number 45

Editor’s Viewpoint Positive signs as Indian private equity seeks to put the past behind it Page 3

News AD Capital, Baring Asia, DCM, Everstone, Exhilway, GIC, GGV, GREE Venture, HighPoint, ICG, JAFCO, KKR, Morningside, Nomura, Oaktree, Odyssey, Phillip Private Equity, Risa, Shunwei Page 4

Industry Q&A Milestone Capital’s Rubi Arya on why she stuck Unlocking with the business and where it’s going Private equity firms track ’s emerging control deal opportunities Page 7 Page 15

focus Focus

From field to shelf Unwilling investors? Updating India’s agricultural supply chain Page 10 LPs’ faith in Indian managers is still weak Page 13

Pre-conference issue AVCJ private equity and forum India 2013 Anything is possible if you work with the right partner

Unlocking liquidity for private equity investors www.collercapital.com London, New York, Hong Kong Editor’s Viewpoint [email protected]

Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Mirzaan Jamwal (852) 3411 4821 Light at the end Winnie Liu (852) 3411 4907 Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow

Senior Research Manager of the tunnel Helen Lee Research Manager Alfred Lam Research Associates Indian private equity has taking a depressed rupee rate is factored in. Herbert Yum, Isas Chu, beating in recent years. As the excesses of the GPs are also spending time focusing on Jason Chong, Kaho Mak industry’s overcrowded GP population catches returning capital to investors. A total of 82 exits Circulation Manager up with the realities of a sluggish economy valued at $4.2 billion have been recorded since Sally Yip Circulation Administrator and a weakening currency, it is no surprise that January, which means last year’s total of just Prudence Lau fundraising has been slower in the last few years. under $5 billion is within reach. Manager, Delegate Sales A lot of the troubled GPs, many whom Of course, we should note that there is a Pauline Chen probably shouldn’t have been in the PE business bit of double counting as quite a few of these Director, Business Development in the first place, find they are unable to attract transactions have an element of sponsor- Darryl Mag new capital commitments and many are now to-sponsor in them. Deals such as Hexaware Manager, Business Development consigned to a slow death. Consolidation is Technologies (ChrysCapital Partners to Baring Anil Nathani, Samuel Lau inevitable. Private Equity Asia) and Shriram Transport Sales Coordinator AVCJ Research figures confirm this. From Finance (TPG Capital to Temasek Holdings) Debbie Koo the highs in 2008, when 60 India-focused funds appear in both the investment and exit totals. Conference Managers raised in excess of $9.5 billion, the drop-off has The numbers seem to say what many local Jonathon Cohen, Sarah Doyle, Zachary Reff been relentless. So far this year, 19 new vehicles PE professionals having been telling the market: Conference Administrator have raised just over $1.7 billion. For those Indian private equity is in better shape than the Amelie Poon Conference Coordinator with the luxury of dry powder, it is a good time market gives it credit for. Fiona Keung, Jovial Chung to invest: they are fewer in number, face less As one GP put it to me, “India is a long and Publishing Director competition and should, in theory, secure assets bumpy road. It eventually gets there but it takes Allen Lee at good valuations. a lot longer than you expect.” So there will almost Managing Director This is especially true for US dollar- certainly be more bumps in the road, but with Jonathon Whiteley denominated funds that can take advantage of less competition and reasonable valuations, the the weaker rupee, assuming they are confident it current vintage should have the makings of a will remain stable. good one. It appears those still in the market are already taking advantage of the conditions. Almost $7.2 Incisive Media billion has been deployed across 353 transactions Allen Lee Unit 1401 Devon House, Taikoo Place over the first 11 months of 2013 – that’s in line Publishing Director 979 King’s Road, Quarry Bay, Hong Kong with recent years and probably more if the Asian Venture Capital Journal T. (852) 3411-4900 F. (852) 3411-4999 E. [email protected] India private equity fundraising, investment and exits URL. avcj.com Beijing Representative Office 12,000 No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, Chaoyang District, Beijing, 10,000 People’s Republic of China T. (86) 10 5869 6203 8,000 F. (86) 10 5869 6205 E. [email protected] 6,000

4,000 US$ million The Publisher reserves all rights herein. Reproduction in whole or in part is permitted only with the written consent of 2,000 AVCJ Group Limited. ISSN 1817-1648 Copyright © 2013 0 2008 2009 2010 2011 2012 2013YDT

