Creating and Deriving Value in Private Equity

November 04, 2011

Outline

1. What is Private Equity? 2. Fund Structure 3. Stakeholders 4. Fund Life Cycle 5. The Value Drivers 6. The Value Proposition
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What is Private Equity?

Its Different!
Private Equity Patient Capital Exists for Investors

Driven by Self Regulation

Partnering with Portfolio Companies
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Fund Structure - Unified

International Investors

Rest of World

Mauritius

Mauritius Fund

India

Sponsor

Indian Investors

Trustee India Fund Investment Manager

Portfolio Company 1 Portfolio Company 2 Portfolio Company 3

Stakeholders

Identifying the Stakeholders

Investors Sponsor Trustee Investment Manager

Others Regulators, Advisors, Society etc.

Fund Life Cycle

Fund Raising Stage

Investment Stage

Divestment Stage

Limited Life Vehicles Strategy and Timing matters

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The Value Drivers 1

Value Drivers Fund Raising Stage People & Track Record Fund Terms and Strategy Fund Documentation Investor Profile Regulations

The Value Drivers 2

Value Drivers Investment Stage Four Factor Analysis Promoter - Business -Terms Exit

Investment Process
Entry Valuation

Portfolio Monitoring
Portfolio Valuation
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Reporting

The Value Drivers 3

Value Drivers Divestment Stage Liquidity and Exit Opportunities Timing Divestment Process Relationships

The Value Drivers - 4

The Value Drivers The Core People Passion Processes Relationships Trust

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The Value Proposition -1

The Value Proposition Investors Risk and Reward Risk Mitigation Responsible Investing Good Corporate Governance Co-invest opportunities

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The Value Proposition -2

The Value Proposition Investment Manager High ROE Business Steady Income Share in Profits Building a Partnership Brand and Track Record

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The Value Proposition - 3

The 2-20 Game Decoded Capital Contribution received from Investors on Day 1 Of which: Management Fees paid for one year @ 2% pa Expenses of the Fund paid Invested in Equity Shares of a Portfolio Company Sale Proceeds on divestment of the equity investment on Day 366 DISTRIBUTION WATERFALL Capital Contribution redeemed to Investors Hurdle paid to Investors @ 8% p.a. Catch up paid to the Investment Manager (IM) @25% of Hurdle Total Distributions made before Carry Payouts Balance Available for distribution Shared 80:20 - 80% to Investors Shared 80:20 - 20% to the IM as Carry Total Income Distribution to Investors (8+ 72) Total Income Distribution to the IM (2+ 18)
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INR 100 2 8 90 200 100 8 2 110 90 72 18 80 20

The Value Proposition - 4

The Value Proposition Portfolio Companies Risk Capital Focus on Value Accretion

Strategy & Business Development

Best Practices & Improved Governance

HR Matters
Finance & Leveraging Relationships
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The Value Proposition - 5

The Value Proposition Society

Encouraging Entrepreneurship
Support to Sunrise Sectors Growth Capital & PPP Economic Growth & Job Creation Better Governance

Responsible Investing
Mitigating Systemic Risks
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Private Equity A MAD World

It is all about Making A Difference! AND To make a difference, you need to walk that extra mile and on that extra mile, you seldom have company!

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THANK YOU
For more information, contact
Rupa Vora Infrastructure Development Finance Co. Ltd. Naman Chambers, C-32, G-Block Bandra Kurla Complex, Bandra (East), Mumbai 400 051 Email: rupa.vora@idfc.com

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