transactions 2015: confidence spurs m&a

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Cont

ents Foreword 03M&A highlights 04Private equity highlights 11Sector focus 161. Automotive 162. Health care 193. Media and entertainment 234. Metals and mining 265. Pharmaceuticals 296. Infrastructure 327. Retail and consumer products 358. Technology 38M&A outlook 42Appendices 44Methodology 48

Welcome to the sixth edition of Transactions Annual, our annual analysis of India’s M&A scenario.

Growth picked up in 2014, with the economy demonstrating signs of a turnaround. �� has been boosted by on-going reforms to the monetary policy framework, with ��

��!��!��" ��disclosed deal value also increased after witnessing a decline over the past two years. While India remains a preferred investment destination for global players, �� #$%��"��'��'��(��was M&A activity on the domestic front that took centerstage. In many instances, companies used divestment as an approach to consolidate or reduce their debt burden, strengthen balance-sheets and infuse liquidity into businesses by disposing non-core assets.

The year also ended on a positive note for Indian private equity (PE). The PE ��"��

the highest number of deals since 2008. Mega deals in the e-commerce sector, a spike in deals in start-up/early-stage transactions and consistent exit activity that was in line with the trend over the past three years, drove positive PE activity.

M&A on the inbound front was positive, ��+�� and retail & consumer products accounting for a majority of the inbound deals. Meanwhile, infrastructure and real-estate sectors will continue to see divestments ��"�!!�� that are driven by a need to raise cash for ��short to medium term growth objectives.

We expect inbound M&A activity to witness increased traction, owing to a positive economic outlook for the country, continued focus on reforms by the government, robust PE activity and optimistic investor sentiment. 2015 is expected to deliver sustained positive M&A activity as businesses set their eyes on driving long term growth.

Amit Khandelwal National Director and Partner Transaction Advisory Services Ernst & Young LLP

Foreword

4 '��

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5Transactions 2015

M&A activity involving Indian companies revived in 2014 with 870 deals and a total disclosed value of US$28.6 billion. Compared to 2013, this represents a 17% increase in deal volume (742 deals in 2013) and a 6% increase in deal value (US$27 billion in 2013), and this also ended a decline in deal value over the past two years.

<��=��majority, the M&A activity improved in the second half of the year. The Government’s intent to accelerate the growth of the Indian economy positively impacted the business environment, thereby improving the investor sentiment. The M&A market clocked 448 deals in 2H14, the highest half-yearly volumes since 1H11 and up 36% against the corresponding period last year.

Domestic M&A drove the deal activity with 494 deals worth US$16.2 billion, which accounted for 57% of both total deal volume and value. During the year, the domestic activity registered an increase of more than 160% in terms of value as compared to the previous year, more than compensating for a decline in value of the cross-border deals.

Technology, retail & consumer products and infrastructure exhibited the most activity in terms of deal volume. These three verticals together accounted for approximately one-third �!��>?@B�( ��!��at the forefront, followed by pharmaceuticals and retail & consumer products.

Exhibit 1. M&A activities of Indian companies

Source: EY analysis of Thomson ONE data

Deal value (US$ billion) Number of deals

32.1 27.0 27.0 28.6

826 834

742

870

2011 2012 2013 2014

Exhibit 2. Five most active sectors by deal count in 2014

116 96 94

78

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5,829

4,159 4,010 3,751

2,021

Exhibit 3. Five most active sectors by deal value in 2014US$ million

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Focus on consolidation drives increased domestic activityK�� >?@B��a focus on consolidation by Indian companies. 494 domestic transactions were witnessed with an aggregate disclosed value �!QVX@Z�>��recorded over the past four years.

A major highlight of this year’s domestic activity was the shift from small-sized to larger-sized deals. The mid-market deals (US$20 million – US$100 million) recorded an increase of 52% in volume over the preivous year, against a 5% increase in deals with a disclosed value of less than US$20 million. At the same time, the year also witnessed nine big-ticket deals (US$500 million and above) against just three last year. As a result, the average size of domestic deals more than doubled to US$87 million from US$39 million last year.

Subsequent to the 2014 general elections that helped deliver a stable government, Indian companies displayed more openness and aggression in pursuing acquisitions, in alignment to their expectations of the economy to accelerate at a faster pace. At the same time, some companies divested their assets to raise cash with a focus on repaying debt and thereby reducing their interest costs. Consequently, large cash-rich companies were seen deploying more funds for acquisition of domestic assets. Interestingly, in some of the larger transactions, stock was used as consideration, which helped the buyers to leverage opportunities without impacting their cash accruals or raising fresh funds.

[��!��!�� V��Pharmaceuticals Limited (Sun Pharma) acquired Ranbaxy Laboratories Limited (Ranbaxy) for US$3.2 billion through a share swap agreement. In addition to the share swap amount, Sun Pharma also acquired Ranbaxy’s debt of around US$800 million, taking the overall transaction value to US$4 billion. V��!��\��] %�� portfolio as well as its strong market presence across India and other emerging markets.

��+��^��+��(��+%�_^��+`��{��![|=} � �(��+��[��![|=��K��!��QVX>�B��~��largest ever transaction in the Indian banking sector. This deal is expected to make Kotak the fourth-largest private bank in the country in terms of overall business, expand its national presence and put it in a better position to compete with bigger ��"��['['[(��+��K�'(��+��]��(��+�~��!��"��consolidation in the crowded banking sector and result in a spurt in deal activity by the banking majors.

(�� "��+place signify an intent to increase market share. Some notable transactions include, Carnival Films Private Limited announcing the acquisition of a multiplex unit of Reliance MediaWorks Limited for US$110.8 million; Adani Power Limited announcing the acquisition of Lanco Infratech’s Udupi power plant for US$982.3 million; Strides Arcolab Limited announcing the acquisition of Shasun Pharmaceuticals Limited for US$195.9 million; UltraTech Cement Limited agreeing to a deal to acquire two units of Jaiprakash Associates Limited for US$846.6 million.

7Transactions 2015

Cross-border volumes on the upswingTransnational deal activity involving Indian companies demonstrated a mixed performance in 2014. With 376 deals during the year, the cross-border activity registered an uptick of 23% in volume from 305 deals in 2013. However, deal value declined to US$12.4 billion from US$20.8 billion, due to a reduced number of big-ticket transactions (cross border transactions saw 9 deals in 2013, as against 5 deals in 2014.)

Inbound activity witnesses positive momentumThe inbound activity registered a 27% increase in the number of deals to 257 from 203 during the last year. Foreign players continued to buy/ increase stake in the Indian companies to establish/ increase their presence in India. These companies were further attracted by the newly elected Government’s

2014

2013

2014

2013

Domestic

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Exhibit 5. Geographical distribution of deals

Inbound Outbound

59%

57%

23%

57%

27%

29%

51%

36%

14%

14%

26%

7%

intent to foster a more benign investment climate in the country for international players. While inbound transactions increased in volume, their value was relatively smaller in size. Consequently, the cumulative deal value of inbound deals declined to US$10.4 billion from US$13.7 billion seen in the previous year.

~�� consumer products sectors experienced a majority of the inbound action, with retail & consumer products sector leading in value, primarily on the back of two big-ticket transactions ��{��~��!��the largest inbound deal of the year — the US$1.9 billion acquisition of a 26% stake in India-based United Spirits by Diageo PLC through a tender offer, which made Diageo the

2013 2014

Count Value (US$ million)

Count Value (US$ million)

Domestic 437 6,179 494 16,212

Inbound 203 13,747 257 10,402

�� 102 7,068 119 2,005

Total 742 26,995 870 28,620

V��#$�� !~��|#��

Exhibit 4. Domestic M&A activities of Indian companies



5.5 13.9 6.2 16.2

423 452 437

494

2011 2012 2013 2014

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Exhibit 6. Five most acquisitive nations of Indian companies in 2014


71 40 21 16 15 U

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Exhibit 7. Five most targeted nations by Indian companies in 2014


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controlling stakeholder in the company. With this deal, Diageo ��+��spirits industry in India and expand its revenue streams from emerging markets. The other big-ticket deal also involved United Spirits, where it divested its Whyte & Mackay Scotch whisky unit to Philippines-based Emperador Inc. for US$724.5 million.

�� domestic companies at bay from overseas acquisitions��!�� of inbound — deal volume increased while value declined. During the year, total outbound deal volume stood at 119 deals, up from 102 in 2013, while deal value declined to US$2 billion from US$7 billion. The larger deal value last year can be attributed to two big-ticket transactions in the oil & gas sector, which together contributed more than 70% to the last year’s total outbound deal value. If these two transactions are excluded from consideration, then the current year’s outbound �� [��continued to remain cautious with regard to outbound acquisitions as they focused more on deleveraging their ��!��

The US was the most active cross-border partner

Companies from the US were the most prominent with regard to cross-border transactions involving Indian players. They were involved as acquirers in 71 inbound deals worth US$1.5 billion and targets in 38 outbound deals worth US$1 billion. India continues to be an attractive destination for the US companies because of its strong domestic market that offers ��=��%�commitment to boost the ease of doing business in the country, further investment opportunities are on the cards for the investors. At the same time, steadily improving economic fundamentals and strong corporate earnings in the US provide ��!��[��QV!��inorganic growth.

