Aditya Birla Private Equity - Sunrise Fund Innovation themed investments in Lifestyle, Lifeskills & Education, Lifecare & Applied Technologies
Aditya Birla Private Equity
Copyright Aditya Birla Capital Advisors Private Limited 2010
Innovation themed investments in Sunrise Sectors Lifestyle, Lifeskills & Education, Lifecare & Applied Technologies
Aditya Birla Capital Advisors: Proprietary deals and mature insights Decades of experience and know-how: C. INR 880 crore under management in Fund I Cross-sector early-stage development experience Extensive Indian and global network Culture of entrepreneurship Strong corporate governance Rigorous financial discipline and controls
Investment team: Sunrise sector specialists
+
Richly experienced, multi-functional team: Deep experience of team members across sunrise sectors over the last two decades Track record of 11 exits in past careers with average IRR @58% p.a. over 3-5 years Attained superior returns through commercial and operational inputs to sunrise sector deals
Aditya Birla Private Equity - Sunrise Fund: Compelling Investment Opportunity in Key Sunrise Sectors
Innovation themed growth capital investments within sunrise sectors: Lifestyle, Lifeskills & Education, Lifecare and Applied Technologies Placed strongly to build a portfolio of winners through careful deal selection backed by strong monitoring and hands on value addition as required Focus on proprietary deal flow to generate high alpha returns: developed a ready database of 60 plus companies which have undergone preliminary evaluation by the team
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Executive Summary INR 350 crore Fund + Greenshoe option and upsizing Early cycle mover in sunrise sectors to target public market beating IRR, commensurate with higher risk Sunrise sector companies focused on Lifestyle, Lifeskills & Education, Lifecare and Applied Technologies
Fund Details for Investors Target Returns: Pre-Tax IRR @30% p.a. (Not Guaranteed) Investments over 2.5 years & Exits between 3.5 – 6 years (+ 1 year extension, investment manager‟s discretion) Hurdle Rate: 10% p.a., compounded Upfront Load: 2.25% (fixed) Management Fee: 2% p.a. + Applicable Taxes
Carried Interest: 20% (With Catch-Up)
Investment characteristics Focus on sizeable sunrise sectors with innovation as a super theme Based on proven venture investing and exit credentials of senior team in similar sectors Portfolio Companies: Revenues about INR 25 crore, nearing break-even/ profitable, in the year of investment Portfolio Companies: Professionally managed, adaptive companies Individual Portfolio Investment ticket size: INR 25-50 crore
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Aditya Birla Private Equity – Sunrise Fund Features Snapshot The Fund
Aditya Birla Private Equity - Sunrise Fund (ABPE-SF)
Target Fund Corpus
INR 350 crore (with Greenshoe and upsizing at the option of the Investment Manager)
Sponsor Commitment
10% of the Fund Corpus; up to INR 50 crore
Investment Manager
Aditya Birla Capital Advisors Private Limited
Target Return/ IRR
Pre-Tax 30% p.a. (Not Guaranteed)
Term of the Fund
2.5 years for investments + further 3.5 years for exits (+1 year extension at discretion of IM)
Minimum Commitment *
Non institutional investors: Institutional investors:
Hurdle Rate
10% IRR p.a., Compounded
Draw Down Schedule
Institutions: Non institutional investors:
INR 0.10 crores INR 2.00 crores
Initial 10% (subsequent calls, as per requirements) Initial 100% (INR 0.10 crore) Initial 20%; mini Rs.7.5 lakh (INR 0.15-0.45 crore) * Initial 10% (INR 0.50 crore & above) *
Management Fee
2% p.a. of the Committed Capital + applicable taxes; 1st year fee in advance and charged quarterly from 2nd year
Upfront Load (one-time)
2.25% (fixed); Subscriptions after 1st close charged 1% per month (i.e. fewer units allotted for the same commitment amount)
Distribution of Returns
Distribution net of all taxes as applicable
Operating Expenditure
OPEX charged to the Fund on actual basis and capped at 0.30% p.a. of Committed Capital. Besides, a fixed sum of INR 200,000 p.a. charged to the Fund towards Trusteeship Fee
Performance Linked Fee
Carried Interest @20% of the Pre-Tax returns (With Catch-Up)
* Commitments
will be accepted in increments of INR 5 Lakh up to INR 50 lakh; and in increments of INR 25 lakh thereafter
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Innovation themed Investments in Sunrise Sectors Lifestyle, Lifeskills & Education, Lifecare and Applied Technologies
Lifestyle 20% CAGR to 2015
Innovation themed investments in sunrise sectors poised to deliver 22% revenue CAGR till 2015
Lifeskills & Education 22% CAGR to 2015
Wellness & Beauty Media, Entertainment & Leisure Value Added Processed Foods
Education Delivery Channels Learning Solutions R&D, CRAMS
Lifecare 25% CAGR to 2015
Specialty Devices Specialty Care Pharma Retail
Applied Technologies 25% CAGR to 2015
Cleantech Mobile VAS Intellectual Property applications Automation
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Selecting innovation themed Sunrise Sectors Generating superior IRR by targeting exceptional early growth stories
Overweight on sectors with the following characteristics: Growing annually @20% plus, i.e. 2.5x-3x GDP growth in India Driven by aspirations of the prospering mass population to improve overall quality of life Supported by the benefits of higher disposable incomes and improving infrastructure Have a higher percentage of passionate and visionary professional management Have currently a relatively lower share of wallet and limited number of organized vendors
