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INDIAN PRIVATE EQUITY REPORT 2007
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Indian Private Equity Report 2007

About the Report

Indian Private Equity Report 2007

Four-S in association with IVCA have used their extensive experience of working closely
with leading Private Equity (PE) firms to put together a report that presents all the
current issues and trends in Indian PE. The report classifies PE Investments during the
year by Sector, Industry and Development stage and also includes a listing of the top
PE/VC players in 2007. Fund raising activity, Exits & Liquidity events as well as a study
on the performance of PE-backed companies have also been covered in the report.

Who should read the report?

The report is relevant for all key players associated with Indian Private Equity –
Corporates looking to raise funds, PE Funds investing/planning to invest in the Indian
markets, Investment Banks, Consulting Firms and Law Firms.

PE Funds operating/planning to invest in the Indian markets will be able to analyse the
trends in the market from a single authentic source.

Top executives of corporates looking for PE funding will get to know about the funds
and the kind of companies they invest in. They will also be able to benchmark the
valuation against the comparable companies and will also be able to understand the
value addition from a PE investor on the operational front through our special section
“Impact of PE Funding on Investee Companies”.

Investment Banks, Consulting Firms and Law Firms will be able to know about the key
funds and the kind of deals they are doing in the Indian market.

Study Methodology

Four-S has a strong understanding of the PE space in India having worked with leading
PE firms in India for over six years in a research support role. We have also ensured
that we have captured the views that matter through in-depth meetings with leading PE
stalwarts. The firm has been actively tracking the fund raising space and has a deals
database of PE activity in the country since year 2000 and also comes out with the
Fortnightly Four-S Private Equity Newsletter. As a result, the deals data used in the
report is the most authentic source available on the Indian Private Equity Market.

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Indian Private Equity Report 2007

1. Executive Summary
2. PE/VC Investments in India
1.1. Investment Analysis - Top 10 deals
1.2. Trend Analysis
2.2.1 Sector & Industry Wise Trend
2.2.2 One-of-a-kind Investments
2.2.3 Development Stages Wise Trend
1.3. Most Active PE/VC Firms (Top 10 Value Wise)
Table of Contents

2.4 Indian & Middle East PE firms

3. Fund Raising, Exits & Liquidity Events

1.4. Fund Raising Activity
3.1.1 Indian Economy on a Roll
3.1.2 Top New Funds Raised
3.1.3 New Instruments / Fund Types
- Hedge & Mezzanine Funds
- Proprietary Funds
- Structured Products
1.5. IPO & Non-IPO Exits
3.2.1 Returns Analysis
3.2.2 Major PE Backed IPOs
3.2.3 Major Exits Through Other Modes

4. Impact of PE Funding on Investee Companies

1.6. PE Funding: A Performance Booster?
1.7. Case Studies
4.2.1 Shriram Transport Finance
4.2.2 Jyothy Laboratories
4.2.3 GMR Infrastructure

5. China PE Market and Comparison with India

6. Policies Affecting PE/VC Investments
7. Major Deals That Were Called Off

Annexures:
A. List of PE/VC Deals in 2007 (Sector Wise)
B. Source of PE/VC Funds (Country/Region Wise)

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Indian Private Equity Report 2007

Year 2007 saw Private Equity (PE) and Venture Capital (VC) investments ‘Riding a
Wave of Euphoria’ in India. If 2006 was about PE/VC activity ‘Bursting into Bloom’, by
2007, as the comfort level of investors increased, the sentiment had escalated to
ecstatic levels as can be witnessed in the phenomenal growth in PE/VC investments
in India which hit an unprecedented $xxbn in 2007, x times the $xxbn figure of 2006.

With GDP growth in 2007 maintaining momentum at xx%, projections of over xx%
growth for the next 5 years, a stock market that showed x% growth in the year and
strong business indicators, it was an investment party where everyone wanted to be
seen. In fact, 2007 saw India stride ahead of China in terms of investment – in
comparison, the neighboring BRIC country received only $xxbn PE investment.

By the end of the year, it had become evident that the growth was not sustainable. As
volatility set in and the severity of the US sub-prime crisis began to sink in, purse
strings tightened. However, on the brighter side, the finger on the pause button is
expected to be only a temporary phenomenon. The recent market correction is
resulting in more attractive valuations and investment sentiment is expected to be
2006 2007 YoY Growth %
1. Executive Summary

Investment Value $xxbn $xxbn* xx%

No. of deals xx xx* xx%
Funds Raised $xxbn $xxbn xx%
Average Deal Size $xxmn $xxmn xx%
Active PE Funds xx xx xx%
Biggest Deal $xxmn $xxbn xx%
positive by the second half of 2008 which will see the return to healthy growth as
opposed to the unprecedented growth of 2007.