Renewed interest from Japan

As India-Japan bilateral ties continue to strengthen, this sentiment is echoed by an increase in acquisitive interest from Japanese companies in India. We witnessed 40 inbound

deals from Japan with a cumulative disclosed value of US$1.7 billion in 2014, after seeing a lull in the previous year (28 deals worth US$641 million in 2013). Furthermore, last year also saw the highest number of inbound acquisitions from Japan since 2011. Japan took a second spot after the US in acquiring Indian businesses. Japan has always been a prominent investor in India and the attractive size of the Indian market, favorable demographics and Japan’s urge to reduce its dependence on China are continuously routing Japanese companies to look toward the country for sustained growth. With Indian Prime

9Transactions 2015

Exhibit 10. Composition of total M&A by deal size in 2014(deals with disclosed value only)


Less than US$20 million US$20-100 millionUS$100-500 million US$500 million and above

62.0%

22.5%

11.4%4.2%

Exhibit 9. Average deal size over the last four years


Average deal size (US$ million)

2011 2012 2013 2014

95.3 82.7 96.1 85.7

�� ![��engaging in deals less than US$500 million, with half of them expressing a preference for deals under US$50 million.

��!��"��dominated by domestic deals during the year, with Indian companies engaging in large opportunistic buyouts with an eye on consolidating their position in the market. This is in stark contrast to the previous year, when all the billion-dollar transactions were cross-border in nature.

Minister Narendra Modi’s visit to Japan further reinforcing the Indo-Japan relations, the inbound interest from Japan is expected to increase in the near term.

A pronounced inclination towards small-to-mid sized dealsThe Indian M&A landscape continued to be dominated by small-��"��>?@B��!��!��with disclosed value, those below US$100 million accounted for 84% while just 4% had a value greater than US$500 million. This resulted in a decline in average deal size, which reduced to US$86 million in 2014 from US$96 million a year ago.

The preference of Indian companies towards smaller deals is in line with the nature of opportunities that are available in the ��+��~��"�!�� !#$%�'��'��(�� !senior executives of large companies around the world, with the results narrating a similarpoint of view. According to the

Exhibit 8. Indian inbound M&A activities from Japanese companies


30 39

28

40


2011 2012 2013 2014

1,074 1,791 641 1,650

10 '��

sector has been struggling as many plants were stranded due to lack of fuel, government-regulated low tariffs and distribution bottlenecks. Key asset sale examples include — Lanco Infratech selling its power generation assets to Greenko Plc and Adani Power in two separate deals, cumulatively worth US$1.1 billion; Japirakash Power Venture Ltd selling its hydroelectric power plants to JSW Energy Ltd. in the largest ever deal in the sector for US$1.6 billion.

Apart from infrastructure, players across other sectors also disposed off their non-core assets to reduce debts. Jaiprakash Associates Ltd. announced the sale of its two cement units ��Q��~��'�� (��=�� !��around US$847 million; DLF Limited, Ashok Leyland Limited and Tata Group also sold their respective non-core assets to reduce debt in their books.

Core business regains focusAsset rationalization by Indian companies having sound balance sheets was due to increased focus on their core ��(��+��businesses domestically as well as in its overseas operations — the company has recently signed a deal to sell its 4,800-plus telecom towers in Nigeria to American Tower Corporation for around US$1 billion as a part of its plan to exit non-core ��'��!��streamline both production and supply chain segments; Max Healthcare has divested its international operations with an aim to focus on the growing Indian health care industry.

Clearly, divestment, beyond being seen as a route to survival, has increasingly emerged as a strategic route to enhance value.

Divestments — road towards recoveryDivestment and restructuring exercise by Indian companies ��!�� 2014. An increased focus of companies to de-leverage their balance sheets, restructure their operations and infuse much needed liquidity in the business were the prime reasons for such transactions.

Debt trap — the prime reason for divestmentsUntil a few years ago, Indian companies had actively engaged in raising debt to expand their operations which was driven by their expectations of an improved economic environment in the country. However, the country’s relatively subdued economic environment had an adverse impact on these ��%�� V�� +��an environment of high interest rate were major impediments ��+��!��!��their debt obligations. In order to address this situation, many highly leveraged companies resorted to asset disposals.

�� infrastructure playersDivestments were a common feature across the infrastructure sector in 2014, with companies selling assets to pare debt ��!��{�� the power sector witnessed several large-sized disposals. The

11Transactions 2015

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Changing winds for fund raising At US$3.6 billion, fund raising for 2014 improved 1.6 times, as compared to 2013.However, in terms of number of funds, �� an increase in average ticket size. Notably, around half of the ��!�� !��V�{��'��'��<��(��'��#��Capital and IDFC Alternatives. IDFC Alternatives closed its second infrastructure fund at US$900 million (US$256 million raised in 2014 and US$644 million raised in 2013), the ��[��"��!��>?@?��"!��of the total fund raising during the year was dedicated for investments in the real estate sector, signaling an increasing appetite for Indian real estate in the coming months.

\��[��%�� !��new Government came to power, has started to show in fund raising announcements as well. These amounted to US$8.4 billion in 2014 from US$5.2 billion in 2013. The Government of India’s US$1.6 billion start-up fund and IL&FS US$1 billion Environmental fund to invest in clean technologies have led the fund raising announcements.

2014 ended on a positive note for Indian private equity (PE) activity. PE investments touched US$11.7 billion across 469 deals in 2014 — the second-highest in terms of deal value and the highest in terms of number of deals since 2008.

The increase in deal value was primarily driven by a couple of mega deals (greater than US$500 million) in the e-commerce space. Two leading e-commerce platforms — Flipkart and Snapdeal— together raised multiple rounds of funding during the year, accounting for nearly one-fourth of the total deal ��>?@B�\�� +� �� during the year.

While deal value was driven by e-commerce megadeals, the prominence of start-up/early-stage transactions spiked the total deal number. Touching an all-time high at 254 deals, these accounted for more than half of the total deals in 2014. ~�� of India’s home-grown entrepreneurs with the PE and VC community. Flipkart and Snapdeal, for example, are ranked ��~�>�(��"K��V��'�� ~��<��Street Journal 1.

While 2014 was clearly dominated by start-up investing, buyout deal activity (as a percentage of total deal value) declined substantially from 2013. There were only six buyouts worth US$407 million in 2014, compared to 11 buyouts worth US$1.6 billion in 2013.

In terms of sectors, e-commerce and technology together received an overwhelming response from PE investors — accounting for nearly 40% of the total deal value and number of deals in 2014. They were closely followed by real estate, hospitality and construction that saw a revival in 2014, with the number of deals touching an all-time high and deal value the second-highest after 2007. There were 55 deals worth US$2.2 billion in 2014, as compared to 34 deals worth US$1.1 billion in 2013.

[��(��+��acquired six IT parks near Delhi/NCR from Unitech for US$563 million. Some of the other mega deals in the sector include a QVX>??�� #�� !��+�_��#�� =��~��(��+��=��`��Vrindavan Tech Park, an integrated residential and commercial ��(��QVX@B�� }�!~��(��+��=��#]��~��a New Delhi-based residential project developer.

1 http://graphics.wsj.com/billion-dollar-club/

13Transactions 2015

!��<��building up within the investor community, we expect deal activity in 2015 to at least continue at the same pace witnessed in 2014. Early stage deals will continue to garner a majority share as Indian entrepreneurs emerge with new businesses in sectors such as e-commerce, IT and ITES. Also, other consumer-demand driven sectors such as real estate, health care, retail ��+�� to attract investor interest in 2015. Further, we also see greater direct investments in Indian companies by the leading global LPs — like in 2014 Canada Pension ��[��(��^��+��(��+�

Exits will continue to remain an important focus area for PE funds in India. With a large overhang of investments from the 2006-2008 period, in 2015, we expect more investors spending considerable time on their exit readiness initiatives and performance improvement agendas to prepare their investees for exits.

