Asia’s Private Equity News Source avcj.com October 28 2014 Volume 27 Number 40

EDITOR’S VIEWPOINT China’s latest stab at SOE reform isn’t necessarily an opening for PE Page 3

NEWS CHAMP PE, CIC, CITIC Goldstone, Creador, CVC, EIG, Fidelity, IDG, KWAP, OneVentures, Orchid, Permira, Quadrant, Sequoia, Sailing Capital, Tiger Global Page 4

DEAL OF THE WEEK Creador scores 3x return on partial exit from Repco Home Finance Page 10

The direct approach AVCJ RESEARCH LPs want more Asia infrastructure exposure, but vary in how they get it Page 6 Data f ile Page 11

FOCUS DEAL OF THE WEEK

Payment prodigals Indonesia’s Alibaba? VCs target SE Asia mobile money pioneers Page 9 SoftBank leads $100m round for Tokopedia Page 10 Private Equity & Venture Forum Taiwan 2014 20 November • Westin Taipei

GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjtaiwan.com

Keynotes: KAO Shien-quey Nicky Lu Deputy Minister Chairman & CEO Simultaneous translation is NATIONAL DEVELOPMENT COUNCIL ETRON TECHNOLOGY, INC. available

活動全程提供 中英文同傳。

Confirmed speakers include: Chien-Yi Chang Ming Bin Chang Andrew S. Hawkyard Director, Research Division II Deputy Director-General Chief Operating Officer TAIWAN INSTITUTE OF INVESTMENT COMMISSION, MORGAN STANLEY ECONOMIC RESEARCH MOEA PRIVATE EQUITY ASIA

Richard Hsu CY Huang Nisa Leung Managing Director President Managing Partner INTEL CAPITAL FCC PARTNERS QIMING VENTURE PARTNERS

Gordon Shaw Weichou Su Sonia Sun Managing Director, Shanghai Partner Partner BARING PRIVATE EQUITY STEPSTONE GROUP KPMG LAW FIRM ASIA

Alex Ying Brooke Zhou Managing Director Executive Director - Asia THE CARLYLE GROUP Pacific, Private Equity LGT CAPITAL PARTNERS

For the latest programme and speaker line-up, please visit avcjtaiwan.com

Registration enquiries: Pauline Chen T: +852 3411 4936 E: [email protected] Enquiry Sponsorship enquiries: Darryl Mag T: +852 3411 4919 E: [email protected] Speaking enquiries: Joy Qian T: +852 3411 4866 E: [email protected]