450 24
xx
400 21
350 xx 18
300 y
15
250
12
200 xx
9
150
Source: Four-S Research Growth
xx
Pattern of PE/VC
y Deals6 in India
100 xx
50 y 3
Record-level growth in PE/VC 0
y y
0
Investments 2003 2004 2005 2006 2007

No. of Deals (LHS) Investment $bn (RHS)

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Indian Private Equity Report 2007

Total PE/VC investments announced in Indian companies was $xxbn across xx deals in 2007, as
compared to $xxbn across xx deals in 2006. The average deal size nearly doubled as compared to
2006 ($xxmn v/s $xxmn), as even smaller investors that earlier used to look for $xxmn deals began
looking for $xxmn deals.

Source: Four-S Research

* Deals include QIPs and those done by Hedge Funds and Proprietary Funds.
Executive Summary

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Indian Private Equity Report 2007

Investing in the Core

Infrastructure (Engineering & Construction) sector accounted for a lion’s share in the 2007 deals list
with nearly $xxbn worth of investments (xx% of total PE/VC investments announced during the
year). As core development continues to be a high priority, the Infra sector is expected to be one of
the fastest growing sectors in India, requiring huge investments worth $xxbn over the next x years.
The major growth driver within the Infrastructure sector was the Construction industry, accounting for
xx% of the investments.
PE Investments (in $mn): Sector-wise
Telecom was a
strong second and
major gainer due to
the 2 mega deals
involving the Bharti
Group. The sector
saw a total
investment of
$xxbn (a xx% jump
over the $xxbn
investment in 2006)
based on the
phenomenal growth IT/ITES Manufacturing Engg. & Healthcare & BFSI Real Estate Telecom Others
rates predicted in Construction Lifesciences
Executive Summary

the subscriber base

which could double
2006 2007
to xxmn by 2010. Source: Four-S Research

BFSI came in third with an investment of $xxbn (xx% of the total). Maximum activity in this sector
was among NBFCs and Brokerage Firms driven by the strong performance of Indian Capital
Markets. Brokerages posted healthy returns based on diversification strategies, strong expansion in
terms of services portfolio, network, etc. and thus attracted $xxmn worth of PE investment. The top
four sectors of Infrastructure, Telecom, BFSI and Real Estate (in that order) received nearly xx% of
all PE investments during 2007.

IT/ITES sector was the biggest loser with investments dropping by xx% on YoY basis due to the
slower profitability growth forecast. The slowdown in the sector was based on the adverse impact of
the over x% appreciation in the rupee and the depressed US economy, which is a major revenue
source for Indian IT companies, coupled with the fact that most of the big IT firms were not looking
to raise funds. However, the sector still managed a record xx small sized deals mainly in the web
based Information Services Industry and in the BPO/KPO Industry.
Traditional favourites like IT/ITES, Manufacturing and Healthcare together comprised of only xx% of
all investments by value in 2007 as compared to xx% in 2006 mainly due to better and bigger size
opportunities in other areas of the economy and comparatively slower growth rates in these 3
sectors. PE Investments (in $bn): Development Stage Wise
250 10
200 8
Focus shifting to Growth 150 6
stage funding 100 4
Growth stage funding received 50 2
0 0
the largest share of the Early Growth Late PIPE Buyout Spin-off
investment pie (xx%), with No. of deals (LHS) Investment $bn (RHS)
$xxbn invested in xx deals as
compared to xx PIPE deals at
Source: Four-S Research
$xxbn.

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Indian Private Equity Report 2007

About Four-S
Four-S Services is India's leading provider of Research, Financial Consulting and
Business Content services. We have a proven track record of consistently delivering high
quality solutions, enabling our clients to improve the effectiveness of decision making and
acting as a catalyst in achieving business success.

We provide full spectrum business and financial research & consulting services to Private
Equity players. Working as an extended arm with leading private equity players, we
identify and track target sectors and companies, prepare investment recommendation
reports and monitor emerging investment trends.

We have offices in Delhi, Gurgaon and Mumbai with state of the art infrastructure to
ensure safety and confidentiality of information. Our team comprises of experienced
analysts with advanced qualifications covering a wide range of sectors including
Infrastructure, BFSI, Textiles, Auto, Pharmaceuticals, Information Technology and
Consumer Durables amongst others.

Our services include:

• Financial Consulting
— Valuation
— Investor Relations
— IPO Consulting
— Capital Structuring
— Strategy & Planning

• India Specific Research

— Information Services
— Business & Financial Analysis
— Industry Analysis & Updates

• Business Content Services

— Annual Reports
— Website Content Development Services
— Investor Presentations
— Corporate Profile

Four-S is a trusted Business and Financial Research Partner for Global Private
Equity Funds. If you would like to know more about our service offerings or want to
discuss your research requirements, please write to us at seema@four-s.com

Four-S Services Pvt. Ltd. Locations

New Delhi: 409, Meghdoot, 94, Nehru Place, New Delhi -110019, INDIA Tel. No. +91-11-41808168
Mumbai: 202, Vinayak Chambers, 4th Road, Khar (West), Mumbai – 400052, INDIA
Tel. No. +91-22-26482878
www.four-s.com

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Indian Private Equity Report 2007

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