"�� push exit volume to a new highExit activity averaged around US$3 billion in terms of deal value, fairly consistent with the trend witnessed during the last three years —US$3.4 billion in 2014, US$3.5 billion in 2013 and US$3.4 billion in 2012. However, total number of exits (164) touched a four-year high in 2014, driven primarily by exits through the open market and strategic routes. Exits through the open market witnessed nearly a two-fold improvement, (from 52 in 2013 to 96 in 2014), driven by the recovery in the Indian capital markets. In the largest open ��+��(��'��]��MotoCorp, a leading two-wheeler manufacturer. Additionally, exits through the strategic route also increased to 27, as compared to 17 in 2013 – in line with the overall improvement �� #]��[��continued to remain challenging, with only three PE-backed [�� !��>?@��

Exhibit 11. Aggregate PE investments

Source: VCC Edge Venture Intelligence and EY analysis

Value (US$ million) Volume

17,715 10,627 3,657 8,430 9,641 7,546 9,116 11,683

406

362 226372

446

416

392

469

CY 07 CY 08 CY 09 CY 10 CY 11 CY 12 CY 13 CY 14

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Exhibit 12. Stage-wise analysis (by volume)

Buy-out Growth PIPE Early Stage

Source: VCC Edge, Venture Intelligence and EY analysis

9 11 11 8 14 9 11 6

221 209

109

204 198173

133 148

7746

41

50 75

6369 61

99

96

65

110

159

171179

254

CY 07 CY 08 CY 09 CY 10 CY 11 CY 12 CY 13 CY 14

8,420

5,163

3,609

2,248

32

42

29

26

Exhibit 13. Funds announced and raised

By value (US$ million)

By volume

CY13

CY14

Announced

Source: VCC Edge Venture Intelligence and EY analysis

Raised

CY13

CY14

Exhibit 14. Number of exits

CY13 CY14

Buyback IPO Open Market

Secondary Strategic

Source: VCC Edge, Venture Intelligence and EY analysis

25 22

4 3

52

96

27

16

17

27

15Transactions 2015

Exhibit 16. Sector-wise analysis – by volume

Source: VCC Edge Venture Intelligence and EY analysisOther includes auto, textiles, cement and building products, travel, chemicals, oil and gas, telecom, metals and mining, media and entertainment.

Financial ServicesE-commerceTechnology

Real estate, hospitality and

construction

Education Pharmaceuticals Other

105

20 13 32

71 4255

RCP

26

Healthcare

30

Food and Agriculture

22

Infrastructure

10

Industrial products

18

Business services

13

Logistics

12

Exhibit 15. Sector-wise analysis – by value (US$ million)

Source: VCC Edge Venture Intelligence and EY analysisOther includes Auto, travel, oil and gas, textiles, education, CBP, business services and chemicals.IP – Industrial products, CBP – Cement and building products, HC – Healthcare, RHC – Real estate, hospitality and construction,RCP – Retail and consumer products, F&A – Food and agriculture

3,875 2,202 1,191 1,136 694 593 585 295 177 165 133 131 115 368

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17Transactions 2015

Inbound deals dominate M&A activityIn 2014, the Indian automotive industry reported mixed ��<��!reduced excise duty and improved economic conditions pushed up the sale of passenger cars, the sale of commercial vehicles was hit due to continued poor performance by the light commercial vehicle segment. Amidst this mixed performance, the sector recorded 27 deals during the year with an aggregate disclosed value of US$291 million — down from 37 deals worth QVX��>��>?@��~��of industry players who waited to see the ground work being done by the Government to stimulate healthy activity in the industry. The automotive components domain continued to grab the limelight, accounting for almost all the deals (96%) in the sector.

Increased contribution of inbound deals in total M&A volume of the sector was the highlight of deal activity during the year. In 2014, there were a total of 13 inbound deals in the sector with a cumulative disclosed value of US$154 million. Most of these transactions were done by foreign players, who were aiming to gain control of their existing operations in the country. The rest of the transactions involved international companies entering India either through forming new JVs with domestic players or acquiring stakes in already established companies. This trend reiterates the growing importance of the Indian auto component market in the global automotive industry.

Renewed interest from Japan Among global players, companies from Japan were most active acquirers of Indian auto companies. Japanese auto component makers were seen strengthening their Indian operations by acquiring their partners’ stake in their existing �}�� ^� ��''Company Limited, a Japanese auto parts maker, acquired the remaining 50% stake in FCC Rico Limited from its JV partner Rico Auto Industries Limited for US$80.7 million and Kasai Kogyo Co. Limited acquired the remaining 50% stake in Antolin Kasai TEK Chennai Private Limited for US$4.6 million.

Starting with Suzuki Motor Corporation, India’s automobile sector has always been on the investment radars of Japanese ��~�� develop advanced supply chains and growing ancillary units in India. Moreover, the stagnating growth in their economy is further routing more Japanese companies towards India for sustained growth. For instance, Shiroki Corporation of Japan entered a JV with Technico India Private Limited to manufacture seats and window regulators and Hitachi Metals Limited acquired a majority stake in two Indian companies, RPS Vikas Castings Private Limited and Garima Vikas Metals Private Limited, focused on automotive casting.

The recent increase in inbound M&A activity in the automotive components industry is a clear indication of the renewed interest of global majors in the sector. Thus, while the sector’s performance is still gaining impetus, there is a high level of optimism on the growth expected over the next few years.

Randhir Kochhar, Partner - Automotive, Transaction Advisory Services

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33 37

27

Exhibit 17. M&A deals in the automotive sector

2012 2013 2014

Deal value (US$ million) Number of deals

253 592 291

2012 2013 2014

Number of deals

Domestic 10 13 9

Inbound 16 14 13

�� 7 10 5

Total 33 37 27

Deal value (US$ million)

Domestic 53 45 2

Inbound 86 341 154

�� 114 206 135

Total 253 592 291

V��#$�� !~��|#��

!��Auto components segment to drive M&A activity

The Government is gradually putting in efforts to promote the Indian manufacturing sector by removing hurdles at various stages of production. It has launched the ”Make in India” initiative, which, through increased focus on infrastructure development, land acquisition reforms and improved labor laws, aims to provide a conducive investment climate for automotive companies. At the same time, it is closely working with states to create a consensus on a decision to implement GST, which is expected to leave a favorable impact on vehicle sales.

India has a considerable size of the automotive market, which has substantial growth potential and is expected to become the fourth-largest by volume in the world by 2015. The country has already become a well-established manufacturing hub of export-oriented products for global automotive manufacturers, due to its cost competitiveness and geographical location close to key automotive markets such as Japan, Korea and Europe. Now, with the Government taking �� !��!the Indian manufacturing sector, foreign players are expected to continue to bet on the bright outlook of the Indian automobile industry.

��!��!��[��sector looks optimistic, with the automotive components segment providing solid ground for a healthy activity. The beginning of monetary easing � ��\([��!�� auguring well for a promising year for automotive manufacturers. However, with the excise duties being rolled back in 2015, it will be interesting to see how the domestic market shapes-up as we progress through the year.

19Transactions 2015

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Consolidation drives M&A in the sectorThe health care industry is one of the most rapidly evolving industries in India. Led by private sector investment, the industry is growing at a robust CAGR of 17% and is expected to be approximately US$160 billion by 2017 and US$280 billion by 2020. We see several players evolving their business models to strengthen and expand their scope of services. We also see players developing and adopting new technologies and applications to serve the rising needs of the population of the country. In terms of M&A, 2014 was a bright year for the sector with the highest number of deals witnessed in the last four years. The deal volume grew to 34 deals in 2014, registering an increase of 31%, up from 26 deals in 2013. However, the deal value experienced a decline of 55%, to US$295.4 million in 2014 from US$662.9 million in 2013.

The largest deal of the sector during the year was the US$127.5 million investment in Max Healthcare (MHC) by the South Africa-based Life Healthcare Group (LHC). LHC invested US$63.75 million directly in MHC by subscribing to fresh equity at INR 67.50 per share equaling a 13.3% stake. LHC also acquired an additional 13.3% of existing stake in the company from Max India, MHC’s parent at INR67.50 per share for US$63.75 million, enabling LHC to gain an equal ��'(��

Homegrown players focus on expanding their presence in IndiaDomestic health care players acquired assets across the country to bolster their market shares and expand regional presence or service offerings. Key deals in this space include _@`(��"��|�� %��{��!��!<��(��+��!��QVX>B��|��2014 and acquisition of two hospitals of Jubilant Life Sciences in March 2014 to expand its presence in Eastern India (2) ~��"��^��[��!��V��_^[�V`acquisition of a majority stake in the 600-bed Al Shifa Hospital, located in the northern part of Kerala (3) Hyderabad-based ��%��{��!��@��Q��'��'��

Private equity exits – Where are the buyers?��QVX��B��!��{�� !��in the Indian health care delivery space during the years 2010-2014 by way of 140+ announced deals. Private equity has been the largest source of FDI for the Indian health care delivery industry over this period. The kind of inbound interest being witnessed from MNC strategists in allied segments like pharmaceuticals and medical equipment is largely missing in health care delivery. Except for the acquisition of stake in Max Healthcare by South Africa’s Life Healthcare, and curiosity being seen from a couple of providers in South East Asia, MNC inbound interest is largely missing in this sector. The industry’s widespread dependence on individual doctors (rather than institutions), and the low penetration of meaningful health care insurance are being cited by MNCs as key reasons for lack of meaningful interest.