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Join your peers avcjtaiwan.com #avcjtaiwan Private Equity & Venture Forum EDITOR’S VIEWPOINT Taiwan 2014 [email protected] 20 November • Westin Taipei Managing Editor Tim Burroughs (852) 3411 4909 Staff Writers Andrew Woodman (852) 3411 4852 Winnie Liu (852) 3411 4907 Reform agenda? Creative Director Dicky Tang Designers Catherine Chau, Edith Leung, Mansfield Hor, Tony Chow CLEARLY NONPLUSSED BY THE QUESTION, seriously. Sinopec is one of several large SOEs the GP’s voice crept up an octave as he replied: that is undergoing restructuring. CITIC Pacific Senior Research Manager GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjtaiwan.com Helen Lee “Of course we’re bidding for Sinopec Marketing; has acquired a huge swath of assets from its Research Associates everyone is. But I’ve no idea if we’ll get it.” state-owned parent, while China Everbright has Herbert Yum, Isas Chu, Keynotes: Sinopec, one of the country’s three leading announced plans to switch from a SOE into a Jason Chong, Kaho Mak KAO Shien-quey Nicky Lu state-owned oil majors, revealed plans in joint stock company. Furthermore, earlier this Circulation Manager Sally Yip Deputy Minister Chairman & CEO Simultaneous February to restructure its marketing business year SASAC identified six SOE parent groups to translation is and allow in “social and private investors.” This was serve as pilot projects for private investment. Circulation Administrator NATIONAL DEVELOPMENT COUNCIL ETRON TECHNOLOGY, INC. available Prudence Lau the sprawling downstream business, comprising Answering the last two questions is more Subscription Sales Executive 活動全程提供 中英文同傳。 30,000 gasoline stations, 23,000 convenience difficult. Sinopec Marketing, for example, is a Jade Chan plum asset and a host of private investors were stores, plus oil pipeline and storage facilities. Manager, Delegate Sales Confirmed speakers include: A 30% stake in the business would be sold for interested in it. But given the nature of the asset Pauline Chen $17 billion. But who would get it? CICC Private and the number of investors, can they hope to Chien-Yi Chang Ming Bin Chang Andrew S. Hawkyard Director, Business Development Equity, Bohai Industrial Investment, RRJ Capital play – indeed, will they be required to play – a Darryl Mag Director, Research Division II Deputy Director-General Chief Operating Officer and Hopu Investment Management were the meaningful role in improving performance? TAIWAN INSTITUTE OF INVESTMENT COMMISSION, MORGAN STANLEY Manager, Business Development independent PE players chosen. Each either has At the other end of the spectrum, there are Anil Nathani, Samuel Lau ECONOMIC RESEARCH MOEA PRIVATE EQUITY ASIA direct ties to the state-owned bureaucracy or plenty of SOEs in a far worse condition that Sales Coordinator a track record of working with it. The investor cash-strapped local governments are desperate Debbie Koo Richard Hsu CY Huang Nisa Leung roster was filled out by combination of domestic to offload. Will private investors be interested in Managing Director President Managing Partner financial and strategic players. these assets? It all depends on how distressed Conference Managers Jonathon Cohen, Sarah Doyle, INTEL CAPITAL FCC PARTNERS QIMING VENTURE This was a landmark transaction in that it the businesses are and whether the investors are Conference Administrator PARTNERS represented an early foray in China’s latest push allowed to implement meaningful turnaround Amelie Poon towards state-owned enterprise (SOE) reform. strategies without interference from the vested Conference Coordinator Fiona Keung, Jovial Chung Gordon Shaw Weichou Su Sonia Sun By diversifying ownership and bringing in interests that percolate the SOE system. Managing Director, Shanghai Partner Partner true commercial players, it is hoped that these Private equity firms have participated in Publishing Director BARING PRIVATE EQUITY STEPSTONE GROUP KPMG LAW FIRM behemoths’ efficiency, productivity, corporate successful SOE restructurings. CITIC Capital Allen Lee ASIA governance and return on assets will improve. Partners and Hony Capital were early entrants Managing Director Given this is hardly a new topic, an oft- into the space. Hony claims to have been Jonathon Whiteley Alex Ying Brooke Zhou repeated list of questions apply. How committed involved in 31 such transactions. Most recently, Managing Director Executive Director - Asia is the government to bringing about significant the GP acquired a minority stake in hotel chain THE CARLYLE GROUP Pacific, Private Equity and lasting reform? What kind of assets will be Shanghai Jin Jiang International. The GP plans to Incisive Media LGT CAPITAL PARTNERS made available to what kinds of investors? And improve governance and management and then Unit 1401 Devon House, Taikoo Place to what extent will these investors be allowed or make acquisitions at home and overseas. 979 King’s Road, Quarry Bay, Hong Kong expected to elicit real change? These deals are not for PE firms that are too T. (852) 3411-4900 For the latest programme and speaker line-up, please visit avcjtaiwan.com According to the State-owned Assets foreign or too faint-hearted. SOE credentials and F. (852) 3411-4999 E. [email protected] Supervision and Administration Commission the government connections that come with URL. avcj.com Registration enquiries: Pauline Chen T: +852 3411 4936 E: [email protected] (SASAC), there are more than 140,000 SOEs in them help generate initial traction – Hony is Beijing Representative Office Enquiry Sponsorship enquiries: Darryl Mag T: +852 3411 4919 E: [email protected] China with RMB55 trillion in assets at the end of sponsored by Legend Holdings, CITIC Capital has No.1-2-(2)-B-A554, 1st Building, No.66 Nanshatan, Speaking enquiries: Joy Qian T: +852 3411 4866 E: [email protected] 2012 and more than 69 million people on the ties to CITIC Group. But bringing about better Chaoyang District, Beijing, payroll. Most of them are controlled by local performance often requires unwinding layers of People’s Republic of China T. (86) 10 5869 6203 governments, not by SASAC itself. entrenched habits, micro-political power bases F. (86) 10 5869 6205 Asia Series Sponsor Co-Sponsors Using the earnings of the MSCI China Index and perhaps blatant corruption. E. [email protected] constituents, PineBridge Investments calculated It remains to be seen which assets are opened that SOEs’ return on equity in the first half of up to such potentially sensitive re-tooling, and 2014 was 13% compared to 25% for private whether they end up in the hands of investors The Publisher reserves all rights herein. Reproduction in whole or in part is permitted only with the written consent of companies. Their balance sheets have also with a genuine ability to execute. AVCJ Group Limited. weakened since the global financial crisis – when ISSN 1817-1648 Copyright © 2014 SOEs benefited from loose monetary policy Legal Sponsor Knowledge Partner intended to shore up the economy – with net gearing reaching 41% as of June 2014. Private Tim Burroughs companies’ net gearing was 20%. Managing Editor There is evidence that Beijing is taking reform Asian Venture Capital Journal

Join your peers #avcjtaiwan avcjtaiwan.com Number 40 | Volume 27 | October 28 2014 | avcj.com 3 NEWS