Fundraising Investments Exits

Source: AVCJ Research

Number 45 | Volume 26 | November 26 2013 | avcj.com 3 News

Baring Asia backs Giant owns two office buildings in Beijing’s China AUSTRALASIA Central Place. A total of 439.5 million share units Interactive take-private will be made available under the offering, at Australia’s Ansell buys PE- Baring Private Equity Asia is supporting a HK$3.81-4.04 apiece. AD Capital is owned by the management of Chinese online game Development Bank of Japan and Asuka Asset backed glove maker developer Giant Interactive Group that values Management. US-based Odyssey Investment Partners has the New York Stock Exchange-listed company agreed to sell BarrierSafe Solutions International, at approximately $2.8 billion. If the deal goes Morningside, GGV, Shunwei a provider of disposable gloves, to Australia’s through it would be the second-largest PE- Ansell for approximately $615 million. The backed take-private of a US-listed Chinese invest in Kingsoft acquisition will be funded by a $300 million debt company after Focus Media. Kingsoft Office Software, an office suite that facility and the sale of new shares through a A consortium led by Baring Asia and Yuzhu competes with Microsoft Office, has received private placement of A$338 million ($308 million) Shi, Giant’s chairman, are offering to buy all $50 million in funding from Morningside and a share purchase plan of as much as A$100 Technologies, GGV Capital and Shunwei China million. Internet Fund. The office solutions provider, which recently opened its North American Tax office warns foreign headquarters in Palo Alto, will use the capital to expand its global partnerships with major investors on compliance original equipment manufacturers, software The Australian Taxation Office (ATO) has written developers and service. to 130 private equity firms offering to “assist with their compliance” as it scrutinizes the pipeline of CBC, Sichuan Changhong to upcoming IPOs to ensure foreign investors don’t avoid paying local tax. The ATO warned that if the launch $41m internet fund ATO concludes a particular investor is a capital China Broadband Capital Partners (CBC) and flight risk, and appropriate reassurances are not Sichuan Changhong Electric, a Chinese electric provided, it may take legal action to freeze assets. outstanding American Depository Shares for goods maker, plan to launch a RMB250 million $11.75 apiece in cash. This represents a 21% ($41 million) venture fund to invest in the cloud KKR’s Bis Industries premium to the volume-weighted average computing, big data, smart phone and internet price on Giant’s previous close. The consortium industries. The launch of the fund is a part of acquires Powertrans currently owns around 47.2% of Giant. The Changhong’s “smart home” business plan. The KKR-held Australian mining logistics company consortium plans to finance the acquisition with fund will mainly invest in companies that can Bis Industries will buy mining haulage systems a combination of debt and equity capital. improve Changhong’s supply chain systems. operator Powertrans for A$30 million ($27.46 Susquehanna Asia Investment previously million). The effective purchase price is A$20 committed $50 million to Giant in August 2007, China to modify IPO million, plus an additional A$10 million for ahead of the company’s IPO, which raised $886 inventory and work-in-production, which is million in October of the same year. Standard approvals system expected to be utilized within the operations Chartered Private Equity invested $25 million China will move towards a registration-based of Bis or otherwise monetized in the next 12 through the IPO. system for IPOs in place of the current approval- months. The transaction will be funded from Founded in 2004, Giant focuses on massively based system. This is intended to make it easier existing available debt facilities. multiplayer online role playing games and for companies, especially smaller ones, to raise currently operates 13 titles, including the ZT capital. Under the approval system, listing HighPoint Capital invests in Online 1 Series, ZT Online 2, Elsword and World applicants must meet certain CSRC-set revenue of Xianxia. and profit requirements. The approach has been Brand New Media criticized because state-owned enterprises are HighPoint Capital has acquired a significant often allowed to jump the queue. minority shareholding in Brand New Media Capital Management are two of 10 cornerstone (BNM), a Sydney-headquartered business that investors that will cover up to 44% of China Cinda DCM, Bertelsmann commit runs digital channels for brands and broadcasters. Asset Management Corp’s IPO. The company, Its partners include Seven West Media in originally set up to absorb non-performing $10m to China’s Ucloud Australia, New Zealand’s national broadcaster loans (NPLs) from China’s Big Four state-owned Ucloud, a Chinese cloud computing service TVNZ and the Singapore government. banks, is looking to raise as much as $2.46 billion provider, has received more than $10 million in through the Hong Kong offering. Series A funding from DCM and Bertelsmann GREATER CHINA Asia Investments. The new capital will be used for AD Capital-owned Spring product innovation, marketing and purchasing REIT to raise $229m in IPO hardware, according to the company’s founder Norway fund, Oaktree and CEO Xinhua Ji. Founded in 2011, Ucloud Spring REIT, a real estate investment trust owned targets online gaming and e-commerce Cinda IPO anchors by AD Capital, is looking to raise up to $229 operators, offering services such as cloud storage Norway’s and Oaktree million through a Hong Kong IPO. The REIT and data analytics.

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NORTH ASIA Japanese pension funds Virgin forms India JV with must diversify - panel Cinema Capital Venture Japanese government Japan’s public pension funds - which collectively Richard Branson’s Virgin Produced media manage more than JPY200 trillion ($2 trillion) in production company has entered into a launches ‘Cool Japan Fund’ assets - should diversify into alternative assets, partnership with Mumbai-based Cinema Capital The Japanese government has launched a “Cool including private equity, and have greater Venture Fund and Tantrik Group, a media and Japan Fund” which will invest up to JPY90 billion independence to do so. The recommendations entertainment asset management firm, to launch ($884 million) in cultural exports such as fashion, were part of a final report submitted by a Virgin Produced India. It will develop, produce food and media. The government will initially government-appointed advisory panel charged and distribute Bollywood films and remake contribute JPY30 billion to the fund, making with reviewing the funds’ investment strategies, Hollywood content for Indian audiences. an additional investment of up to JPY50 billion risk management and measures to increase by end of the 2014 financial year. Private sector returns from long-term investments. India’s VC-backed Qubecell investors will contribute JPY7.5 billion, potentially The report by the so-called “Panel for rising to JPY10 billion. Sophisticating the Management of Public/Quasi- acquired by Boku public Funds” recommends that the pension Mobile billing aggregator Qubecell, which is ICG, Nomura set up Japan backed by Kae Capital, Blume Ventures, Mumbai Angels and TA Ventures, has been acquired by mezzanine fund San Francisco-based Boku. Founded last year, Intermediate Capital Group, a global mezzanine Qubecell allows purchases over mobile internet specialist, and Japanese investment bank through carrier billing. It raised an undisclosed Nomura Holdings have together launched a joint amount of seed funding from Kae Capital, Blume venture to manage a Japan-focused mezzanine Ventures, Mumbai Angels and TA Ventures in fund. Each will the contribute JPY10 billion ($98 December 2012. million). SOUTHEAST ASIA Risa Partners exits drug store for $99m funds – the largest of which is the JPY120.5 Exhilway’s mines fund Risa Partners, a unit of NEC Capital, has exited its trillion Government Pension Investment Fund 56% stake in Japanese drug store operator Hearty (GPIF) – should review domestic bond holdings targets Indonesia Wants to Tsuruha Holdings for JPY10.1 billion and consider investing more in overseas assets. Exhilway Global, a US-based hedge fund and ($99 million). Headquartered in Hiroshima, Hearty They should also look to diversify into private emerging markets private equity manager, has Wants commands a chain of 140 stores located equity, venture capital, real estate investment closed its maiden mines and minerals PE fund in Hiroshima and through the Chugoku region of trusts, infrastructure and commodities, where at $200 million. The vehicle will acquire and western Japan. It reported sales of JPY51.1 billion returns may be higher than on local sovereign operate mines in alliance with local companies for the 2012-2013 financial year. bonds. in Indonesia, as well as in Kazakhstan and Turkey. It also outlined a proposed overhaul of the LPs include high net worth individuals, pension JAFCO-backed ZIGExN raises governance structure of the funds with the funds and fund-of-funds. $58m in Tokyo IPO investment committee - currently part of the administrative arm of the funds - reporting Indonesian fashion site ZIGExN, a JAFCO portfolio company that runs directly to a board of directors, independent of network of search engine websites, saw its stock the CEO. Berrybenka raises $5m more than double to JPY1750 on its first day of Japan’s Transcomos has led a $5 million Series trading following a JPY5.8 billion ($58 million) B round of funding for Berrybenka, picking a Tokyo IPO. The firm, which listed on the Mothers license as well as long-term master franchise and more than 30% interest in the Indonesian fashion section of the Tokyo Stock Exchange, sold 9.8 sub-franchise rights for all of India. Everstone will e-commerce start-up. Existing backer GREE million shares, including 1 million new shares, at work with Burger King AsiaPac to set up a supply Venture also participated. In January, Berrybenka JPY600 apiece. chain in India and roll-out restaurants across the secured funding from Gree Ventures in a Series country. A round, having received seed capital from East SOUTH ASIA Ventures in 2012. GIC to anchor Ascendas India realty platform Phillip PE leads Series B Everstone in Burger King GIC Private will be the lead investor in an Indian round for Sin Clozette India tie-up real estate platform launched by Singapore- Phillip Private Equity has led a $3 million Series The Everstone Group has entered into a joint based Ascendas. The Ascendas India Growth B round for Singapore-based fashion shopping venture with Burger King Worldwide to bring the Programme has a target size of S$600 million network Clozette.co, with participation from world’s second-largest fast food hamburger chain ($482 million) and will invest in real estate in existing backers Walden International and several to India. The agreement includes a development India. angel investors. Clozette was founded in 2010.