21Transactions 2015

This raises a concern with respect of the exits that Private-Equity funds might be able to secure from their investments, especially from the small-to-medium platforms. The obvious buyers for such assets would be local strategists; but there are only a handful of credible domestic buyers. Since small-to-��!��+��[��obvious route of exit would be for the incumbent PE funds to ��+��#!��"��"medium platforms might qualify for such exits, on account of ��\�'#��+��The lack of adequate secondary deal appetite also seems to be driving the larger corporate health care providers to evaluate public listings in order to grant exits to their incumbent investors. This leads us to believe that the health care delivery segment in India is indeed becoming a “buyers’ market”.

Medical devices and equipment: an emerging growth storyMedical devices and equipment is another important segment �� [�>?@B�this segment accounted for 7 deals, as companies’ appetites to acquire emerging technologies and improve market reach/ shares drove M&A. Key transactions in the segment were — (1) Trivition Group taking over operations of two Indian companies — Imaging Products (India) Pvt Ltd and Kiran Medical Systems Ltd. (2) Cura HealthCare Pvt Ltd’s acquisition of Concept Integrations (I) Pvt Ltd (3) Euro-Asian Interventional ~��%��{��!(��Interventional Technologies (India) Pvt Ltd.

The growth in Indian health care has been largely driven by private players ��+�!��equity investments. Traditionally these investments have been focused on tertiary care. However, we are now seeing the emergence of a new breed of “focused” health care providers, !��"��+��such as post-operative care, palliative care and day-care procedures. We expect this new breed of providers to become increasingly important and attractive to prospective investors as the Indian health care market evolves beyond the tertiary care theme.

Krishanakumar V. Partner – Health care, Transaction Advisory Services

22 '��

!��Strong growth in medical equipment; Unbundling of value chain in health care delivery

The health care industry is poised for a promising future, supported by favorable demographics and underpenetrated health care market in the country. ��<��%�<��Health Statistics 2013, health care spending stood at B��!��=K��[��!��=K��(��!��=K��^��health care spending in the country compared to other developing countries.

Medical devices and equipment ranks among the most important areas for indigenous investment, since India meets nearly 70% of its requirement of medical devices (in value terms) through imports from developed nations. The industry is in dire need of indigenous technology and manufacturing infrastructure to be able to meet the growing domestic requirements of devices and consumables at “Indian” price points. The December 2014 relaxation of FDI norms to allow @??��K[��!international investment into this sector.

In health care delivery, we continue to expect robust growth in the tertiary care segment, with the scale of operations, and quality of outcome becoming important differentiators. We also see the emergence of innovative models resulting from the unbundling of the traditional value chain. We are seeing the emergence of focused providers in areas such as post-operative care, palliative care, ambulance services, day-care procedures, etc. We expect this trend to continue as the industry continues to evolve and mature.

Exhibit 18. M&A deals in the health care sector

2012 2013 2014


27

418 663 295

24 26 34

2012 2013 2014

Number of deals

Domestic 15 13 21

Inbound 6 11 11

�� 3 2 2

Total 24 26 34


Domestic 79 24 26

Inbound 289 629 269

�� 50 10 -

Total 418 663 295

V��#$�� !~��|#��

23Transactions 2015

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Motion pictures value-chain provides robust ground to M&A activityThe Indian media and entertainment (M&E) industry is widening its reach and playing a critical role in creating awareness on issues affecting lives, and building aspirations, of millions of Indians. Amidst this expansion trajectory, the sector reported healthy M&A activity in 2014, registering 53 transactions during the year with a total disclosed value of US$1.1 billion. Compared with 2013, while deal volume remained constant (51 deals), deal value increased multi-folds from just US$83 million seen last year. This sharp increase in value was on account of one US$500 million and two US$100 million-plus deals.

Content production riding on the waves of expansion The motion pictures and audio visual segment was the main contributor and accounted for 19 deals worth US$353 million during the year. In a landmark deal for the segment, we saw Reliance MediaWorks Limited (Reliance) and Prime Focus ��businesses, and both the companies infusing a total of US$40 million into the merged entity through preferential allotment of shares. Within the motion pictures and audio visual segment, content producers and distributors stole the show since they followed the inorganic route to enhance their capabilities and add capacity to quickly expand their operations in the country. For �]��(��{��^VV��acquired Digital Cinema & Technology, while PVP Media acquired a 23.5% stake in Picturehouse Media Limited.

Consolidation evident in the movie exhibition industryAnother trend seen within the motion picture segment was the consolidation in the movie exhibition space. Multiplex operators chose the M&A route to consolidate their position in the industry, �� and distributors, and partly to gain an increased share of box-�!��~��{��]��improve revenues through increased ticket sales and increased advertising income, besides optimizing costs. At the same time,

��{��!+� geographies in their portfolio.

There were four such transactions in the second half of 2014, the latest being the US$110.8 million sale of the multiplex ��(��'�� \��'��(Carnival). After this transaction, Carnival will operate more than 300 screens nationwide, which is likely to catapult the company to rank amongst the top three multiplex operators in �� [��]��Limited’s acquisition of Satyam Cineplexes Limited, Carnival’s ��{��!(�� '��!��K��Infrastructure Limited, and Mexican multiplex chain Cinepolis’ acquisition of Fun Cinemas.

As a sign of further consolidation in the industry, some more players are rumored to make acquisitions to strengthen their position. This trend is expected to continue in the near term as the slowdown in new mall development has led to sluggish organic growth in the segment and players are left with no other option but to acquire companies to achieve exponential growth.

Largest deal in broadcasting domain(�� \��Industries Limited’s (RIL’s) acquisition of Network 18 Media �[�� ~}@�(��Limited for US$680 million. This also happens to be the largest transaction of the sector in 2014. The acquisition was aimed at combining Network 18’s media capabilities with RIL’s telecom business. This will help RIL in differentiating its upcoming 4G services by providing a unique amalgamation at the intersection of telecom, web and digital commerce via a suite of premier digital properties.

The radio industry is gaining attentionThe radio media segment saw a noteworthy deal during the ��+��{��(��Private Limited, the owner of Radio City 91.1 FM, to consolidate its position in the media space and provide multiple advertising ��!��!��!companies are resorting towards radio advertisement due to squeezing advertising budgets, cheaper radio advertisement costs and massive reach of radio, making it an attractive business bet for media conglomerates. In addition, the segment will likely see the entrance of new players under the phase 3 frequency auctions in 2015, making the segment more fragmented and opening doors for consolidation in subsequent years.

25Transactions 2015

!��Future is digital

With the advent of the internet, the M&E environment in the country is evolving at a rapid pace. The increasing use of social networking services, online gaming and mobile applications, amidst fast growing internet user base in the country, has added a new dimension in the world of M&E in recent times. To address these changing dynamics of the industry, players are adopting new approaches to keep them abreast and deliver top class services to customers.

The publishing segment has begun to evolve towards digital media to cater to the increasingly tech-savvy population of the country. During the year, the S. Chand Group, India’s leading publishing enterprise, signed a Memorandum of Understanding with the Ministry of Human Resource Development on digital content under the Government’s NMEICT and Sakshat initiatives. To facilitate this, S.Chand also acquired DS Digital Private Limited, a company providing digital content solutions to the education industry.

The advertising space is also reporting a transition towards digital space, where companies across sectors are increasingly looking for digital marketing to promote their products. To make the most of the available opportunity and engage consumers in new ways, advertising agencies are expected to respond by acquiring digital and social media boutiques, and strengthening their position in the market. With the fundamentals well in place to support the transforming landscape of the industry, digital media continues to be the big hope for the future of M&E in the country.

Exhibit 19. M&A deals in the Media and entertainment sector

2012 2013 2014


27

50 51 53

875 83 1,094

2012 2013 2014

Number of deals

Domestic 30 30 34

Inbound 16 16 16

�� 4 5 3

Total 50 51 53


Domestic 587 12 1,067

Inbound 288 64 27

�� - 7 -

Total 875 83 1,094

V��#$�� !~��|#��

��!�� consolidation in the media and entertainment sector. With most of the large global MNCs looking to further expand their operations in India, we expect this trend to continue. Increased M&A activity is expected across the traditional media segments.

Ajay Shah, Partner - Media and Entertainment, Transaction Advisory Services

26 '��

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27Transactions 2015

Maxsteel Limited, a Mumbai-based manufacturer of sponge iron, from Welspun Power & Steel Limited, for US$165 million to expand its capacity. Another similar deal was, Madhumalti Merchandise Private Limited raising its stake in Ramsarup Industries Limited.

At the same time, small and mid-tier companies were seen scouting for strategic partnerships to tap overseas funds and �� |��"��V��Iron & Steel Co. Limited sold a 10% stake to Japan-based Daido Steel Co Limited for US$9.4 million.