Tencent, Tiger Global lead take over from Liqun Jin who has resigned from ASIA PACIFIC CICC. Jin’s departure came less than two weeks $350m shopping app round after Levin Zhu, son of former Chinese premier MVision hires two Hong Koudai Gouwu, a Chinese mobile shopping Zhu Rongji, quit as CEO and chairman of CICC. Kong managing directors portal, has raised a $350 million Series C round of funding led by Tencent Holdings and Tiger CITIC Goldstone backs Placement agent MVision has hired Michelle Global. H Capital, VY Capital and DST Advisors Paisley and Dennis Kwan as managing directors also participated. Of the total amount, Tencent $285m mining acquisition in its Hong Kong office. They will join founder committed $145 million for a 10% stake. Goldstone Investment, the direct investment arm and CEO, Mounir Guen, who recently moved to Koudai is a mobile-focused shopping of CITIC Securities, is aquatics producer Hubei Hong Kong. The appointments coincide with the marketplace that let merchants sell directly to Wuchangyu’s RMB1.75 billion ($285 million) departure of MVision’s Hong Kong-based partner consumers. It also offers shopping tips, fashion- acquisition of a Guizhou province-based mining Niklas Amundsson. firm. The transaction will be financed through a private placement worth RMB580 million. AUSTRALASIA IDG-backed Sky Solar seeks up to $150m in US IPO Quadrant’s APN Outdoor to Sky Solar Holdings, a Hong Kong-based raise $289m in IPO independent power producer (IPP) backed by Quadrant Private Equity will make a partial exit IDG-Accel China Capital, plans to raise up to $150 from ANP Outdoor as the Australian advertising million through a US IPO. The company will sell business raises A$329.3 million ($289 million) 12.5 million American Depository Shares (ADS) at through an IPO. APN has priced its offering $10-12 apiece. at A$2.55 per share, the bottom end of the matching and special sales information. In indicative range. The company will sell 129.1 addition, it has integrated Tencent Holdings’ Sailing Capital puts $50m million shares, of which 82.7 million will be instant-messaging app WeChat into the platform, offloaded by Quadrant. The PE firm will realize enabling retailers to set up accounts and use into UK diagnostics firm proceeds of around A$210 million. the service to market products. As of September, Chinese PE firm Sailing Capital has invested over 12 million retailers across 172 countries had $50 million in Enigma Diagnostics, a UK-based CHAMP PE to buy Nuplex listed items through Koudai WeChat platform. developer of devices used to test for infectious Koudai currently has 83 million unique visitors disease. As part of the investment, Enigma assets for $112m per month, with total sales volume of about RMB will form a joint venture with Beijing Leadman CHAMP Private Equity has agreed to buy New 15 billion ($2.45 billion). The company plans to Biochemistry, a maker of diagnostic products. Zealand-based Nuplex Industries’ distribution and use the new capital to boost its online traffic on plastics additives businesses for A$127.5 million WeChat. Intel Capital invests $28m ($112 million). The assets – Nuplex Specialties Lei Jun – a Chinese super angel investor – and Masterbatch – will be transferred to a newly- provided seed funding for Koudai in 2010. In from smart device fund created, CHAMP-controlled entity by the end of 2011, the companY raised $12 million in Series Intel Capital, the US chip maker’s corporate 2014. Nuplex will use the proceeds to pay down A funding from Chengwei Ventures and Matrix venture capital arm, has invested $28 million debt. Partners. This was followed by Series B round of from its China Smart Device Innovation Fund undisclosed size from Warburg Pincus. (CSDIF) into a batch of technology start-ups. OneVentures hits $53m The investees are EyeSmart Technology, Shanghai Ailiao, Shenzhen Fibocom, Guangdong first close on Fund II prompt a scaling back in exploration. The Appscomm, and LeWa Technology. Australian venture capital firm OneVentures has restructuring package comprises a new $225 reached a A$60 million ($53 million) first close on million in covenant-lite term loans and an equity Fidelity injects $15m into its second fund, which is looking to raise $100 injection of $119-127 million, including a fully- million for Series B and C stage investments. The underwritten rights offer worth up to $84 million. hospital operator vehicle will focus on start-ups across healthcare, Fidelity Growth Partners Asia has invested RMB90 education, mobile, media, cloud computing and million ($15 million) in Zhejiang Banger Medical data, sensors and robotics, and food security. GREATER CHINA Management, a Chinese orthopedic hospital operator. Established in 2012, Zhejiang Banger Centerbridge leads $352m China sovereign fund operates five hospitals.. listed miner restructuring chairman moves to CICC Orchid Asia invests in Centerbridge Partners will support a $352 Xuedong Ding, chairman and CEO of China million restructuring plan for Boart Longyear, Investment Corporation (CIC), has moved to apparel maker La Chapelle an Australia-listed mining services provider that investment bank China International Capital Orchid Asia has taken a minority stake in has struggled as falling commodities prices Corporation (CICC) as its new chairman. Ding will Shanghai La Chapelle, a PE-backed ladies apparel