Proprietary deal flow Based on the Investment team‟s extensive business network in overweight sectors: 60 high quality early stage proposals received over the last 12 months, a large proportion through direct networks
Experienced investment team to complement disruptive business models and visionary managements by: Providing proactive inputs on macro strategy, operations and business development areas Ensuring focused execution of business plans by aligning people, process and technology
Maximizing Fund IRR through timing and selection of appropriate mode from multiple exit options
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Investment Super Theme Innovation in sunrise sectors Globally, cutting-edge innovation focuses on delivering the following objectives: – Improving quality of lifecare – Improving quality of lifestyle – Improving skills
– Improving the environment and obtaining sustainable sources of energy
In India, c. INR 610,000 crores market in above sectors is set to grow at > 20% p.a. till 2015 and fulfill ALL the selection criteria Lifecare, INR 39,500 cr
CAGR till 2015 Applied Technologies, INR 153,000 cr
25%
25% 22%
20%
Lifestyle, INR 232,800 cr Lifeskills & Education, INR 70,900 cr
Applied Technologies
Lifeskills & Education
Lifestyle
Lifecare
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Investment Rationale Early exposure to innovation in sunrise areas potentially yields exceptional returns
• Illustrations demonstrating historical evidence for success of similar investment strategy 350
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solutions provider in 2006 is currently worth INR 3,525
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INR 100 invested in a fast food chain in 2009 yielded INR 880 in 2010 for its venture capital investor
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Practice Leadership Bharat is the youngest CEO at the Aditya Birla Group and is founder of Aditya Birla Private Equity Over 20 year of strategy, principal investing, M&A, post-merger integration, capital markets & CXO-level experience. As Founding CEO, he led the initiative to set ABPE practice, build the team and raise $200m in its maiden domestic fund in trying environment of 2009. In his earlier role as Head of Group Finance at the Aditya Birla Group, he played a pivotal role in expanding the Group through complex M&A and organic means. Earlier he worked with the Indian JV of J P Morgan with ICICI, where he was responsible for primary capital markets and corporate advisory, leading PSU practice. He is Fellow Chartered Accountant, Cost Accountant, Company Secretary and Bachelor of Commerce Bharat Banka
Career highlights
th
Formation of India’s 5 largest mobile company, Idea Cellular, through merger of Birla AT&T and Tata, acquiring RPG Cell and Escotel, providing exit to JV Partners Tata and Cingular, US $ 1 billion sale pre-IPO and US$ 550 million IPO, creating a US$ 5 billion company and creating 2.5x value in less than 2 years Creation of India’s largest $7 billion cement company by acquiring L&T Cement in a complex deal, rebranding and consolidation of L&T Cement with Grasim Cement to form UltraTech Cement Establishing $6 billion non-ferrous giant Hindalco by merging Birla Copper & INDAL with Hindalco and raising finance in excess of $2 billion in innovative structures Formation of US$ 2 billion Aditya Birla Nuvo by merging Indian Rayon, Fertilizer & Financial Services Private Equity investments into Anupam Industries, a leading material handling equipment player, into CARE, the second largest credit rating agency in India, into V-Mart Retail, the fastest growing value retail store chain in North & West India; and into BSE, India‟s premier stock exchange Active member of Indian Angel Network, Mentor Square & expert panel of “Hottest Startups (NEN)”, mentoring entrepreneurs. A Member of National Committee on Capital Markets, Confederation of Indian Industry (CII). He is a member of the Boards at a leading materials handling equipment company and a fast growing apparel company, He is also on the Advisory Councils of an upcoming healthcare solutions company and a unique social media platform. Accolades: Recipient of “Professional Achiever – Finance Sector” Award from ICAI, 2008 Publications: Writes his column „Bankanomics‟ in Network 18 business magazine „The Entrepreneur‟ and had co-authored book on „Project Finance‟ for the ICAI
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Key Senior Team Members
Rahul Shah Investment Director
Mehul Maroo General Principal
Over 22 years of experience in private equity, business strategy, entrepreneurship and management consultancy; of which the last 12 were spent leading Indian private equity firm IIML, sponsored by IL&FS, large Indian financial house. Has an in-depth understanding of the full life-cycle of private equity investment management across diverse sectors and an exceptional track record of managing growth investments through to exit, often guiding portfolio companies through directorship to the board. He is a Chartered Accountant from the ICAI and a Bachelor in Commerce from the University of Mumbai.