Hunt for overseas mining assets fadingM&A activity in the mining segment remained subdued in 2014, primarily due to the cautious approach of Indian companies to look for overseas mining assets. Until 2012, Indian players were aggressively pursuing outbound acquisitions with an aim to ensure continuous raw material supply. However, the trend was completely reversed in subsequent years, as Indian players started focusing on deleveraging their balance sheets and improving operational �!�� ~��!��!��India’s historically preferred coal-hunting destinations. There were just 2 acquisitions targeted towards Australia and none in Indonesia in the two previous years, as compared to 15 seen collectively in these 2 countries during 2011 and 2012. The increasing resource nationalism in mineral-rich countries could also be another contributing factor for this.

Facing challenging timesThe Indian metals and mining sector recorded 26 deals with an aggregate disclosed value of US$676 million in 2014, and registered a decline in terms of deal count from 35 deals in 2013. Although the deal value recovered from US$446 million in 2013, it still lagged behind substantially from the levels seen in prior years (US$4.9 billion in 2012 and US$2.9 billion in 2011). However, the year provided some relief as the sector reported three deals with a value of more than US$100 million each as compared to none in the previous year.

Similar to last year, domestic activity remained at the forefront in 2014, with 12 deals worth US$167 million. However, it was inbound activity which grabbed the attention in terms of value (US$324 million). At the same time, inbound deal volume remained stable during the year, thereby indicating sustained appetite of global players for Indian businesses.

Iron and steel drives deal valueThe iron and steel segment led the pack during the year, accounting for 46% of total deal volume and 74% of deal value. Indian steel majors focused on consolidating their position through small and mid-tier acquisitions, and restructuring shareholding in their group companies. JSW Steel Limited (JSW) was the leading player in strengthening its position in the market through acquisitions. The company acquired a 50% stake in Ludhiana based Vallabh Tinplate Private Limited with an aim to enter into the high-value tinplate business. EY acted ��]��}��~��!��transaction. In another transaction, JSW acquired Welspun

'��!��!�� and deleveraging balance sheets. Although fund raising in ��!�� new initiatives by the Government in terms of auction of mines in a completely transparent manner will augur well for the industry.

Dilip Khanna, Partner - Metals and Mining, Transaction Advisory Services

28 '��

Exhibit 20. M&A deals in the Metals and mining sector

2012 2013 2014


41 35

26

4,957 446 676

2012 2013 2014

Number of deals

Domestic 18 21 12

Inbound 9 6 8

�� 14 8 6

Total 41 35 26


Domestic 4,617 180 167

Inbound 119 85 324

�� 221 181 185

Total 4,957 446 676

V��#$�� !~��|#��

!��Setting the stage for a rebound

M&A activity in India’s metals and mining sector will likely pick-up in the mid-to-long term, since the Government’s ambitious infrastructure plans, coupled with a promising economic outlook and escalating energy needs are expected to keep on fueling demand for base metals and fossil-fuels. De-leveraging and consolidation moves by Indian players will also provide a further push to transaction activity. Moreover, to sustain healthy growth rates for the long term, the Government has to move faster to resolve environmental and mining issues. Things have already started moving with the intent to introduce favorable land acquisition norms and new labor laws. With the Government’s strong focus on ‘Make in India’ campaign, further improvement is expected in the approval process and investment policies for the M&M sector in the near-to-mid-term. The Government is also pushing state-owned companies to improve output ��]��!�� !existing plants and mines.

Many state-run mining and power companies are also looking for overseas acquisition targets to expand capacity and secure raw material supply. While NTPC is eying overseas coal assets to secure raw material, Coal India has been considering such acquisition options for a while. Interestingly, the recent slowdown in China, has led to a downward spiral in commodity prices and mining investments in resource-rich nations. It remains to be seen if Indian players will be able to take advantage of this opportunity to further their resource security objectives.

Coal block auctions will be in the limelight throughout 2015 as the Government plans to put 204 blocks for private and state-owned companies. These auctions are expected to generate healthy collections for the State as well as Central exchequer. Also, iron ore, manganese, bauxite and other mines may be auctioned later in the year. Integrated plants with captive coal and/or iron ore mines are expected to attract both domestic as well as international in-bound investors in the future.

29Transactions 2015

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Domestic deals dominate M&A landscapeIt was an active year for the Indian pharmaceuticals industry, with a few large-ticket transactions driving the M&A value in 2014. During the year, the sector reported a considerable domestic consolidation transaction (Sun Pharma - Ranbaxy deal worth US$3.2 billion), along with a mid-sized outbound deal (Aurobindo Pharma Limited – Natrol Inc. deal worth QVX@��`�~��(Meiji Seika Pharma Co., Ltd. – Medreich Limited deal worth US$290 million) getting completed, all of which buoyed up the total deal value. The year also marked the completion of Torrent Pharmaceuticals’ acquisition of a part of Elder Pharmaceuticals’ domestic formulations business, a deal which was signed in December 2013.

��>��>?@B��aggregate disclosed value of US$4.2 billion*, registering the highest deal volume and value in more than four years. Compared to 2013, this represents a 63% increase in deal volume and 12% in value terms. The volume growth was primarily driven by outbound transactions which contributed 45% to the total increase. This was followed by domestic transactions which drove 35% of the incremental deal activity in 2014. Though inbound deal activity increased in volume �� _��`��of value in 2014. Global strategists continue to approach India with cautious optimism on big-ticket investments, on account of issues pertaining to IPR/ Compulsory Licensing, ever-expanding scope and prevalence of price control, and uncertain regulatory framework on clinical trials.

Desire for expansion drove acquisitions Indian pharmaceutical companies acquired other local players in order to strengthen their product portfolios and expand their businesses both in existing and new markets. There were 23 domestic transactions during the year with total disclosed value of US$3.6 billion, contributing 44% to ��%��Z��(��V��

Pharma-Ranbaxy landmark deal, several other companies made domestic acquisitions to gain economies of scale and �� For instance, Strides Arcolab Limited acquired the Indian ��!(�!��to build distribution reach; HLL Lifecare Limited acquired a majority stake in Goa Antibiotics and Pharmaceuticals Limited to expand and diversify its pharma portfolio.

Historically, Indian pharmaceutical companies have not indulged in big-ticket M&A in the domestic market. However, we see this trend slowly changing with the Torrent-Elder and Sun Pharma-Ranbaxy transactions. Given the long-standing fragmented nature of the domestic pharmaceuticals industry, and the aggressive emergence of bigger players as a credible force in domestic M&A, we expect to see more consolidation in the domestic market.

After a prolonged period of slowdown in outsourcing (the brunt of which was felt over 2008-2011), we are witnessing a widespread resurgence in the outsourcing of process development and scale-up activities for new molecules by innovator pharma companies to Indian Contract Manufacturing ��_'��`��'��was the acquisition of Shasun Pharmaceuticals by Strides Arcolabs in an all-stock transaction worth US$196 million.

Indian players also continued their quest of acquiring niche technology/ manufacturing capabilities, brands, and client/ distribution reach of companies internationally (17 outbound deals with a total disclosed value of US$210 million) to expand in developed as well as emerging markets. While Cipla was the most active acquirer of overseas companies — featuring in three outbound deals (acquired Chase Pharmaceuticals in the US and one undisclosed company each in Sri Lanka and Yemen), Aurobindo Pharma Limited (Aurobindo Pharma) was the acquirer in the largest outbound deal of the sector _��{��QV"��|��[��!��QVX@��`��key outbound acquisitions include Lupin Limited’s acquisition of one company each in Mexico and the Netherlands, and Aurobindo Pharma’s acquisition of Actavis Plc’s generic drug operations in Europe.

31Transactions 2015

!��Domestic players well-positioned for overseas growth

While India is becoming increasingly meaningful in the global generic drug industry, it is nevertheless important for Indian companies to de-risk their business models by building balanced portfolios across multiple markets, including the US, the EU, and Latin America. However, if Indian players have to establish themselves in these areas, they would have to ensure compliance with global regulations and quality standards. Failure to comply with such norms could cause severe setbacks in terms of multi-year disruptions in production and exports, remediation costs, as well as reputational and litigation damages.

After achieving strong positions in terms of “number of prescriptions generated” in the US generics market, leading Indian generics players are now focusing on improving the “value per prescription.” Towards this, �� +��pipelines with differentiated/value-added generic formulations. These formulations, referred to as “super generics”, incorporate incremental innovations over and above existing reference-listed-drugs, which, if approved, might qualify for a few (typically less than 5) years of patent life. This, in turn, might help the generic drug companies to secure increased market shares and pricing over the life cycle of products.

Exhibit 21. M&A deals in the Pharmaceuticals sector

2012 2013 2014


43 3252

2,017 3,717 4,159

2012 2013 2014

Number of deals

Domestic 17 16 23

Inbound 18 8 12

�� 8 8 17

Total 43 32 52


Domestic 80 740 3,565

Inbound 1,128 2,962 384

�� 809 15 210

Total 2,017 3,717 4,159

V��#$�� !~��|#��

*The total disclosed value does not include the acquired debt of the targets in M&A transactions.