4 avcj.com | October 28 2014 | Volume 27 | Number 40 NEWS

manufacturer that listed in Hong Kong last Permira in $3.5 Arysta exit used to refinance a $70 million facility provided month, for HK$122 million ($16 million). Orchid by Standard Chartered in 2011. Asia VI acquired an extra 8 million shares to take to US strategic its stake in the company from 2.51% to 6.35%. Permira has exited its investment in Japanese IFC proposes investment in agricultural chemicals maker Arysta LifeSciences Temasek’s India NBFC Luye Pharma to take full to US chemicals firm Platform Specialty Products (PSP) for about $3.51 billion. The International Finance Corporation (IFC) ownership of Beijing Jialin Arysta - which makes insecticides, weed killers is considering an investment of INR4.5 billion Luye Pharma Group, a PE-backed Chinese drug and plant-nutrition products - was formed in ($75 million) in Fullerton India Credit Company maker, has taken full ownership of its industry 2001 when the life-sciences divisions of Japan’s (FICC), a non-bank financial company owned by peer Beijing Jialin Pharmaceutical, acquiring a Tomen Corp. and trading company Nichimen Temasek Holdings. FICC has around $1 billion in 42.02% interest from existing PE shareholders for Corp, owned by Sojitz Holdings Corp, combined. assets under management. It has a strong focus RMB2.42 billion ($395 million). Exiting investors Permira acquired the company from Olympus on rural and urban micro-lending as well as include Xinjiang Plane Trees Equity Investment Capital in 2007 for around $2.2 billion. The trade catering to small and medium-sized enterprises. and Beijing Zhongguangcun Guosheng Venture sale exit comes a month after Arysta filed for a US Capital Center. SOUTHEAST ASIA Sequoia leads Series C for Chinese English-study site SoftBank leads $100m Sequoia Capital has led a $55 million Series C round for Tokopedia round of funding for 51Talk, a Chinese online SoftBank will lead a $100 million round of English-teaching platform, with participation funding for Tokopedia, an Indonesian online from Shunwei Capital Partners and DCM. The marketplace. Sequoia Capital will also participate two-year-old start-up received $12 million in alongside existing investor SB Pan Asia Fund. funding in December led by Shunwei and a $2 Founded in 2009, Tokopedia claims to be million round from DCM in June. Indonesia’s leading online marketplace, acting as IPO with a view to raising as much as $500 million a platform that individuals and companies can in an offering that was expected to value the use to open their own online stores. NORTH ASIA company at around $4 billion. The company’s consolidated sales reached CVC-backed Link Net cuts Mizuho Capital to launch $1.5 billion in 2013, up from $1.46 billion the previous year. However, Arysta posted a net size of Indonesia share sale $300m SME mezz fund loss of $93.4 million for 2013 - compared to a Link Net, an Indonesian fixed-line broadband Mizuho Capital Partners is set to launch a JPY30 $152 million loss in 2012 - as interest and other and cable TV operator in which CVC Capital billion ($277 million) mezzanine fund which financial expenses continued to eat away at its Partners is an investor, has reduced the size of its will support Japanese small to medium-sized bottom line. planned share placement. First Media, CVC and enterprises (SMEs) in the form of subordinated PSP plans to combine Arysta with previously other shareholders will sell 30% of the company, loans and preferred shares. It will be the acquired companies Agriphar and Chemtura pricing the shares at IDR6,000 apiece, for around successor vehicle to MH Mezzanine Investment Crop Solutions. According to a release, the IDR5.48 trillion ($450 million). Enterprise II, a JPY17.7 billion fund. combined entity, to be led by current Arysta CEO Wayne Hewett, will operate as a vertically- Tiger Global leads Series C Korea’s KnowRe raises integrated agricultural chemicals company with sales of about $2.1 billion. round for GrabTaxi $6.8m Series A Tiger Global Management has led a Series C SoftBank Venture Korea (SBVK) has a led a $6.8 round of funding for GrabTaxi, a Southeast million Series A investment in Seoul-based new contribution came from fund-of-funds Asian-focused taxi-booking mobile phone app. education technology start-up KnowRe. KTB Hamilton Lane. Creador, which invests in India New investor Hillhouse Capital Management Network, Partners Investment and SparkLabs and Southeast Asia, announced in August that and existing shareholders GGV Capital, Vertex Global Ventures also took part in the round. it would hold a final close at its original $300 Ventures and China online travel operator Qunar million hard cap. also participated. SOUTH ASIA EIG invests $125m in TAP, KWAP invest in renewables player Greenko Malaysian snack maker Creador ups Fund II to EIG Global Energy Partners has invested $125 Southeast Asia-focused GP Tremendous Asia $330m with commitment million in Greenko, an India-focused renewable Partners (TAP) has teamed up with pension fund Creador has increased the size of it second energy developer that has previously received KWAP to buy a 30% stake in Munchy Group, a fund to $330 million after receiving an funding from the likes of GIC Private and TPG Malaysia-based snacks producer. The size of the additional LP commitment of $30 million. The Capital. The proceeds of the investment will be investment was not disclosed.

Number 40 | Volume 27 | October 28 2014 | avcj.com 5 COVER STORY [email protected] Building partners LPs are seeking to boost their exposure to Asian infrastructure through direct investment, either independently or alongside GPs. In a highly varied regional market, there is no one-size-fits-all approach

WHEN IDFC ALTERNATIVES REACHED A public sector pension account make up 19% understanding of the market, and the LPs get final close on its second infrastructure fund this of the infrastructure co-investors, while other comfort from working with partners who can month, the GP was looking at a very different include insurance firms (8%), asset managers also offer ongoing portfolio management environment to the one it faced when raising the (9%), and banks (5%). support.” maiden vehicle six years earlier. “I think managers are recognizing how However, when seeking co-investment First, the macroeconomic situation in India important it is to their own clients. It is certainly opportunities in developing markets like – and indeed globally– is clearly in much better becoming important to many LPs,” says Benjamin India and China – where risks are high and shape than it was during the period immediately Haan, managing director in Partners Group’s transparency is low – it is paramount that after the global financial crisis. Second, the recent private infrastructure team. “We were relatively LPs identify a partner with whom they are election of Narendra Modi and the country’s well- earlier movers on the co-investment side. Several comfortable. publicized $1 trillion infrastructure opportunity years ago we might have been the only investor Partners Group has been an active has helped whet investor appetite. able to do co-investments, but now there are infrastructure investor in Asia and currently Accordingly, India Infrastructure Fund II many LPs in these funds that have a co-invest has around $9 billion worth of assets under met with a strong demand for co-investment capability of their own.” management in the region. It is engaged across opportunities from LPs. The $900 million fund developed and developing markets, doing direct corpus is supported by a further $800 million that Mutual benefits deals and making co-investments. One of the will go directly into deals alongside the fund, on For the GP, co-investment brings in the extra firm’s highest-profile deals was in India where it a zero-fee basis. capital needed to access larger infrastructure joined a consortium led by Singapore’s Temasek “Clearly, there has been a substantial increase projects. Deals become possible that previously Holdings that paid $1 billion for a 10% stake in of interest in our co-investment pipeline,” says were not due to limits on the amount that a fund Bharti Infratel, the telecom towers subsidiary of M.K. Sinha, managing director and CEO of IDFC can deploy in a single investment. On the LP side, mobile operator Bharti Airtel. Alternatives. “We would expect there to be two or three deals where we can bring in significant Asia private equity infrastructure deal ow additional capital.” LPs seeking more co-invest opportunities 10,000 35 is a well-established phenomenon across the 30 broader asset class and infrastructure is no 8,000 25 exception. Investors are comfortable going into 6,000 projects directly and they like how it reduces the 20 fee burden tied to the fund. However, the way 4,000 Deals US$ million 15 in which LPs do this depends on the jurisdiction 2,000 they invest in, the partnerships they can foster 10 and the resources they can bring to bear. 0 5 Looking at co-investment in isolation, a recent 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 poll released by Preqin supports the idea that No. of deals Amount (US$m) more investors are looking to get direct exposure Source: AVCJ Research to infrastructure by partnering with local fund managers. While the proportion of LPs interested in co-investments globally still remains small – perhaps the most obvious benefit is the prospect Haan emphasizes the importance of building around 13% of the 1,700 active infrastructure of higher returns by essentially doubling down strong relationships with a select group of investors polled said they were open to co- on the choice assets within a fund’s portfolio. managers when looking at co-investment investment – this still represents an increase on And, just like the GP, they stand to gain from opportunities. the 11% reported in 2013. A further 3% are not making larger bets than would otherwise have “We focus on a small number of key currently active but considering the strategy. been possible. relationships in each of the markets we target The same survey data also show that of those “It’s a dual benefit of getting exposure to rather than a ‘scattergun’ approach,” he explains. LPs with an appetite for co-investment, around the good assets alongside knowledgeable “And with those key relationships we seek to 20% reside in Asia, compared to 38% and 31% local manager and getting a relief on the fee invest meaningful amounts of capital and work in North America and Europe, respectively. Last commitment,” says IDFC’s Sinha. “There is an side-by-side with them on certain transactions.” year the Asia figure was 15%. Demand also varies alignment of stars there. The local managers For GPs, the ideal co-investment partner between different types of LP. For example, bring value to the table in terms of their inevitably depends on the nature of the