6 avcj.com | November 26 2013 | Volume 26 | Number 45 Cover Story [email protected] Ceding control India emerged as and remains a predominantly PE market, but economic and generational factors have conspired to make domestic companies more open to a buyout propositiont

One of the largest buyout deals in still not the bulk of the deals that we see, but really punish over-leveraged borrowers in the India – Apax Partners’ $420 million acquisition of compared to five years ago there is a greater level same way that it does in the West and therefore GlobalLogic – is a typical secondary transaction. of activity now.” conglomerates do have an ability to hold on.” Founded in 2001, the company has evolved The drivers also include a combination Yet the availability of control transactions from a US-based entity with an Indian delivery of generational change at the head of from multi-business family conglomerates sat center into a fully-fledged global outsourced businesses, divestments of non-core assets by at the heart of Kedaara Capital’s operationally- development services provider. conglomerates, or monetization driven by the focused strategy when the GP launched its debut Along the way it raised capital from New inability of an entrepreneur to scale up beyond a fund last year. And LPs clearly bought into the Atlantic Ventures, WestBridge Capital, New certain level. Opportunities cross multiple sectors. idea as the vehicle closed last month above Enterprise Associates, and Both the Hexaware deal and iGate’s Apax- target at $540 million. Sequoia Capital. The VCs were looking to exit backed acquisition of Patni Computer Systems in Manish Kejriwal, founder and managing when Apax approached them about a sale. 2011 are examples of the first driver at work. partner at Kedaara, claims he is seeing far more Five of the 12 India-related control deals As for corporate divestments, it would appear interest in these deals than anticipated. Some in 2013 have involved sales between GPs: there are plenty of potential sellers in India. A of this interest is coming from first-generation GlobalLogic; KKR’s acquisition of Alliance Tires from recent Credit Suisse report found that gross debt entrepreneurs who want Kedaara to bring its Warburg Pincus; Baring Private Equity’s Hexaware at 10 of the largest and most indebted Indian expertise into their businesses. “They usually deal with General Atlantic and ChrysCapital conglomerates topped $100 billion for the first retain a significant minority ownership but hand Partners; SAIF Partners, Goldman Sachs and Sierra time during the last financial year, increasing over the day-to-day running of the business to Ventures’ exit of CSS Corp. to Partners Group; and Multiples Alternate Asset Management’s purchase India private equity buyouts of a majority stake in Vikram Hospital from ICICI Venture Funds Management. 2,000 20 Cyrus Driver, managing director at Partners Group, says there are a lot of deals on the table 1,500 where a PE investor, often with a minority stake, 15 has rights that precipitate the sale of a majority 1,000 of the business, or is able to convince the other Deals US$ million 10 shareholders also that it is time to monetize. 500 The lack of IPO exits over the last few years has encouraged corporate M&A for exiting PE funds 0 5 and also opened up opportunities for funds 2006 2007 2008 2009 2010 2011 2012 2013 wanting to buy into assets. No. of deals Value (US$ million) “This is a trend that will be around for 3-4 Source: AVCJ Research years, just because of the large number of deals that happened in the boom years of 2007-2008 that are now at the stage where they need an 15% as compared to the previous year. These us, and exit along with us after 4-6 years, creating exit,” Driver adds. conglomerates include cement maker Jaypee much larger overall value,” Kejriwal explains. Group, Reliance ADA Group, and PE-backed GVK. Vivek Gupta, partner at BMR Advisors, adds Emerging opportunity Earlier this year a consortium of investors that there has been a change in attitude towards Secondaries are only part of the reason for the led by Gaja Capital acquired a majority stake in selling out. Ten years ago it carried a stigma, but rise in the number of potential buyouts in India. preschool chain Eurokids for more than INR1.7 now there are potential deals to be done with The 12 transactions completed this year add billion ($27.5 million) during debt-laden parent entrepreneurs who run INR5-10 billion businesses up to more than $1.95 billion, a record sum company Educomp Solutions’ selling spree. As of and are not able to ramp them up to the next in a country where control investments have March 2013, Educomp’s total stand-alone debt level, or make them large enough to compete previously crossed the $1 billion threshold only was INR9.6 billion. with global rivals. twice – in 2006 and 2007, at the peak of the pre- However, the number of such deals is still low The slowdown in India’s economy and lower global financial crisis boom. according to Driver: “We expected to see more growth in a number of markets could be part “We’re seeing early signs of a buyout market carve-outs, given that leverage in corporate India of the reason why. “Entrepreneurs looked at emerging,” says Devinjit Singh, managing director has risen and a lot of conglomerates do need to their likely personal return from hanging on and in The Carlyle Group’s Asia buyout division. “It’s de-lever. But the banking system in India doesn’t growing with the market 4-6 years ago,” explains

Number 45 | Volume 26 | November 26 2013 | avcj.com 7 Cover Story [email protected] Market intelligence on Shashank Singh, partner and head of the India promoter is seeing a definite value addition fact that that we have highly respected CEOs office at Apax Partners. “That personal return come from the private equity investor, then the as operating partners providing strategic and now is probably lower now if they were to do the PE is also in play.” operating capabilities and as such, the majority of Asian private equity? same analysis.” Value addition and operational ability the deals in our pipeline are control deals.” The structural decline has also contributed to then is key to making the most of the current New Silk Route Partners has also been bulking AVCJ is the solution more reasonable valuations, which means deals opportunity. While the likes of KKR and Apax have up in this area. Last year, it appointed a strategic have a better chance of closing, although there is for some time been able to bring in specialist advisory board to identify global opportunities still an expectation of a premium for control.