~�� !��~�"�?�� >??��@B��{�� !>?@B��!��>�companies with revenues of US$2 billion – US$5 billion in 2007, a whopping 21 companies had been acquired by the end of 2014. Correspondingly, we had 22 companies with revenues of above US$10 billion in 2014, up from 14 companies in 2007. This trend will get mirrored in India, as we see an expanding scope of price control, and tighter regulations ��]��"��!��

Krishanakumar V., Partner - Pharmaceuticals, Transaction Advisory Services

32 '��

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33Transactions 2015

While domestic and foreign strategic investors continue to evaluate M&A opportunities in India, we are now seeing interest from PE funds including pension funds to invest growth capital in Indian Infrastructure assets.

Kuljit Singh, Partner – Infrastructure, Transaction Advisory Services

#�� $��%��'��activity in the power generation spaceThe Indian infrastructure sector put up an impressive show ��+�� "��" ��increase, both in terms of value and volume. In 2014, the sector registered an aggregate disclosed value of US$5.8 billion with 94 deals, as compared to US$2 billion with 73 deals in 2013. This increase in value of the sector can be attributed to four mega deals (more than US$500 million), as compared to just one seen in 2013.

Within infrastructure, cleantech and thermal power segments hogged the limelight as they cumulatively accounted for 74% of the total M&A value and 33% of volume of the sector. The power generation segment also saw the largest deal of the sector with a transaction value of US$1.6 billion. Engineering services (16 deals) and logistics (14 deals) were other active segments during the year. However, the total disclosed deal value in both of the sectors was very small (engineering services – US$56 million, logistics – US$139 million) due to the absence of big-ticket deals.

Balance sheet de-leveraging remains �'��(�� The transaction activity in the power segment has picked-up off late. Many companies had entered the power generation segment over the last decade and committed aggressive capex plans to build capacities. However, a subdued economic ��!��>??��{�� !��+��and high-leveraged balance sheets, stalled big power projects. ��"��land acquisition hurdles and delay in environmental clearances exerted further drag on the sector and led to cost escalation. Consequently, some of the companies decided to divest their assets and de-leverage balance sheets. For example, Jaiprakash Power Ventures, a part of the Jaypee Group, sold two hydro power assets to JSW Energy Limited for

QVX@�Z��V��>?@B��other hand, India’s undying thrust for power, along with the Government’s focus on increasing output and renewed ��[��%��started attracting global players.

Clean energy comes to the forefrontAn increasing awareness about the climate change, focus on clean energy globally and India’s heavy reliance on imported fossil fuels are the reasons for the Government’s increasing focus on clean energy sources. India continued to maintain its position as the seventh largest clean energy investor in the world in 2014 with an investment of US$7.9 billion. Furthermore, the Government is betting big on clean energy sources such as wind and solar to continuously support the booming economic activity. The government has set a target of 100GW solar power output by 2022, a 33x increase from the current capacity. This ambitious target will require an investment of approximately US$100 billion, and the government is attracting companies from China, Japan, Germany and the US to install capacities in India. In addition, the Government hopes to install 60GW wind power capacity by 2022. According to media reports, many global solar power players such as China’s Trina Solar and US-based First Solar Inc. are believed to have plans to set up manufacturing facilities in India. Recently in January 2015, US-based Sun Edison Inc. announced to form a US$4 billion* JV with India-based Adani Enterprises Ltd to build a solar photovoltaic manufacturing facility in India. Furthermore, the US President (��+��!QVX>��India’s renewables energy space during his recent visit to India, highlighting the importance of clean energy in power-starved Indian economy. Hydro energy is another focus area for the government with a targeted capacity addition of 11GW in the ��!�� >?@��!��players in India’s renewable power sector is expected to increase in the near future, aided by supportive government policies.

��[�� QV��(��+��%��[��visit, paving way for a buoyant activity in nuclear power space. The Government has earmarked a capacity addition of 5GW for nuclear power and 72GW for thermal power under in the twelfth �� !��production methods in the Indian economy.

34 '��

!��Multiple drivers to provide an additional push to M&A activity

The Indian infrastructure sector is set to witness interesting times as the Government’s move to build infrastructure and fasten the clearance processes has cheered the business leaders. Furthermore, improving bilateral ties with other key global economies such as Japan, China and the US, and their intent to partner with India on infrastructure projects will also augur well for the sector.

At the sub-sector level, the Indian power industry has been grappling with multiple challenges such as ��!!��!�� of existing plants, fuel availability and quality related issues for quite some time. In addition, the cancellation of 214 coal blocks allocation by the Indian Supreme Court in September 2014 had also dampened the investor sentiment. However, factors like positive developments on land acquisition reforms and environmental clearances, coupled with steady progress on electricity amendment bill 2014 have led to a conducive environment for business investments. Furthermore, easing monetary policy, sharp decline in global fuel prices and the Government’s renewed focus to resolve mining issues are providing big relief to industry players. At the same time, reducing leverage further is going to be another major driver for M&A in the near future. An increasing number of companies are looking to sell their power assets in order to improve their debt-infested balance sheets. Hence, we may see more deals involving divesting off of assets, divisions or subsidiaries by large power houses.

2012 2013 2014

Number of deals

Domestic 29 43 52

Inbound 27 21 33

�� 12 9 9

Total 68 73 94


Domestic 88 721 4,954

Inbound 121 1,181 839

�� 76 81 36

Total 285 1,983 5,829

V��#$�� !~��|#��

Exhibit 22. M&A deals in the Infrastructure sector

2012 2013 2014


68 73

94

285 1,983 5,829

*Value not included in total M&A deals as this deal was announced in Jan 2015.

35Transactions 2015

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\�� ![��%��and hence the growth story remains intact. This will continue to make the sector attractive from an ��!��'=�!��[��!!��!��+��[��continue to dominate the investment space as it is offering itself to be the fastest growing and most scalable segment

Nitin Gupta, Partner - Retail and Consumer Products, Transaction Advisory Services

Strong value with recovering volumesM&A in the Indian retail and consumer products sector was bright in 2014. The sector clocked 96 deals worth US$4 billion during the year, registering an increase of 32% in volume after witnessing a 26% decline in 2013. Notably, this happens to be the largest yearly value seen in more than four years. Food and beverages was the most active segment during the year, accounting for 73% of the total M&A value and 44% of volume �!��13 deals cumulatively worth US$773 million (19% of the total deal value).

Like last year, domestic deal activity dominated the sector’s M&A landscape in terms of volume (68% of total deals of the sector in 2014) with no deal crossing the US$100 million mark in value.

Food and beverages drove deal activityThe food and beverage industry continued to drive the deal activity within the retail sector, both in terms of aggregate deal value and deal volume. The segment recorded 42 deals cumulatively worth US$2.9 billion in 2014.

Amongst food and beverages, the most active sub-segment was non-alcoholic beverages, as companies in the tea and coffee business acquired international players (6 deals out of total 8 deals) to strengthen their overseas presence. The +� ��!��"��~��=��(��%_~=(`@??��{��!��"��(��+�#�� #��\�� ~��{��~=(%�� to become a leader in natural beverages - tea, coffee and water. The deal would enable the Indian player to expand its �!!��"��(1) Mcleod Russel India Ltd’s acquisition of 90% interest in Pfunda Tea Company SARL, a producer of tea in Rwanda, for US$19.5 million and tea processing factory of Ngoc Hai Co Ltd., a Vietnamese player, in separate deals (2) Asian Tea Co Pvt Ltd’s acquisition of Sri-Lanka based Classic Teas Pvt Ltd (3) Kothari Group’s acquisition of Malawi-based Group Development Ltd.

Domestic liquor manufacturers were also active in acquiring domestic production facilities to increase their capacity. Examples include (1) Agro Industries’ acquisition of Nirvana (�� _>`~��+��[��%��{��![��!��{��!��[�(��[��_�`Q��(��%��{��!��V��!��QVX@��These deals indicated the efforts taken by indigenous players to add capacities and develop a portfolio of leading brands across different segments of spirits market.

Online retail steams upAnother segment that was in focus throughout the year was online retail. The largest deal in the e-commerce space was QVXZ>�� V�!�(��+[��Snapdeal.Com, an e-commerce start-up founded four years ago.

Domestic e-tailers improved the Indian M&A market as they increasingly indulged in acquisitions to meet the growing demand for online shopping of products and counter the escalating competition. These companies are now increasingly seeking to diversify their portfolio to ensure growth with �� K�� +� �� !!��segments consolidated their position in the market through M&A. Key deals include Flipkart’s acquisition of Myntra, Snapdeal’s acquisition of doozton.com and Wishpicker.com; GiftCardsIndia.com’s acquisition of social gifting venture =�!�� V��%��{��!(��+��Acadzone.com and Koolskool.com in one deal. Investments by leading corporate entities also strengthened investor’s ��!��!�� V�!��+[��Media’s above mentioned investment in Snapdeal and Ratan ~��%��{��!�� +��(��leading examples.