6 avcj.com | October 28 2014 | Volume 27 | Number 40 COVER STORY [email protected]

transaction. Sharat Goyal, managing director stumbling block – regardless of jurisdiction – can in a dedicated Japanese solar platform to be with AMP Capital, stresses the importance of be LPs’ internal approval processes. operated by Nippon Renewable Energy (NRE). identifying partners that complementary skills “There have been situations where we’ve had For both groups it represented a first foray into and strengths to the deal. to do the same exercise twice over: once with Japanese infrastructure and a solar market that A local investment house, for example, our own investment committee, and then having remains underpenetrated by private equity. In would be well-placed to handle relationships to explain the deal all over again to individual this case Equis – which raised its $647 million with other counterparties, particularly on the co-investors,” says Bamasish Paul, senior vice debut pan-Asian energy and infrastructure government and regulatory side. A development president with Brookfield Asset Management in fund last year – also brought in Babson Capital, finance institution (DFI) such as the International Mumbai. “The due diligence process is longer, LGsuper and Qantas Superannuation as co- Finance Corporation (IFC) or the UK’s CDC Group, and at times that effects our ability to execute investors meanwhile, might attract other co-investors and deals faster.” Haan says that while Partners Group does facilitate access to cheaper lines of debt. Co-investment may be the preferred direct investment and co-investment with local “These are advantages that we cannot bring approach in emerging Asia’s infrastructure sector partners, the emphasis is on the former. One to the table,” says Goyal. “So it is good to have a but that is not necessarily the case in the region’s developing country where it exercises both these partner that can fill in the gaps and make deals developed markets like Japan and Australia. strategies is India. more workable.” Increasingly, pension funds and sovereign wealth “We are huge believers in the importance of Partners Group’s Haan adds that ensuring funds – which want to deploy large sums – seek diversification, so all of our integrated programs an alignment of interest with fund managers is out direct investments on their own. have a high degree of diversification on many vital. The Partners Group approach to getting The reasons for this are two-fold. First, different factors: counterparties, countries, comfortable with a manger and ensuring there is developed markets are inherently less risky. The currencies, even investment types between a strong pipeline of co-investment opportunities assets are often operational and the returns doing direct, secondaries and primaries,” says does not only involve looking at the size of might be guaranteed by regulators, so investors Haan. “Certainly one way to partly mitigate the deals typically targeted. A manager’s track going in have a very clear idea of what they currency risk is to have a diversified program.” record on co-investment is also scrutinized, as well as how they are incentivized to offer such opportunities. Is it mandated or just an “We focus on a small number of key relationships aspirational goal? “The key when you are investing alongside in each of the markets we target rather than a others is getting the governance arrangements ‘scattergun’ approach” – Benjamin Haan right,” Haan says. “You have to take into account what the shareholders’ agreement looks like, whether you are aligned on exit, how much you will get coming out. Second, the infrastructure AMP’s Goyal makes the point that India could trust that partner and whether it is a partner you investment thesis in more mature markets has see more direct investment in future as investors have invested in.” been proven several times over and the investors get more comfortable with the market and build themselves may have built up considerable on- out their presence in the country. Those seeking Timely teamwork the-ground experience. co-investment today could end up doing more While additional capital may be welcome, co- For example, Australia’s superannuation funds direct investment tomorrow. “It is difficult to investment relationships can also bring added have been investing local infrastructure assets identify one common objective for those LPs complications to a deal process and potential since the 1990s. AustralianSuper allocates 10% of who do co-investment,” says Goyal. “But certainly delays in decision-making. This point was overall portfolio to infrastructure, far exceeding you can deduce that some are wetting their feet highlighted by Simon Lund, a principal with the 2% that the California Public Employees’ with co-investment before they go direct.” HarbourVest Partners in Hong Kong, at the AVCJ Retirement System (CalPERS) deploys across Canada Pension Plan Investment Board, for Real Assets Forum earlier this year. He observed infrastructure and timberland. example, recently announced its first direct that the increased desire for co-investment AustralianSuper is also a seasoned direct deal in the country with an agreement to invest among LPs is not always matched by an ability to investor. Last year, it teamed up with three other INR20 billion ($322 million) in Larsen & Toubro consummate a deal against the clock. superannuation funds, Abu Dhabi Investment subsidiary L&T Infrastructure Development “We try to only work with groups were they Authority (ADIA) and IFM Investors to acquire Projects. Also this year, Netherlands-based APG have discretion, where they have proven that 99-year leases on Port Botany and Port Kembla Asset Management teamed up with local player they can execute against a set time-frame, for A$5.07 billion ($5 billion). While this was a Piramal Enterprises to invest up to $1 billion in whether it is two days or three days,” says Lund. consortium participating in an auction process, the sector over the next three years. “When one talks to private equity GPs that have the superannuation funds went in with an For his part, IDFC’s Sinha thinks a market as growing ranks of clients who are seeking co- experienced manager in the form of IFM. large and nuanced as India is one that will require investment, their experiences generally cross a There are also developed market LPs to build up experience and a track record broad spectrum. Oftentimes they will take down opportunities that fall beyond the mainstream. before pursuing all the available opportunities. a deal and syndicate right afterwards so it doesn’t Indeed, the valuations commanded by the The same is true of any emerging market. interrupt the transaction.” biggest brownfield infrastructure projects in “They can selectively participate but to really Downstream syndication relieves time developed market are an incentive for some cover this market in its entirety you need a long- pressure, giving LPs longer to assess a managers to look further afield. term, stable model,” he says. “Not everybody can transaction, although the terms are less favorable In January, Equis Funds Group and Partners replicate a big shop in India and pursue deals than when participating up front. A particular Group together led a $250 million investment directly.”