Strategic imperative Largest India buyout deals The AVCJ Private Equity and Venture Capital However, buyout firms face a number of Size (US$ million) Investor Target Company Year Reports provide key information about the challenges in a business and commercial 900 KKR; Sequoia Capital Flextronics Software System 2006 fast changing Asian private equity industry. context, and also from a leverage, structuring 600 KKR Alliance Tires* 2013 and regulatory perspective. Competition from Researched and compiled by AVCJ’s industry strategic investors is one of them. 420 Apax Partners Global Logic* 2013 The value of announced M&A deals involving 400 Baring Private Equity Asia Hexaware Technologies* 2013 leading research team, the reports offer an Indian companies stood at $43.4 billion last year, 270 Partners Group CSS Corp.* 2013 in-depth view of private equity and venture up 12% on 2011, according to Thomson Reuters. 210 Morgan Stanley Infrastructure Partners Continuum Wind Energy 2012 But corporates, foreign and domestic, have won capital activity in Asia Pacific, as well as most of these. Recent transactions where PE 202 Goldman Sachs ReNew Power 2011 Asian Private Equity and in major countries and regions including Venture Capital Review firms have lost out to corporates include Prizm 200 The Blackstone Group Intelenet Global Services 2007 Payment Services, a provider of ATMs and point Source: AVCJ Research * involves secondary stake sale Australasia, China, India, North Asia and 2013 AVCJ private equity and of sales systems to financial institutions. Japanese Southeast Asia. venture capital report tech giant Hitachi beat out financial investors to global teams to complement their on-the- for portfolio companies. It includes Supratim 9th annual edition Australasia acquire Prizm from Sequoia Capital and other ground presence, younger GPs such as Kedaara Bose, previously of Johnson & Johnson Services. 2013 minority shareholders. have to work quickly to build up their capabilities The emphasis on operations is further Each AVCJ Report includes the latest

In February, GPs also lost out in the bidding in this area. amplified because control deals in India do not 9th annual edition for the injectable drugs unit of Strides Arcolab to Keen to use control as a means of follow the traditional model of statistics and analysis, delivering insights on Pennsylvania-based generic drug maker Mylan. differentiating itself, Kedaara wrote value-add using debt to multiply returns on equity. investments, capital raising, sector-specific Strategics have the advantage of big balance into its DNA. A partnership with Clayton Dubilier Buyouts of IT companies, where clients are sheets, in-house management capabilities and & Rice (CD&R) helped the firm develop systems primarily based in the US and Europe, have all activity. The reports also feature information the ability to deal with long gestation periods. to bring in operating partners, and establish how used leverage. This is driven by the fact that if on leading companies and business This gives them a comparative advantage they would work alongside portfolio companies. there are cash flows overseas they can be used particularly in the current environment. The firm’s operating team includes Pramod to service overseas debt which is US dollar- transactions. “If it’s a deal where a promoter is substantively Bhasin, Sanjeev Aga and Vindi Banga, ex-CEOs of denominated and therefore cheaper. But adding exiting, which means he’s selling more than Genpact, Idea Cellular and Hindustan Unilever, leverage to a purely domestic company is AVCJ private equity and 80% of his equity, then in most cases a strategic respectively. difficult – offshore money can come into India For more information, please contact venture capital report will win,” says BMR’s Gupta. “But if the deal is for “We will also do growth capital deals,” says only as an equity instrument, and there are Sally Yip at +(852) 3411 4921 or email China between 51% and 75% of equity, where the Kejriwal, “but I think our key differentiator is the restrictions on the lending ability of Indian banks. 2013 AVCJ private equity and Past deals, such as KKR’s 2006 buy of [email protected]. venture capital report Flextronics Software System, used structures to 9th annual edition India push down the overseas leverage into the Indian 2013 Regulatory obstacles company, but that was under a different set of AVCJ, your Asian private equity information regulations. It is much harder to replicate this source. 8th annual edition he acquisition of a majority stake in a listed company is made more complicated by the approach under the current rules and as such TSecurities and Exchange Board of India’s (SEBI) takeover regulations. Any acquisitions resulting domestic deals tend to be all equity. in entitlement of 25% or more of voting rights in a listed company triggers a mandatory open However, Partners Group’s Driver notes that offer for another 26% from public shareholders, on terms that are not inferior to the terms on people are increasingly finding new ways to get which substantial shareholders make their investments. leverage in. “It may not be the leveraged buyout avcj.com After the initial threshold, acquisition of voting rights exceeding 5% in any financial year structure of overseas, it may just be increasing triggers open offer obligations. If an acquirer crosses a 75% stake, they have to sell down to 75% the leverage used to fund the growth of the before launching a delisting offer. business, but effectively some leverage will be When The Blackstone Group bought a 97.9% stake in Agile Electric Sub Assembly in July for required for investments to make their target AVCJ private equity and INR3.3 billion ($53 million) it also got a 62.8% interest in Agile’s listed subsidiary Igarshi Motors. It returns,” he says. venture capital report had to make an open offer for another 26% stake of Igarshi Motors at INR65 a share, a premium of For his firm, this is an added bonus on top of North Asia 8.4% to the last traded price, which cost it as much as INR517 million. the economic and generational factors that are 2013 AVCJ private equity and venture capital report SEBI amended these takeover rules in 2011 to bring them closer to global practices. The stake making India are far more attractive market than an acquirer can buy in a listed firm without triggering a public offer was raised from 15% to 25%. it has been in the recent past. “We’ve actually 9th annual edition Southeast Asia This trigger threshold is 30% in Singapore and Hong Kong. invested more in the last 12 months than we did 2013 in the prior four years,” Driver adds.

8th annual edition Scan to find out more 8 avcj.com | November 26 2013 | Volume 26 | Number 45 about the regional reports Market intelligence on Asian private equity? AVCJ is the solution

The AVCJ Private Equity and Venture Capital Reports provide key information about the fast changing Asian private equity industry. Researched and compiled by AVCJ’s industry leading research team, the reports offer an in-depth view of private equity and venture capital activity in Asia Pacific, as well as Asian Private Equity and in major countries and regions including Venture Capital Review Australasia, China, India, North Asia and 2013 AVCJ private equity and Southeast Asia. venture capital report 9th annual edition Australasia

2013 Each AVCJ Report includes the latest

th statistics and analysis, delivering insights on 9 annual edition investments, capital raising, sector-specific activity. The reports also feature information on leading companies and business transactions.