Over 14 years of experience in private equity advisory and consulting in India and the US. Was formerly an Associate Partner with the global management consulting firm Kurt Salmon Associates, where he jointly led development of their practice in India. Brings a strong background in strategic consulting for leading global and Indian lifestyle and consumer-facing companies. Holds a Master‟s degree in Engineering and Management, and a Bachelor‟s degree in Industrial and Systems Engineering, both from Stanford University.
Shamik Moitra General Principal
Sandeep Bhat CFO and Head of Compliance
Over 18 years of experience in entrepreneurship, equity research, principal investing and consulting with firms like Accenture, Bank of America & DLJ, in India & Europe. He was previously partner with corporate finance firm Europa Partners LLP in London and combines deep operational, entrepreneurial and corporate finance backgrounds with senior level experience working alongside international private equity firms. Shamik also made successful principal investments in early stage ventures and holds a Masters in Finance from the London Business School – UK, an MBA from XLRI - Jamshedpur, India and a Bachelors in Science with Honors in Physics from the University of Delhi.
Over 25 years of varied experience in accounting, financial control, tax management & operational risk control, legal and compliance, and optimization of IT and administration resources; of which the last 16 in the financial services industry, with firms like UBS and ABN AMRO Equities. Has extensive experience in directing Finance & Accounting, treasury and risk management functions for financial institutions. Sandeep is a Chartered Accountant from the ICAI and holds a Bachelor of Commerce degree from the University of Mumbai.
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Successful Track Record of Generating Superior IRR 11 exits with an average 58% annual IRR, in the past careers of the team
Company Name TECHNOLOGY Mro-Tek Ltd Future Software Sasken Communication Technologies Ltd Active Hotels Ltd
Sector/Business
Internet Access Products Telecom Software - Telecom Equipment Vendors Telecom Software - Telecom Equipment Vendors Internet software - Online hotel reservation system
Total Cash Outflow (US$ mn)
Total Cash Inflow incl. Div (US$ mn)
IRR (%)
0.5
1.0
31.5
IPO
2.0
6.2
91.0
Strategic Sale
Manner of Divestment
Sunrise sectors: Team competence - 11 exits with 58% IRR p.a. underline senior team members proven credentials
3.8
7.0
64.3
IPO
7.0
62.0
72.5
Strategic Sale
in overweight sectors - Investing track record from start up to exit - Direct entrepreneurial experience
CONSUMER Shoppers Stop Ltd
Retailing
3.4
12.6
23.4
IPO
Godrej Beverages & Foods Far Pavilions Tours and Travels Pvt Ltd Indian August Tours & Travels Pvt Ltd
Consumer Goods Leisure, Hotels and Travel Services Leisure, Hotels and Travel Services
24.8
38
53.6
Strategic Sale
3.0
5.5
34.0
Strategic Sale
2.4
14.0
140.0
Strategic Sale
ITES Secova eServices Ltd
BPO
2.0
3
19.3
Trade Sale
Indiagames Ltd
Gaming
0.3
4.7
71.9
DQ Entertainment LTd
Media-- 2D & 3D Animation
1.0 3.3 Average IRR (%)
33.7 57.7
Strategic Sale IPO ON AIM Ex.
- Largely proprietary deal origination with 60+ deals already evaluated for the sunrise fund
Sunrise sectors: Build on group‟s reach
MEDIA & ENTERTAINMENT
- Build on the Sponsors‟ 100+ years operating experience and reach in Education (schools) and Healthcare (hospitals)
Data depicted in the table above pertain to the experience of individual team members prior to joining Aditya Birla Private Equity
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Performance of maiden ABPE – Fund I Marquee investments made by ABPE in the previous Fund Company
Anupam Industries
Description India's leading manufacturer of EOT cranes; now has a technical collaboration with Mitsubishi Heavy Industries. Anupam has a demonstrated track record of profitable growth and has a solid order book and prospects.
CARE
Promoted by major banks and financial institutions, CARE is India's second largest credit analysis and research institution. Formed in 1993, CARE specializes in providing credit rating and grading services across sectors and in line with best internationally accepted practices.