Number 40 | Volume 27 | October 28 2014 | avcj.com 7 15th Annual Private Equity & Venture Forum India 2014 2-3 December • Taj Lands End, Mumbai

MODI-F.I.E.D. - FUELLING INDIA'S ECONOMIC DEVELOPMENT

Register before 17 NOVEMBER What’s new this year? to SAVE INR18,090/  A panel of successful entrepreneurs from US$300 portfolio companies discussing how Private Equity and industry can effectively collaborate to deliver alpha Sanjeev Aga Pramod Bhasin Business Advisor; Founder and Former MD, Vice Chairman, IDEA CELLULAR GENPACT; Chairman, THE SKILLS ACADEMY Registration Enquiries: Yeni Kittrell T: +852 3411 4836  a highly interactive and Investor Selector: E: [email protected] entertaining session on “What do LP’s really look for in a GP when deciding where to For the latest programme and commit their money” speaker line-up, visit avcjindia.com

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Scan this QR code with your mobile Join your peers phone to review AVCJ India avcjindia.com #avcjindia latest updates 15th Annual Private Equity & Venture Forum FOCUS India 2014 [email protected] 2-3 December • Taj Lands End, Mumbai Breaking down barriers Driven by strong demand from consumers underserved by traditional payment channels, VC and strategic investors are increasingly active in Southeast Asia mobile payment. It is too early to identify winners