AVCJ private equity and For more information, please contact venture capital report Sally Yip at +(852) 3411 4921 or email China 2013 AVCJ private equity and [email protected]. venture capital report

9th annual edition India 2013 AVCJ, your Asian private equity information source. 8th annual edition avcj.com

AVCJ private equity and venture capital report North Asia 2013 AVCJ private equity and venture capital report

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8th annual edition Scan to find out more about the regional reports Focus [email protected] Green shoots India’s agricultural sector is fast-growing but inefficient. Private equity is well positioned to capitalize on the need for better technology, information and distribution

A revolution is taking place in Indian of Commerce and Industry (FCCI) found that Firstly, the country suffers from a high degree dietary habits. The mix of foods that have last year private equity accounted for 3.8% of of fragmentation in land ownership. According underpinned domestic nutrition for generations all investment is agriculture, including logistics to the United Nations, the average size of an is changing, with the traditional dependence on and agricultural equipment manufacturing, operational holding is 1.6 hectares, with about grains giving way to demands for more protein, compared to 0.8% in 2008. The venture capital 81% of farms having land holdings of less than diary, fruit and vegetables. share has grown to 1.6% from 0.2% over the 2 hectares. This is largely a result of successive In a country known for the prevalence of same period. iterations of the Land Ceiling Act, which limits vegetarianism, meat consumption has doubled AVCJ Research data also suggest that the amount of land that can be held, making it in the space of a decade, with 5.5 kilograms PE activity in core agricultural industries is difficult to achieve production efficiency through consumed per capita every year, according to a increasing. Last year saw $135 million committed scale. report by Credit Suisse. Dairy consumption has to the sector across five deals. The bulk of this Water conservation problems are also linked also been increasing steadily, with a compound came from one transaction – Temasek Holdings’ to government policy, with subsidies on water annual growth rate of 4% outstripping that for $104 million acquisition of a 20% stake in Godrej rates leading to poor management and eventual cereal. Demand is soaring for eggs, fish and Agrovet, an agribusiness company focusing on shortages. Sub-oar irrigation and overuse of edible oils. animal feed, oil palm and agri-inputs and poultry. pesticides and chemical fertilizers, meanwhile, Much of this is driven by the country’s It is the largest deal in the space to date. have helped deplete soil fertility. Supply chain emerging middle class, which now has the Most investment in agriculture, however, has obstacles are created by a lack of adequate purchasing power to seek out more variety and more convenience. Ernst & Young estimates that PE investment in Indian agriculture India’s global middle class – i.e. those defined as such by the standards of any country – numbers 150 8 around 50 million, or 5% of the population. It is 7 expected to reach 200 million by 2020. 6 100 “They expect better value-added foods 5 and they are not satisfied merely with staple 4 foods,” says Rajesh Srivastava, a general partner 3 Deals US$ million 50 with Rabo Equity, which manages an India Agri 2 Business Fund. “Consumers are more demanding 1 and that is creating an opportunity for private 0 0 equity.” 2005 2006 2007 2008 2009 2010 2011 2012 2013 No. of deals Amount (US$m) Bottlenecks Source: AVCJ Research The flip side is that the agricultural sector has struggled to keep up with this growth as it grapples profound inefficiencies. Supply chain unsurprisingly been characterized by smaller storage and cold chain logistics and poor issues, for example, mean that food wastage in cap deals focusing on early- and growth-stage transport infrastructure. India is among the worst in the world, with 40% investments. Sub $25 million deals accounted for Finally, labor issues involve a shortage of of all fresh produce ultimately destined for the 22 out of 38 transactions since 2008, while 18 of skilled labor. Census data indicate that the garbage can. The sector is also extremely labor- those under the $10 million mark. number of farmers in India has plunged by 9 inefficient, with around 50% of the workforce is “Our working theory is the most innovative million since 2001, principally as a result of rural- engage in some form of agriculture despite the companies in India are start-ups – young, urban migration. sector contributing just 16.6% of GDP. fresh businesses looking at old challenges in These issues can be addressed through new ways,” says Mark Kahn, a founding partner Tech inroads improvements and innovation throughout with early-stage agriculture investor Omnivore To date, many of the companies working on the value chain – from farm gate to market Partners. “Large corporations in India often under solutions to these problems have done so stall. Private equity is seeking to play the role invest in R&D and innovation, so essentially it is through technological innovation. One of a of facilitator by identifying and supporting going to be the entrepreneurs that really solve number of recent investments in this area is businesses that offer the best solutions. these very difficult bottlenecks.” IvyCap Venture’s investment in Thomson Reuters’ PE investment in the sector is nascent but These bottlenecks are traced back to five information platform for Indian farmers, Reuters is on the rise. A recent report produced by scarcities in Indian agriculture: land, water, soil, Market Light, which targets the country’s KPMG and the Federation of Indian Chambers supply chain and labor. small-hold farmers by providing agricultural,

10 avcj.com | November 26 2013 | Volume 26 | Number 45 Focus [email protected]