Feeling the need to enhance mode of operation, home grown players running brick and mortar business also entered the online operation mode through the inorganic route — Hybrid ��!��(��[��!�� venture Meals on Wheels; Paired Technologies, a provider of software solutions to transportation and logistics industry entered the e-tailing industry by acquiring Deals15.com, a computer peripherals and mobile accessories online retailer.

37Transactions 2015

!��Indian retail market to continue the growth trajectory��$��(��+"�VV�'��[��%�retail market is likely to touch a whopping INR47 lakh crore (US$738.7 billion) by 2016-17, expanding at a compounded annual growth rate of 15% from the level of [|\>��+��>?@@"@>��+��which currently constitutes only 7% of the total retail market, poses untapped opportunities for both domestic and international players. Supported by constructive demand-side factors, including favorable demographics, increasing urbanization, nuclearization of families, ��!��!��for branded products, are further likely to drive retail consumption in India.

At the same time, the Foreign Investment Promotion (��_�[�(`��+��investments in the country’s retail segment. In 2014, ��[�(��QVXZZ��!��(��SA and Flemingo. Additionally, the board cleared three 100% single-brand retail proposals worth US$35 million. ~�� [�(��global majors looking to enter the growing Indian retail market. Moreover, with the demand-side factors well in place to provide warm welcome to these players, healthy inbound action is expected in the near term.

Furthermore, the online retail space is expected to continue being in limelight with acquisitions in a broad range of segments, including grocery, furniture and jewellery, as the players strive to become one-stop shop and cater the bourgeoning needs of new-age urban consumers. These players are also taking steps to develop an entire seller ecosystem, from logistics, supply chain to payment solutions. Several leading ecommerce ��+��(� ��process of setting up their own logistics units in different states to cater to the regional demand. As the demand mushrooms, they may also acquire small logistics companies and payment solutions companies to enhance their in-house capabilities.

Exhibit 23. M&A deals in the retail and consumer products sector

2012 2013 2014


27

2,853 3,843 4,010

98

73

96

2012 2013 2014

Number of deals

Domestic 59 53 65

Inbound 24 13 19

�� 15 7 12

Total 98 73 96


Domestic 683 132 178

Inbound 1,987 3,707 3,743

�� 183 4 89

Total 2,853 3,843 4,010

V��#$�� !~��|#��

38 '��

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39Transactions 2015

Health and insurance software segments pose opportunity for IT playersIT majors betting on health care and insurance software segments were commonly heard during the year. With the prevailing regulations pertaining to the health care industry in the US, Indian companies are pulling their capabilities up to be a specialized health care IT services provider. They are looking to acquire additional expertise which will be required for health exchanges, hospitals and medical devices manufacturers and to shift from being a generic service provider to a spealized and focused health care player. Acquisitions on this line included (1) India-based Mastek acquiring the US-based Cover-All Technologies (2) India-based Asya Infosoft acquiring Ideal Systems (3) Piramal-backed Decision Resources Group acquiring the US-based Relay Technology Management Inc.

Tech players go mobileAnother prominent segment was creators of mobile applications and software. Applications on mobile devices are being seen as ��!�� !!��to their targetted customers and tap into their respective market share. Mobile applications are a big hit amongst players as ��"��"��!��]��internet on mobile phones, thus skipping computers. Majority of the deals in this segment were inbound in nature, primarily from the US. These transactions echo the bonding ties between India and the US on technology platforms. Also, Indian mobile software developers were busy acquiring both domestic and overseas players to seize additional capabilities, simultaneously expanding their market share.

The sector registers $ ��' ��'��activity ~�� !�� highest-ever deal volume in a year since 2011 and an increase by 0.6x in deal volume and 2.7x in deal value from 2013. The year was also a landmark period for inbound investments, recoding the best performance both in terms of value and volume in more than four years. The majority of these inbound deals (43 deals worth US$1.1 billion) were targeted towards the Indian software segment (22 deals worth US$376 million).

Deals with undisclosed value characterized the sector’s M&A landscape in 2014 (88 deals out of 116), like in the previous year. However, 2014 was better in terms of mega deals (above US$500 million), with two deals cumulatively worth US$1.1 ��>?@��cross-border front, the US continued to be the most active partner with the highest number of inbound and outbound transactions. The US companies were engaged in more than 50% of cross-border transactions with Indian companies (37 out of 70 deals), majority being in IT consulting and services, and software domains.

Primarily, IT consulting and services, and software segments drove the deal activity in the sector (85 deals out of 116 deals). The largest deal of the sector was also in the IT consulting and services space — merger of CMC with Tata Consultancy Services valued at US$510.7 million. This was driven by TATA Group’s efforts to consolidate its IT business ��]��

40 '��

!��Borderless tech world

The Indian tech ecosystem is certainly gaining its shine in recent years with its increased integration across all industries. The tech industry had its own �� (�� backend IT services and currently shifting towards data analytics, cloud computing, business intelligence and mobile applications. With start -ups mushrooming in the country to offer enhanced product offerings and personalized services, India’s technology industry is poised to rapidly mature in terms of the talent pool and level of services.

|�VV'��facilitate strategic investments into start-ups by larger companies in view of the growing importance of emerging companies with new capabilities. The outlook of the sector remains bright as tech majors, besides acquiring similar business models, are also eyeing to diversify by acquiring a minority stake in a software start-up, keeping it at arm’s length from its core business. This model is expected to help them create new revenue streams for their services sector model, and possibly, also playing the role of a venture capitalist.

Furthermore, with the growing importance of health care industry globally, the health care insurance software segment is further expected to witness M&A action, especially at the cross-border front. Leading ��[~��are likely to bolster their presence in this segment, not only in the US, but also in emerging markets.

Some of the key deals in the segment include (1) Facebook’s acquisition of Little Eye Software Labs, a provider of performance analysis and monitoring tools for mobile applications (2) Singapore-based Next Generation Payments’ acquisition of JiGrahak Mobility Solutions, a mobile commerce service provider (3) UK-based New Call Telecom’s acquisition of Nimbuzz Internet India, an instant messaging and mobile ��_B`��~��[��%�acquisition of Code Conclave Technologies, a mobile strategy and application development company.

Start-ups: the new sheen of M&A in the Indian technology sectorA common thread amongst all acquisitions in the technology sector in 2014 was that most of the Indian targeted players were start-ups. Global as well as established domestic technology players geared up to acquire start-ups in different segments, including data security, analytics, mobile technology and cloud applications. These acquisitions were primarily focused on gaining access to new technology/product or to acquire talent.

Large and mid-sized players are not only viewing a complete buyout as the solution, but also engaging in equity partnerships with start-ups to gain specialization in emerging areas such as networks, mobility, analytics, cloud, security and sensors. V�� [~��"��parties. With these acquisitions and partnerships, IT companies gain intellectual property and add emerging technologies to their portfolio of traditional services, while the start-ups gain experience, scale, visibility and better valuations.

41Transactions 2015

��!��!�� gone by was the increasing interest ��[��!��and SMAC capabilities as evident by the number of transactions in the ��~�� +from the traditional IT services model which has been the mainstay of the Indian IT industry. This will encourage more technology entrepreneurship in the country.

Ashish Basil, Partner-Technology, Transaction Advisory Services

2012 2013 2014

Number of deals

Domestic 34 25 46

Inbound 25 27 43

�� 31 19 27

Total 90 71 116


Domestic 1,245 20 662

Inbound 153 274 1,144

�� 1,293 250 215

Total 2,691 544 2,021

V��#$�� !~��|#��

Exhibit 24. M&A deals in the technology sector

2012 2013 2014


90

71 116

2,691 544 2,021

42 '��

M&A

out

look

43Transactions 2015

A promising year ahead for M&A2014 has been an encouraging year for India’s business environment, as well as the M&A landscape. After experiencing a long period of lull, the Indian economy seems set towards accelerated growth. The newly-found business optimism, on the back of strong macroeconomic fundamentals, a stable government at the helm and an improved pace of economic reforms, is expected to continue through 2015 and drive M&A activity. This sentiment was also resonated by EY’s '��'��(��overwhelming majority of Indian respondents highlighted their expectations about the Indian M&A market to either improve or remain stable in the coming months.

Inbound M&A activity is expected to rise further and be ��!��+��>?@��~��[��Government’s move to strengthen ties with other key economies, such as the US, China, Japan and Australia, is expected to boost bilateral trade and create opportunities for inbound investments. Despite macroeconomic uncertainties �� K[��[�� >Z� � ��>?@B��"�!��%��!��India’s growth story. With the Government’s recent steps toward relaxation of FDI rules in certain key sectors, foreign �� !��We are already starting to see the positive impact of this move. For example, soon after the announcement to hike FDI limit in ��!�� (��announced plans to raise stakes in their respective Indian ventures. Some more Indian insurance companies are also believed to be in talks with their foreign partners for a stake sale.