AS RECENTLY AS THREE YEARS AGO, is still extremely immature. We don’t know the less fraught. The company started out targeting Mikko Perez’s objective would have seemed direction this market will go and we don’t know cross-border remittances by Filipinos living unreasonable. As founder, chairman and CEO of who the leaders will be.” overseas. This has since been supplanted in Ayannah, a Philippines-based digital payments Mastercard’s Mobile Payments Readiness size by a service that caters to the domestic MODI-F.I.E.D. - FUELLING INDIA'S ECONOMIC DEVELOPMENT business, he will spend the next 4-6 months Index ranked Singapore highest in Southeast remittances market. Financial services were the raising a Series A round of funding. “I would love Asia, followed by the Philippines, Malaysia, ultimate goal but Ayannah first needed points of to have a large Japanese fund and a large Silicon Thailand, Vietnam and Indonesia. The latter five sale, so the company sold mobile phone charge Register before Valley fund invest,” Perez says. generally scored well for consumer readiness but cards. “Mobile airtime is the most liquid and 17 NOVEMBER AVCJ Research has records of 24 VC they were less strong in terms of infrastructure. available form of stored value,” Perez says. What’s new this year? investments involving Japanese groups in The genesis of Coda was the identification With the distribution network established, to SAVE Southeast Asian e-commerce and online services of a gap in the market whereby companies Ayannah too gained momentum, moving into INR18,090/ companies since 2010, and at least 12 M&A deals. could leverage telecom providers’ existing micro-insurance and then remittances. There  A panel of successful entrepreneurs from Fourteen have been announced in 2014 alone. infrastructure to provide billing services for are partnerships with large local retailers as well US$300 E-commerce is the dominant segment, but there third-party merchants. No longer would the lack as with the handful of non-banking financial portfolio companies discussing how Private Equity have also been around half-a-dozen investments companies (NBFCs) that dominate lending at the and industry can effectively collaborate to deliver in payments-related start-ups. lower end of the customer spectrum. Like Coda Ayannah already has Japanese representation “We don’t know the and its telecom partners, these relationships help alpha among its shareholders – the VC units of digital create a defensible market position. marketing agency IMJ, social networking giant direction this market Sanjeev Aga Pramod Bhasin Gree, and e-commerce player Beenos Asia. “We will go and we don’t Looking overseas Business Advisor; Founder and like working with guys who either run internet The flip side is that these relationships are Former MD, Vice Chairman, companies or who have worked for internet know who the leaders a barrier to entry in new markets. Thailand, IDEA CELLULAR GENPACT; companies,” Perez explains. “Our three Japanese for exampe, presents a challenge because – Justin Hall Chairman, investors have a lot of operating experience and will be” payments firm 2C2P has an entrenched position, THE SKILLS ACADEMY Registration they are looking to expand into new markets.” emboldened by tie-ups with most of the banks. Enquiries: These investors’ ability to add value is of a credit cards or debit cards not set up for Ayannah accepts that accessing the more endorsed by Neil Davidson, co-founder and CEO than online purchases prevent consumers from established payments markets in Southeast Asia Yeni Kittrell of Indonesia-based Coda Payments. Among spending money. will involve cooperative arrangements with local T: +852 3411 4836 his company’s backers, he singles out GMO However, creating partnerships with telecom players. Coda, meanwhile, has expanded into  Investor Selector: a highly interactive and Venture Partners for helping scale the business; operators is no easy task. Coda wanted better Singapore and the Philippines largely on the E: [email protected] CyberAgent Ventures for providing merchant economics than those typically granted to third- strength of its merchant network. In this respect, entertaining session on “What do LP’s really partners; and Rakuten for facilitating synergies parties that use operators’ billing capabilities for the links CyberAgent provides to game developers look for in a GP when deciding where to with its other portfolio companies in the region. mobile content. And, to begin with, it was going that want to go cross-border are valuable. For the latest programme and into meetings with an idea rather than a proven Different markets have their own consumer commit their money” speaker line-up, visit avcjindia.com Strong fundamentals business model. idiosyncrasies, regulatory frameworks, and While both are payments companies, Ayannah “It is hard work to persuade an operator business networks. As such, the Southeast and Coda come from different parts of the that you are going to deliver something that is Asia mobile payments map is still divided into industry spectrum – the remittances specialist valuable enough to them that they will make countless pieces. VC money is drawn in by the Asia Series Sponsor Co-Sponsors versus the mobile billing platform. Yet they are some significant changes to business as usual,” market opportunity and the lucrative prospect united in the underlying factors driving their says Coda’s Davidson. “You talk to the operators of backing a winner early on. However, it remains business: rising Southeast Asian consumer and they ask, ‘Who are the merchants?’ You talk to be seen how the industry deals with the markets that want to spend money on products to the merchants [groups that pay Coda and the expected comprehensive roll-out of payment Gaja Capital and services but lack a financial infrastructure to operator for billing services and infrastructure] services provided by sizeable e-commerce TM India’s Meritocratic Capital enable this demand. Mobile solutions in markets and they ask, ‘Who are the operators?’” players such as Rocket Internet and Alibaba where mobile penetration can top 90% make Coda started off with one telecom partner Group. Strategic Japanese investors may also play sense, hence the Japanese interest. and found there was strong demand from an acquisitive role in this situation. Knowledge Sponsors Luncheon Host Cocktail Reception Host Exhibitor “When we say alternative payments it’s a merchants. The company gained momentum “At some point there will be saturation and tremendously large space,” says Justin Hall of and hasn’t looked back. It measures operator consolidation will follow,” says Hall. “Either these Golden Gate Ventures, an investor in Ayannah acquisition cycles in years but once a deal is in companies will merge or somebody larger will and Coda. “There’s a lot of room for growth and place it is a strong competitive advantage. come in, buy 3-4 of these companies and just roll Scan this QR code the payments space in Southeast Asia as a whole For Ayannah, the route was different but no them up.” with your mobile Join your peers phone to review AVCJ India #avcjindia latest updates avcjindia.com Number 40 | Volume 27 | October 28 2014 | avcj.com 9 DEAL OF THE WEEK [email protected] / [email protected] SoftBank bets big on Indonesia e-commerce

SOFTBANK’S FIRST INVESTMENT IN was convinced. At the time, Indonesia had no Tokopedia is leveraging this rapid evolution Alibaba Group came 14 years ago. The initial $20 successful internet story as proof of concept and by running a C2C platform through which million was followed by around $80 million more, prospective investors feared global competition. individuals and businesses can open their own and by the time of Chinese e-commerce giant’s Born into a small-town family in north Sumatra, a online stores for free. With about 2.6 million IPO earlier this year, the Japanese tech firm held a graduate from a local university, and a man with transactions every month, the company still 32.4% stake. This holding is now no entrepreneurial track record, has no fixed date for charging merchants that worth around $78 billion. Tanuwijaya was dismissed out of sell goods on its platform. Rather, the near-term When SoftBank last week led a hand. focus is growing the user base and consolidating $100 million round of investment Finally, in 2009, his former Tokopedia’s market-leading position. for Tokopedia, Indonesia’s largest employer Indonusa Dwitama “All of the investors believe and support the e-commerce marketplace, it provided seed funding. The vision and they never push us to monetize the prompted talk of the company company gained traction and platform, just to focus on growth. With the new again finding success by betting there has been a new round of investment of $100 million, should we worry big and early. Sequoia Capital and Indonesia: Keen to consume investment each year since then. much about generating revenue as soon as existing backer SB Pan Asia Fund, East Ventures and CyberAgent possible?” Tanuwijaya says. which is managed by SoftBank Ventures Korea, Ventures were the earliest backers, soon followed His ambition is to take Tokopedia public, also participated in the round. by Japanese internet player Beenos in 2012 and which requires strength growth to be sustained. “SoftBank’s close partnership with Alibaba then SB Pan Asia Fund last year. The company’s primary obstacle at present is a and its experience in building the world’s mostly Indonesia is the fourth-largest country in the talent shortage, especially on the technology and highly valued marketplace will be invaluable for world with more than 250 million people. Its innovation side. Tokopedia,” says William Tanuwijaya, co-founder internet penetration rate of 29% is expected to “That’s also the reason I choose our investors of Tokopedia. reach 43.7% by 2017. The size of the e-commerce carefully – to make sure we can bring in the Tanuwijaya wanted to build an online market will expand from $1.79 billion to $5.48 know-how and transfer it to our local hires,” he marketplace as far back as 2007 but no one billion over the same period. adds. Creador in Repco Home Finance withdrawal