chain that links to the industry.” Hyland maintains that such aggregation plays Cultivating growth: Indian are also beneficial to small-hold farmers who can find selling produce at a clearing house both time-consuming and expensive. Without any politics and agriculture scale, these farmers are rarely able to fair price. “By aggregating from these guys, we pay them ndia is essentially a nation of farmers. While the agricultural sector may not command as large a fair price, a better price and they get paid on Ia share of the economy as before, it is still a significant part of the national landscape. As such time,” says Hyland. government has a huge role in sector. “Agriculture employs a lot of people so it is politically sacred,” says Tom Hyland, co-founder of Strategic opportunity Aspada Capital Advisors. “There are around 700 million people involved in agriculture in some In many cases these companies make for an form or another so ultimately the government is going to be an important player.” attractive acquisition target for both domestic This is influence is not necessarily benign. For example, an agricultural subsidy program has conglomerates looking to find solutions to been in place since the Green Revolution of the 1960s, which was intended to aid food self- supply chain issues and foreign multinationals sufficiency, lower food prices and benefit farmers. While there have been benefits, policy is unable in search of partners that can help them expand to keep in step with changing food demands, leading to a misallocation of resources. their local footprint. The fastest-growing areas in food demand are vegetables and meat products, and demand “Quite a few multinationals from across the for grain products is declining. Yet rice and wheat crops account for three quarters of agricultural world are planning to have their operations land and 85% of gross value crop output, causing a surplus of these crops. in India, says SEAF’s Mathur. “The problem is Additionally, input subsidies have resulted in detrimental environmental impacts due to when they come to India most industrial players resource overuse, as farmers have no incentive to moderate their consumption of freely available struggle when they realize they have to source resources, notably water. from thousands of farmers.” On other hand, the introduction of the so-called Food Safety and Standards Act of India The only significant exit to be demonstrated (FSSAI) – which consolidates laws relating to food and lays down a framework for regulation in the space to date was to a overseas strategic across manufacturing, storage, distribution, sale and imports – has been lauded by some as a leap investor: earlier this year Qatar’s Hassad Foods forward in organizing a fragmented sector. paid Standard Chartered Private Equity $135 “This has redefined standards for the product as well as food processing,” says Hemendra million for a 51% stake in Indian rice maker Bush Mathur, managing director with the Small Enterprise Assistance Funds’ (SEAF) India Agribusiness Foods Overseas. International Fund. “These standards will drive unorganized players in the food industry to The move was seen as a way for Hassan upgrade and organize. They will also push up exports.” to leverage India’s production capabilities to service its global distribution network. The deal is expected to set a precedent, and not just with weather, market price and crop information via India’s 93 million small-hold farmers, by offering overseas players. A domestic conglomerate mobile phones. It has served more than 1 million access to information and markets that have might see M&A as a more appetizing proposition subscribers across 50,000 villages and 17 states traditionally been closed unavailable to them. than developing its own supply chain in a with five million farmers impacted by the service. SV Agri follows a similar line. A portfolio particular vertical or geography from scratch. “It is not just about inventing something new, company of Aspada Capital Advisors, an early- As such, investors – particularly those it is about getting the right technology from stage investor that manages the SONG Fund, focusing on later-stage, growth investments – wherever it is available and customizing it to the backed by the Soros Economic Development do so with a strategic exit in mind. “The work Indian market,” says Hemendra Mathur, managing Fund in partnership alongside the Omidyar starts as soon as you invest and you have to director with the Small Enterprise Assistance Network and Google, SV Agri is looking for ways start filtering out what strategics are looking for,” Funds’ (SEAF) India Agribusiness International to aggregate production from small-hold farmers says SEAF’s Mathur. “There is no point growing a Fund. “What is important is where technology is to supply large food processors. business if the company buying it has a different differentiated and whether you are ahead of the The company is essentially a B2B play strategy.” curb in terms of competition.” operating in the processed potato supply Most industry participants agree there is more The application of technology to agriculture chain, supplying companies such as McCain consolidation to come about as businesses scale is particularly in common in early-stage deals. and FritoLay with potatoes to be turned in fries up, in part to meet the needs of India’s middle Three of the seven investments made by and potato chips. The company works with up class, and the industry in general becomes more Omnivore, for example, have involved some of 6,000 farmers across five states to produce adept at meeting consumer needs. The logic sort of technology play. These are Stellapps potatoes to a standard required for processing by goes that this will lead to larger check sizes. Rabo Technologies, which builds automation tools larger firms. Equity has set its sights on a $200 million second integrated with cloud data analytics; cloud-based “It is basically like a fast food potato, so it India Agri Business Fund – compared to $120 agribusiness supply chain software provider has to be a certain size and have certain kinds million for the first fund – in anticipation of this. FrontalRain Technologies; and Euravaka, which of sugar so it fries better,” explains Tom Hyland, “There will be buyout opportunities,” says makes on-farm diagnostic equipment used in co-founder of Aspada. “If you have a farmer with Rabo Equity’s Srivastava. “I would imagine in two aquaculture. half an acre of land, actually making him grow years’ time we will see larger deals in areas such Reuters Market Light is also interesting in produce to some sort of specification and then as logistics, agri-inputs and fertilizers. It may not that, while it is technology-based, it taps into the getting it out to the market can be very tough be happening yet but it takes time for people to broader theme of commercially empowering logistically. We need to have a whole supply understand the sector.”

Number 45 | Volume 26 | November 26 2013 | avcj.com 11 Customized Research Report Asian Private Equity Data Made Simple

AVCJ Research can provide your firm with timely and accurate research support to help you simplify and expedite your workflow. We conduct in-depth research and provide insightful analysis in a bespoke report that fully meets your data requirements.

AVCJ’s industry standard data is used by the world’s leading firms in their fundraising, investor relations communications and deal due diligence activities. AVCJ Customized Data Service includes:

✔ Pan-Asian Industry Reviews/Regional Reports – timely updates ✔ Specific industry and financing stage research ✔ Comprehensive statistics on investments and funds ✔ Exits strategic analysis ✔ Market peers comparison