(��K[��!��=��+��![��spur investments. The “Make-in-India” campaign is envisioned

to reignite growth in Indian manufacturing sector.. The Government’s focus to speed-up project approvals and improve ease of doing business in the country have uplifted the morale of corporate leaders. Furthermore, clearance of pending reforms related to land acquisition bill and GST, coupled with the recently concluded coal block auctions would further boost investor sentiment.

��!��last year are likely to continue in 2015. Sectors like healthcare, pharmaceuticals and retail & consumer products are likely to witness a wave of consolidation in 2015 as companies, driven with the need to generate high growth are eyeing opportunities to strengthen market presence and add revenue streams ��]��"��companies in sectors like power, cement and real estate will continue to hive off assets to strengthen their balance sheets. Moreover, Indian players are further expected to move out of the wait-and-watch mode and consider inorganic route to expand their operations as improved political and economic �� +�� to act as strong enablers in pursuing acquisitions.

�� [��improvement last year in terms of volume and is expected to remain stable in 2015. Companies in sectors like technology, automotive and pharmaceuticals will continue to assess acquisition opportunities overseas. However, historically active sectors for outbound transactions such as oil & gas and mining are expected to see subdued activity..

In 2014, the deal pace had picked up during the months closer to the elections and the momentum has been sustained since then. Notably, 4Q14 recorded the best quarterly performance, both in terms of value and volume, over the last four years. With an uncertain economic environment giving way to a more tangible and positive outlook providing greater clarity to business for strategic planning, a promising period is on the cards for Indian M&A.

44 '��

App

endi

ces

45Transactions 2015

Exhibit 25. Quarterly deal activity



235

178 166 163

199 223 233 215

Jan-Mar13

Apr-Jun13

Jul-Sep13

Oct-Dec13

Jan-Mar14

Apr-Jun14

Jul-Sep14

Oct-Dec14

4.6 9.1 5.4 7.9 1.9 11.6 6.8 8.4

46 '��

Exhibit 26. Top 10 deals of 2014

Geography Date Target Target Country

Acquiror Acquiror Country

Value (US$ million)

Sector

Domestic Apr Ranbaxy Laboratories Ltd

India Sun Pharmaceutical Industries Ltd

India 3,226 Pharmaceuticals

Domestic Nov [|=} � �(��+�� India Kotak Mahindra (��+��

India 2,400 (��+��

Inbound Apr United Spirits Ltd India Diageo PLC UK 1,901 Retail and consumer products

Domestic Sep ��(��Power Co Ltd

India JSW Energy Ltd India 1,572 Infrastructure

Inbound Nov (��%�Nigeria-based telecom towers

India American Tower Corp

US 1,050 Telecommunications

Domestic Aug Udupi Power Corp Ltd

India Adani Power Ltd India 982 Infrastructure

Domestic May Dhamra Port Co Ltd India Adani Ports & Special Economic Zone Ltd

India 925 Infrastructure

Domestic Dec Jaiprakash Associates Ltd’s two cement plants

India UltraTech Cement Ltd

India 847 Cement and building products

Inbound May United Spirits Ltd’s UK-based subsidiary Whyte & Mackay Ltd

India Alliance Global Group Inc

Philippines 725 Retail and consumer products

Domestic May Network 18 Media & Investments Ltd

India Reliance Industries Ltd

India 680 Media and entertainment

V��#$�� !~��|#��

47Transactions 2015

Exhibit 27. Deal activity by industry

2013 2014

Target vertical Deal volume Deal value (US$ million) Deal volume Deal value (US$ million)

Agricultural inputs 13 113 13 11

Automotive 37 592 27 291

Cement and building products 16 992 20 1,147

Chemicals 30 415 30 290

K�� 79 399 78 1,244

Education 8 1 10 15

Financial services 56 1,342 55 3,751

Health care 26 663 34 295

Hospitality and leisure 14 166 10 151

Infrastructure 73 1,983 94 5,829

Investment companies 19 2 14 3

Media and entertainment 51 83 53 1,094

Metals and mining 35 446 26 676

�� 9 6,586 14 237

Paper and forest products 2 - 7 1

Pharmaceuticals 32 3,717 52 4,159

Professional services 29 487 45 108

Real estate 24 639 32 1,331

Retail and consumer products 73 3,843 96 4,010

Technology 71 544 116 2,021

Telecommunications 12 3,805 18 1,567

Textiles 19 7 17 23

Travel services 6 103 10 364

V��#$�� !~��|#��

48 '��

Met

hodo

logy

49Transactions 2015

Transaction Annual is based on EY’s analysis of Thomson ONE’s M&A data• The data compiled is for the period 1 January 2014 to 31

December 2014. The report highlights announced deals and indicates their status — either pending or completed. Terminated deals have been excluded from it.

• K��!��~��|#�� ¡customized search, where India was either a target or seller or an acquirer.

• Deal values have been taken as indicated in Thomson �|#_�� >?@B`��QVdollars (unless otherwise stated). The conversion rate of ��"QV��~��|#guidelines; foreign exchange rates are in accordance with deal announcement dates.

• Instances of multiple deals involving mandatory open offers, stake acquisitions in tranches or mergers have been combined into a single deal.

• ~��]��!�� the following basis:

• [��#$%��

• Inbound, outbound and domestic based on the target/ acquirer countries

• Deal size brackets based on announced deal values

• The numbers have been rounded off where otherwise indicated

• Total disclosed value of the deals does not include the acquired debt of the targets

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Kuljit Singh Partner – Infrastructure, Power and Debt

M&A advisory Email id: [email protected]

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Amit Khandelwal National Director

Transaction Advisory Services Email id: [email protected]

�!��£�@@>?Z�@�@�?

Ajay Arora Partner and Leader - M&A Advisory


�!��£�@>>Z@�>?@@?

Ranjan Biswas Partner and National Leader – Technology,

Communication and Entertainment Email id: [email protected]

�!��£�@�?Z�>��@�@

Sailesh Rao Partner – Corporate Finance Services

Email id: [email protected] �!��£�@�?Z�>��@�>

Mayank Rastogi Partner - Private Equity Desk


�!��£�@>>Z@�>?��?

Transactions 2015

NCR=��!}��'��~��(Near DLF Golf CourseSector 42Gurgaon - 122002Tel: + 91 124 464 4000Fax: + 91 124 464 4050

6th��~��18-20 Kasturba Gandhi Marg New Delhi - 110 001Tel: + 91 11 4363 3000 Fax: + 91 11 4363 3200

4th & 5th��|�>(�~��>�Sector 126, |�[K�>?@�?B=��(��|��Q��[��Tel: + 91 120 671 7000 Fax: + 91 120 671 7171

PuneC-401, 4th��Panchshil Tech ParkYerwada _|��K��(��V��`Pune - 411 006Tel: + 91 20 6603 6000Fax: + 91 20 6601 5900

Hyderabad��!��@��'��Hitech City, MadhapurHyderabad - 500081Tel: + 91 40 6736 2000Fax: + 91 40 6736 2200

Kochi9th��(�K|��|�"B��Kochi - 682304Tel: + 91 484 304 4000 Fax: + 91 484 270 5393

Kolkata22 Camac Street3rd��(��+'Kolkata - 700 016Tel: + 91 33 6615 3400Fax: + 91 33 2281 7750

Mumbai14th Floor, The Ruby>�V��(��Dadar (W), Mumbai - 400028Tel: + 91 22 6192 0000Fax: + 91 22 6192 1000

5th��(��+(">Nirlon Knowledge Park�!!<��#]�� Goregaon (E)Mumbai - 400 063Tel: + 91 22 6192 0000Fax: + 91 22 6192 3000

Ahmedabad2nd��V��+[��Near C.N. VidhyalayaAmbawadiAhmedabad - 380 015Tel: + 91 79 6608 3800Fax: + 91 79 6608 3900

Bengaluru12th & 13th��Q('�� '��(��+No.24 Vittal Mallya Road(��"�Z???@Tel: + 91 80 4027 5000 + 91 80 6727 5000 Fax: + 91 80 2210 6000 (12th��`Fax: + 91 80 2224 0695 (13th��`

1st Floor, Prestige Emerald |��B��(��+\��Lavelle Road Junction(��"�Z???@Tel: + 91 80 6727 5000 Fax: + 91 80 2222 4112

Chandigarh1st��V'��@ZZ"@Z�Sector 9-C, Madhya MargChandigarh - 160 009 Tel: + 91 172 671 7800Fax: + 91 172 671 7888

ChennaiTidel Park, 6th & 7th Floor �(��+_��Z?@��?@"�?>`No.4, Rajiv Gandhi Salai, Taramani Chennai - 600113Tel: + 91 44 6654 8100 Fax: + 91 44 2254 0120

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