Bombay Stock Exchange
India's oldest and second largest stock exchange. Following changes in leadership and a dynamic program of business growth, the company is poised to improve its market share and consolidate its historical strengths
Size of Duration of Investment Investment (INR Crs)
50
65
21
Exit Route
3 -4 years
Public issue or sale to 3rd party
3 years
Public issue or sale to 3rd party
3 years
Public issue or sale to 3rd party
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Deal Flow for ABPE – Sunrise Fund Illustrative Transactions (*eventual deals by Fund might differ from these) Theme
Lifeskills and Education
Lifecare
Company
Description
Duration of Investment
Exit Route
An Education Technology company
The company delivers interactive whiteboard based learning solutions for the K12 segment. It has an extensive library of lessons and audio visual tools across all subjects. It has been growing at a high double digit rate and is poised to accelerate further
3-4 years
Sale to 3rd party
A Private Professional University
The company runs a private university focused on higher education in professional disciplines such as engineering, medicine and management. It is looking to expand into new regions within India
3 years
Public issue or sale to 3rd party
A Specialty Critical Care Company
The company delivers diagnosis and technology intensive care for critical illnesses. It has an asset light model based on acquiring outsourced departments within existing, successful regional hospitals across the country. Its poised for rapid growth based on new partnerships and outsourcing arrangements.
3-4 years
Sale to 3rd party
A chain of regional general hospitals
The company runs a successful chain of hospitals in its region and is looking to expand into new geographies. It has tied up with reputed international private hospitals for technology and cutting edge care practices
3-4 years
Public issue or sale to 3rd party
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Deal Flow for ABPE – Sunrise Fund Illustrative Transactions (*eventual deals by Fund might differ from these)
Theme
Lifestyle
Applied Technology
Duration of Investment
Company
Description
Exit Route
A chain of business and family hotels
The company operated medium to luxury branded hotels under management contract as well as self owned properties. It is looking to expand further in fast growing tier 2 business centres
3 years
Public issue or sale to 3rd party
A company managing a portfolio of brands
The company specializes in managing a chain of EBOs for a portfolio of brands. It is looking to expand its footprint in new regions
3 years
Public issue or sale to 3rd party
A global travel search engine provider
The company has a powerful IP based aggregation tool which connects hotels and transport companies with travelers through a community search engine. It has already acquired a significant market share and is rapidly expanding its global footprint
3 years
Sale to 3rd party
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Risks associated with the Fund and Mitigation Risks - With a good probability of high IRR, there is an equal risk of losing entire investment in some of the portfolio companies - The overall portfolio and underlying investments will remain largely illiquid till the eventual exit - The prospects of an IPO of portfolio companies in this Fund are likely to be more muted compared with late-stage investments - With the focus on disruptive business models, investments may be with first-time unproven entrepreneurs/ management
besides products/ offerings of portfolio companies might have muted precedents of success - Investment exits in specific cases may exceed 3 years with an extended holding period - Limited prospects of negotiating collateral securities to securitize against capital loss - Investors must seek expert advise from competent advisors on percentage of their Net Worth to be allocated to this Fund
Mitigation - The Fund expects to be diversified and balanced across a judicious mix of early stage assets across overweight sectors ⁻ Investment team‟s track record of investing and entrepreneurial experience may: • Help filling the management gaps while keeping the promoters on track to achieving business milestones • Help mentoring the portfolio companies to retain focus to achieve profitability and scales of operation • Keep an eye on timing and selecting an appropriate mode of exit out of multiple options
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Key Contacts Aditya Birla Capital Advisors Private Limited One Indiabulls Centre, Tower 1, Level 18, Senapati Bapat Marg, Mumbai 400013, India Mr. Rahul Shah
Mr. Shamik Moitra
Mr. Sandeep Bhat
Investment Director
General Principal
Chief Finance & Compliance Officer
Tel: +91-22-4356-7403
Tel: +91-22-4356-7404
Tel: +91-22-4356-7401
Mob: +91 97022 88252
Mob: +91 97020 47383
[email protected]
[email protected]
[email protected]
Website: www.adityabirla-pe.com Cautionary Statement This „Presentation‟ is for informational purposes only and does not constitute an offer to sell the shares of Aditya Birla Capital Advisors Private Limited (the “Company”) or an offer to participate in the funds proposed to be managed by it. This information profile has been provided to its recipient upon the express understanding that the information contained herein, or made available in connection with any further investigation, is strictly confidential and is intended for the exclusive use of its recipient. It shall not be photocopied, reproduced or distributed to others at any time. This document is neither a prospectus nor an invitation to subscribe to the shares of the Company. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. The information herein is subject to change without notice. Statements in this „Presentation‟ describing the Company‟s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of the applicable securities laws and regulations. Actual results could differ materially from those expressed or implied in this „Presentation‟. Important factors that could make a difference to the Company‟s operations include global and Indian demand-supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the Company‟s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations The information including facts and figures have been derived from public sources and should be relied upon by the reader at his or her own risk and the Company, its directors or officers assume no responsibility, expressed or implied, for the completeness or accuracy of the information contained or views expressed herein or for any direct or consequential loss arising from any use of this publication or its contents. 1110v1.0
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