To understand how AVCJ Research can help you with your data needs, please call: 852-34114956 or email [email protected] avcj.com Focus Customized Research Report [email protected] Uphill battle Asian Private Equity Investor sentiment on India is weak, with LPs wary of re-upping with PE firms that have yet to prove their Data Made Simple ability to return capital. But as underperformers drop away, life could be all the sweeter for the survivors “Those last 12 months were the $12.1 billion – and this includes investments Capital, which raised $540 million in 17 months, worst I have seen in my career,” is Mukul Gulati’s made by regional and global funds. beating its $500 million target; and Tata Capital’s unequivocal verdict on institutional investors’ A shrinking GP base may see the survivors Tata Opportunities Fund, which spent more than appetite for Indian private equity. thrive as they deploy capital in a less competitive two years in the market and ended up with $600 As co-founder and managing director market with more reasonable valuations. But million, short of the planned $1 billion. of Zephyr Peacock, an investor in small and even those LPs actively looking for managers to In the case of Kedaara, LPs highlight a medium-sized enterprises (SMEs), Gulati was on back in the country are wary of jumping in. compelling investment narrative and early AVCJ Research can provide the road until September, marketing his firm’s “We put most of our money to work in India fundraising momentum. The GP plans to focus your firm with timely and third fund. The vehicle launched in November between 2010 and 2012 so we are just waiting,” primarily on buyouts and formed a partnership 2011 with a target of $150 million and reached a says Menka Sajnani, senior vice president at Auda with UK-based Clayton, Dubilier & Rice to accurate research support second close of $70 million in April. A final close Asia. “Distributions from the funds in 2007-2008 develop an operationally-oriented approach; is expected by the end of the year. Fundraising have been minimal. We have money on the then Ontario Teachers’ Pension Plan came in as to help you simplify and for Zephyr’s second fund took less than six ground that is not yet deployed so we might as anchor investor, helping the fund to a first close expedite your workflow. We months in 2009, coming in at $75 million. well wait and see how that plays out. These are of $325 million within six months of launch. Gulati is back in the office overseeing a 2011-2012 vintage funds with dry powder.” One LP adds that the significant members of conduct in-depth research recently launched trade sale process, which is As Zephyr Peacock’s experience suggests, Kedaara’s investor base are not traditional backers drawing interest from strategic players and is fundraising periods are lengthening. AVCJ of Indian PE funds, with several making their first and provide insightful expected to close in early 2014. But overall the Research has records of 21 funds launched in foray into the country. analysis in a bespoke report GP hasn’t prospered in terms of exits, with two in 2012. Of those, 16 are still in the market and 12 In this respect, the GP has much in common the last two years. It was hoped that two more have yet to reach a close of any kind. From the with Tata, which deliberately cultivated a that fully meets your data would follow in 2013 but they didn’t happen. 2011 vintage, 17 of 31 continue to fundraise and narrow range of investors. This was in part an requirements. “It has been disappointing,” Gulati adds. “One 10 are without a close to their name. It is possible acknowledgement of the nature of the fund – it of the exits we wanted to do was going to be an some of these have effectively given up. is backed by Tata Group and makes investments IPO but the market has been dead for medium- sized issuers. You can list but you just won’t get a India PE fundraising AVCJ’s industry standard data is used by the world’s leading firms in their good price.” Zephyr Peacock is to some extent a 10,000 60 microcosm of the challenges facing Indian fundraising, investor relations communications and deal due diligence 50 private equity. But at least the GP is on course to 8,000 40 activities. AVCJ Customized Data Service includes: raise a fund; plenty of others are not. According 6,000 to AVCJ Research, Zephyr is one of only 19 India- 30 focused managers to reach any kind of close 4,000 Funds US$ million 20 ✔ Pan-Asian Industry Reviews/Regional Reports – timely updates in 2013. Fundraising for the year stands at $1.7 2,000 10 ✔ Specific industry and financing stage research billion, trailing the 12-month figure for 2012 by nearly $600 million. It is almost certain to be the 0 0 ✔ Comprehensive statistics on investments and funds weakest fundraising year since 2004. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 No. of funds Amount (US$m) ✔ Exits strategic analysis The root cause Source: AVCJ Research There is a litany of contributing factors: India’s ✔ Market peers comparison slowing economy, the dramatic slump in the rupee, regulatory uncertainty ranging from the Sunil Mishra, a partner at Adams Street within the Tata family of companies as well as tax treatment of offshore funds to PE investors Partners, estimates that the number of funds targeting other India-based assets – and the ability to enforce put options, and policy paralysis launching over the next 12 months will be broader macroeconomic climate. ahead of next year’s general election. “somewhere in the high single digits,” and he “We only have about 10 investors and the LP But the story for private equity is ultimately doesn’t expect any of them to reach a full and universe we reached out to was much smaller the same as it was 12 months ago: not enough final close within a year. Indeed, he predicts that than for a traditional fundraise,” says Bobby Pauly, capital from earlier vintages is flowing back to 60% will not be successful at all. a partner at Tata Opportunities Fund. To understand how AVCJ Research can help you LPs. A staggering $24.3 billion was pumped into In a difficult fundraising environment, “It was a bigger challenge because we are a with your data needs, please call: 852-34114956 or India funds between 2006 and 2008. Five years however, a few GPs have managed to break first-time fund trying to raise money at a time on, those funds should be making distributions, through. The nine funds that have reached a final when the macro environment is the weakest email [email protected] but exit proceeds for 2011-2013 stand at just close in 2013 include two first-timers: Kedaara in 10 years. Our strategy was to find a select avcj.com Number 45 | Volume 26 | November 26 2013 | avcj.com 13 Focus [email protected]

few investors who were here for the long-term of the nine final closes in 2013, which raised $158 a very profitable exit,” says Adams Street’s Mishra. so could look beyond the macro, who were million. “Secondly, all exits are set back by huge currency interested in co-investment and who could write According to industry sources, among the depreciation if you have been investing between large checks.” bigger names likely to launch new funds in the 2006 and 2009 – a 3x becomes a 1.5x.” next 12-18 months are India Value Fund Advisors, The consensus is that a GP raising Fund II Size matters CX Partners and Everstone Group, each of which might still get the benefit of the doubt from Both Kedaara and Tata Opportunities Fund are raised in excess of $500 million for its previous patient LPs. By the time Fund III comes around, looking to punch above their fund size through vehicle. Fund sizes will come under scrutiny, but the first vehicle should already be returning co-investment, claiming they have a fair number so too will exits. capital and if it is not then a re-up is unlikely. Even of sizeable control deals in the pipeline. Dhanpal Jhaveri, partner and CEO at on Fund II, though, negotiations can be fraught. For most GPs, though, ambitions are Everstone, declines to comment on fundraising “If you are raising your second fund the moderating, with many of the current vintage of plans but he admits that returning capital to negotiations will be difficult with existing LPs funds coming in at best only marginally larger investors will be a key area of focus over the who agreed to one set of terms last time but than their predecessors. It would appear that coming year. “The first fund was invested in want to change them this time,” says Sidharth Bhasin, a partner with Shearman & Sterling. There is anecdotal evidence of push back India PE exits on fees, while hurdle rates are being moved up 5,000 120 and, if they were previously calculated in local currency, into US dollars. The trade off is that LPs 4,000 100 still want managers to be able to retain talent and be sufficiently incentivized to chase carry. 3,000 80 At the other extreme, a couple of Indian GPs