THE GROWTH OF INDIA’S NON-BANKING the company in January 2013, taking a 10% stake. Creador is just one of several PE backers. finance companies (NBFCs) – institutions that It was diluted to 7.46% after RHF went public The Carlyle Group initially invested around INR1 offer banking services without meeting the in March of last year. The partial exit represents billion in RHF between 2007 and 2009, taking a definition of a bank – is well-documented. a 3.3x money multiple and the PE firm still has 49.7% stake. The PE firm then sold a little over According to the Reserve Bank of India (RBI), the a 2.46% interest in the company, worth INR719 23% in secondary transactions to Wolfensohn share of NBFC’s assets as a proportion of national million at current market prices. and Creador, with the former taking 13%. It also GDP rose from 8.4% to 12.5% between 2006 and Repco Home finance was founded in 2000 sold a 2.78% to Antique Broking and Shardul 2013. This segment of financial services is now as the mortgage finance unit of Repco Bank. Securities, raising a total of INR1.9 billion through almost as large as the banking Headquartered in Chennai, it all sales. sector in terms of assets. It was provides home loans across The following June, after RHF’s IPO, Carlyle three-quarters the size seven southern India and adjacent made a full exit via an INR4.72 billion open years ago. areas, with 74 branches in eight market transaction. Wolfensohn sold down its Accordingly, private equity states and one union territory. holding over two transactions in April this year, has long been tapping NBFCs “During our tenure the reportedly generating a 2x return. as a proxy for India’s growing business has grown rapidly. They Creador still has three other investments middle class and rising consumer essentially have been serving in the financial services sector, including spending. Last week Creador Repco: Mortgage solution mortgages to an underserved Cholamandalam Investment & Finance, another became the latest GP to reap segment, so the business has Indian NBFC, and BFI Finance in Indonesia. The returns from the segment. The PE firm made done well and margins have been very strong,” third business is another Indonesian financial a partial exit from Repco Home Finance (RHF), explains Brahmal Vasudevan, CEO of Creador. services deal, which has yet to be formally selling 3.1 million shares at INR470 apiece via a “Since we achieved fairly good returns quite announced. bulk transaction on the Bombay Stock Exchange, early – though we would normally invest over a “Financial services are a big area of focus for to raise INR1.45 billion ($23.6 million). five-year cycle – we decided now as a good time us and it is something we expect to do more of Creador originally invested $13.5 million in to exit.” going forward,” adds Vasudevan.

10 avcj.com | October 28 2014 | Volume 27 | Number 40 PRIVATE EQUITY DATA FILE | AVCJ RESEARCH [email protected]

PRIVATE EQUITY IN ASIA Investment Breakdown by Country From January to September 2014 Investee Country Amt. Invested US$mln No. of Deals (Disc.) No. of Investees China (PRC) $24,391.4 530 341 515 India $7,119.9 378 294 363 Hong Kong $7,059.1 26 19 25 South Korea $6,956.4 116 109 116 Australia $5,902.3 72 57 72 Japan $4,801.3 401 315 394 Singapore $3,165.9 52 42 52 Malaysia $1,057.3 11 9 11 Philippines $474.4 9 7 8 New Zealand $390.4 23 16 23 Taiwan $211.8 12 9 12 Indonesia $200.0 26 11 25 Vietnam $140.0 9 3 9 Sri Lanka $107.7 2 2 2 Thailand $35.5 12 8 12 Myanmar (Burma) $7.4 2 1 2 Fiji $2.0 1 1 1 Mongolia $0.4 1 1 1

FUND-RAISING MONITOR

CLOSED FUND Location: Hong Kong Fund Name: Carlyle Asia Partners IV, L.P. Closing Amount: US$3.9 billion (final close) Launch Date: May 2012 Fund Manager/Advisor: Carlyle Asia - Hong Kong Stage Focus: Buy-outs (MBO/MBI/LBO) Industry Focus: Consumer products/services, Financial services, Information technology, Media, Retail/Wholesale, Telecommunications, Transportation/ Distribution Geographical Focus: Australia, China (PRC), Hong Kong, India, Malaysia, Philippines, Singapore, South Korea, Taiwan Contact: Wayne Wen-Tsui Tsou Phone: (852) 2878-7000 Email: [email protected] Website: www.carlyle.com Update: Carlyle Group has held a $3.9 billion final close on Carlyle Asia Partners IV, exceeded its target of $3.5 billion. The Fund follows Fund III's strategy, which closed in 2010 with commitments of $2.55 billion, makes control and significant minority investments in well established companies across the Asia ex-Japan region. New York State Teachers' Retirement System and CDIB Capital have committed $100 million and $20 million respectively.

NEW FUNDS Location: Sri Lanka Fund Name: Sri Lanka Growth Opportunities Fund I Target Amount: US$ 30 million Launch Date: September 2014 Fund Manager/Advisor: Ironwood Capital Partners Stage Focus: Expansion/ Growth Capital, Start-up/ Early Stage Industry Focus: No Preference Geographical Focus: Sri Lanka Contact: Hiran Embuldeniya Phone: (94) 112-055-730 Email: [email protected] Website: www.iwcpsl.com Update: Ironwood Capital Partners has held a first close on its debut Sri Lanka-dedicated vehicle with $25 million in capital commitments. Sri Lanka Growth Opportunities Fund I is targeting $30 million final close by December 2014. It will focus on investments of between $3 million and $7 million in small- and medium-sized enterprises across a range of sectors and stages of maturity. Investors in the first close included primarily Asian high net-worth individuals.

Number 40 | Volume 27 | October 28 2014 | avcj.com 11 Customized Research Report Asian Private Equity Data Made Simple

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