Exits that are struggling to raise funds are said to be 2,000 60 US$ million in negotiations with large institutional investors to become dedicated investment platforms – 1,000 40 essentially managed accounts, complete with the 0 20 less favorable economics. 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 No. of funds 4Q2010 IPO Share buyback A tough sell Open market sale Trade sale As several LPs attest, the weeding out of Source: AVCJ Research underperforming managers has made life easier for investors that are willing to back India-focused funds. Comparisons are drawn with 2003-2004 Mishra of Adams Street’s fear that Indian PE firms 2007-2009 and over that period we made 17 when there were fewer players in the market and will follow many of their Chinese counterparts investments and have so far made two exits,” he less competition for deals, which meant lower in doubling in fund size with each vintage is not explains. “Our strategy is largely to stay invested entry valuations and stronger returns. being realized. After the blow-out of the mid a bit longer, but we are crossing the five-year SAIF Partners India, currently investing its 2000s, the amount of capital available is falling threshold with a number of our investments so 2011 vintage fourth fund, is among those GPs back in line with the economic opportunity. there will be further exits.” that claim to benefit from the changing dynamic. ChrysCapital Partners, for example, restricted With little in the way of capital markets Managing Partner Ravi Adusumalli notes that its sixth vehicle to just $510 million – little more activity, Everstone is increasingly looking at deployment has accelerated in 2013 despite than half the size of Fund V – in order to focus on private market exits to trade and financial buyers. the volatility created by rupee depreciation. “My growth capital transactions rather than the larger In certain situations – even as a minority investor guess is that 2014 will be even larger for us, given mid-market space that it felt had become too – the GP has an agreement that it will help grow there are fewer funds chasing deals,” he says. congested. Samara Capital, having raised $250 a company for 3-5 years and then seek a strategic The challenge for those in the market with million for its first fund in 2007, set a hard cap of buyer. Jhaveri says this is possible because Indian new funds is persuading LPs to see this potential. $300 million for its second, while Gaja Capital is entrepreneurs are now younger, often first- This means looking beyond the current problems seeking $250 million, having raised $200 million generation operators, and generally more open facing India’s economy and the past performance the first time around. to strategies in which they cede ownership. of its private equity industry. It is not an easy sell. Sajnani notes that Auda now prefers Much is made of the uptick in sales to Tata Opportunities Fund’s Pauly recalls two managers with $300 million or below. Another other PE firms, and the numbers support this. institutional investors – one North American executive from an Asian fund-of-funds adds that Secondary transactions total $963.4 million for and one Asian – that made due diligence trips her firm was quite active in 2012 when several the first 11 months, having reached $1.58 billion to India and came very close to committing to VC players raised new funds but then slowed in 2012, much higher than in previous years. the fund but ultimately couldn’t win over their deployment. It is waiting for some of the bigger It represents an alternative exit route for respective investment committees. names to return to the market but also claims to GPs who need to return capital to LPs, but how “It wasn’t as much about our fund as much as have identified some attractive smaller funds in much they manage to distribute is still a function the macro and the performance of India funds in the $100-150 million space. of the amount they spent getting in. “Even if general,” he says. “It came down to China versus These are said to include Motilal Oswal Private a company is good enough to be exited, you India. The investment committee decided that Equity’s India Business Excellence Fund II, another might have paid a very high price so it won’t be China seems to be safer.”

14 avcj.com | November 26 2013 | Volume 26 | Number 45 Rubi Arya | Industry Q&A [email protected] The next mile The sudden death of Ved Prakash Arya in 2011 left Milestone Capital Advisors without a founder and figurehead. His widow, Rubi Arya, took up the reins. She tells AVCJ how the business is moving forward

Q: It is more than a year since you is pretty much at a low and can foreign exchange volatility of 10-12%, but the consumption decided against selling the only go up from here. We will the last year. Having said that, and urbanization story is still business. What has Milestone probably focus on commercial there is a lot of appetite from there. We see huge demand for been doing? ready assets, mainly office foreign investors for what India middle income housing with a A: The primary focus has been on buildings, and we will be looking offers in terms of mid- to long- ticket size of INR10-15 million. At making exits from our early- to raise INR4-5 billion ($64-80 term wealth creation. We find the right price, there will always vintage funds. Milestone was million), with the option of that a lot of Asian investors are be demand. formed in 2007 and the earliest another INR2 billion. interested in deploying capital, funds closed in 2008. We felt that and so we expect to reach Q: You went through a traumatic in order to continue building this out more to family offices and experience and could have organization it was important HNWIs, and then to sovereign walked away from Milestone. to show full-cycle capability. wealth funds and pension funds. Why did you decide to stay? We were able to return $250 A: I didn’t come from this industry million out of the total corpus of Q: India has issued draft and there were people who $850 million, with a mid-to-high guidelines for real estate warned me about the fiduciary teens IRR. The market has been investment trusts (REITs). What responsibilities, that this was a challenging but I inherited a does this mean for your rental big business with $1 billion in good set of investments. There yield funds with IL&FS? assets, that the industry is full of were also some funds that A: The first fund launched in 2008, sharks. My first instinct was to closed after the promoter passed the same year the first draft sell and that’s what we tried to away and had yet to make any regulations for REITs in India do – but in hindsight I shouldn’t draw-downs, so we focused came out. We anticipated REITs have been so hasty. I started to on investing the money. We would become a reality in 2-3 understand what was going on invested nearly $100 million. “We feel that years but it has taken a lot longer. and I realized what Ved had built Now we have seen the second was actually more meaningful. Q: Milestone’s real estate REITs will draft guidelines and more He set up so many vehicles – we investments range from become a reality tweaking needs to be done. For have a non-banking finance greenfield residential example, the guidelines are silent company license, a housing development to yield- very soon, which as to whether or not foreign finance license, a debenture generating commercial assets. direct investment is permitted in trustee license – that needed What have returns been like? means more REITs. Then there are the taxation to be shown more light. And A: We have a diversified portfolio transparency and valuation aspects. All this then the team was still there because we believe we need be needs to be clarified but we feel supporting me; we enjoyed the present in a range of areas – it’s and liquidity for that REITs will become a reality goodwill of our investors; the a question of risk-reward. At the very soon, which means more distributors were backing us; and land level, where the approvals investors” transparency and liquidity for we had some good developers. come, you can get returns of investors. The minimum amount So I took a leap of faith and I am 25-30%; at the construction Q: Do you anticipate any changes of assets required to list as a REIT happy with the decision. level it is 20-25%; and then for in the investor base? is INR10 billion and not many ready assets it is 12-14%. We A: Milestone was the first real estate fund houses have that size, but Q: Milestone has sold off a couple have always been cautiously fund house in India that allowed we already have INR15 billion of non-core businesses. Do optimistic and are happy to give retail participation, including and they are more than 90% you plan to remain a pure-play returns in the mid-to-high teens. family offices and high net worth leased out, so they qualify. real estate investor? individuals (HNWIs). Our average A: For now we will remain real Q: What are your future ticket size was INR2.5 million. Q: What are your expectations for estate-focused, but I want fundraising plans? We have a huge investor base residential real estate? to grow the NBFC and the A: We intend to go back to the – 16,000 retail investors – and A: There is an overhang of supply debenture trustee businesses. market with a new fund in early strong distribution channels. in the residential market and Work has already begun on that. 2014. It will be core assets – we Most our funds have been raised some cities have huge amounts We will start with real estate believe there are opportunities from domestic investors so we of inventory and it’s not tenable. investing because we are familiar because the commercial market haven’t been hit so much by the We expect prices to correct by with that area.

Number 45 | Volume 26 | November 26 2013 | avcj.com 15 Recognized for Excellence

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