Edition 19 July-September 2014 October-December 2013 ... · Transaction analysis: Sector analysis 5 ... Indian economy: India economy promises a turnaround 14 ... Cipla Ltd.’s

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Edition 19 October-December 2013

Transactions QuarterlyA perspective on the Indian transactions market

Edition 19

July-September 2014

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In this editionIndian transaction activity: M&A landscape witnesses an uptick in deal activity 4

Transaction analysis: Sector analysis 5 Cross-border M&A 9 Indian M&A snapshot 10

Global transaction activity: Global M&A records above-average performance in 4Q13 12

Indian economy: India economy promises a turnaround 14

Outlook: Policy reforms and quest for growth bodes well for deal activity 15

Transactions quarterly –3Q14

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Amit Khandelwal Partner and National Director, Transaction Advisory Services, EY

Welcome to the 19th edition of Transactions Quarterly, our quarterly review of India’s M&A landscape.

The world economy reflected mixed trends, both in developed and emerging economies, owing to moderate growth. While the US, the UK and Japan stood out amongst the developed markets, Eurozone’s still fragile economic recovery was impacted. The emerging economies remained subdued, with the exception of China and India. Although China’s economy did hit a soft

spot during the quarter, it avoided a hard landing, supported by the continued implementation of the Government’s reform agenda.

For India, the quarter was encouraging in terms of investor sentiments. The newly-elected Government took a strong position and introduced policy reforms addressing multiple issues, including a focus on boosting economic growth, FDI and infrastructure spending besides streamlining tax procedures.

The global M&A activity slowed down in 3Q14 as geo-political uncertainties forced deal makers to take a back seat in an otherwise exceptional year for M&A. Overall, 2014 remains a blockbuster year, as consolidation efforts of major global players in the telecom, media and pharmaceuticals space led to a spate of mega deals, which helped push M&A value to the highs seen during pre-crisis levels. Global M&A is expected to be positive for remainder of the year owing to continued momentum on a broad range of sectors and solid fundamentals of major economies including the US and the UK.

In India, M&A was the preferred route for companies to expand their operations. M&A activity is expected to gather traction over the next few months owing to rising investor confidence that is being fuelled by a relatively stable political scenario.

M&A over the past quarter was driven by companies’ focus to de-leverage and restructure their operations and simultaneously infuse liquidity in the business. This trend is expected to continue, especially in the power and utilities sector.

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M&A landscape witnesses an uptick in deal activity, driven by improved investor confidence

Transaction activity in 3Q14Indian M&A activity registered an uptick during the quarter, driven by improved investor confidence owing to the Government’s efforts to take Indian economy towards high growth. The total deal volume went up by 22% in the quarter, with the number of deals increasing to 203 from 167 in 3Q13, while deal value reached US$4.7 billion, declining 12% from US$5.4 billion.

This decline is attributable to one mega deal of US$2.6 billion in 3Q13 by ONGC Videsh Ltd. of a 10% stake in Mozambique’s Rovuma 1 offshore block. However, if this deal is excluded, the quarter registered an increase of 71% in deal value against 3Q13. Domestic activity continued to grab the largest share of the Indian M&A landscape, accounting for 61% of total deal volume and 51% of total deal value.

The infrastructure group dominated the M&A table, accounting for 34 deals worth US$1.6 billion. In infrastructure, the power generation sector contributed the most to the aggregate disclosed deal value, primarily due to the largest deal of the quarter. The deal featured Lanco Infratech Ltd. selling its Udyapi thermal power plant to Adani Power Ltd. for US$982 million. The technology sector followed infrastructure with 27 deals worth US$1 billion, reflecting a strong focus on services and solutions around healthcare IT.

1Chapter

Source: ThomsonONE.com and EY analysisNote: Figures have been rounded off to the nearest unit. Conversion rate as per ThomsonONE.com guidelines — foreign exchange rate as on the deal announcement date.*Essar Group sold the US-based operations of its subsidiary Aegis Ltd.

8.64.6

9.15.4

7.9

2.0

11.4

4.7

210235

179 167 166197 213 203

4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14

Value (US$ b)

Source: ThomsonONE.com and EY analysisNote: Deals taken as per announced date. Includes mergers, acquisitions, divestments, spin-offs and JVs. Private equity (PE) deals are excluded.

Count

Exhibit 1: Quarterly transaction activity in India

Top 10 Indian deals of the quarterDeal type

Date Target Target nation

Acquirer Acquirer nation

Value (US$ m)

Sector Deal status

Domestic 13-Aug-14 Udupi Power Corp Ltd India Adani Power Ltd India 982.3 Thermal power CompletedInbound 9-Jul-14 Essar Group’s stake in

Aegis USA Inc.*US Teleperformance

SAFrance 610.0 Technology Completed

Inbound 8-Jul-14 Positive Packaging Industries Ltd

India Huhtamaki Oyj Finland 336.3 Diversified industrial products

Announced

Inbound 14-Aug-14 GRAPP Energies Pvt. Ltd India Solargise Ltd United Kingdom

200.2 Cleantech Completed

Domestic 29-Sep-14 Shasun Pharmaceuticals Ltd

India Strides Arcolab Ltd

India 195.9 Pharmaceuticals Announced

Outbound 17-Jul-14 Atco I-Tek Inc Canada Wipro Ltd India 195.3 Technology Announced

Domestic 18-Aug-14 Welspun Maxsteel Ltd India JSW Steel Ltd India 164.6 Metals and mining

Completed

Domestic 5-Jul-14 Express Towers India Investor Group India 145.7 Real estate CompletedDomestic 17-Sep-14 BPTP Ltd -IT park India RMZ Corp India 131.4 SEZ/IT parks AnnouncedInbound 22-Jul-14 Max Healthcare Institute

LtdIndia Life Healthcare

Group HldgSouth Africa

129.8 Healthcare Announced


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Technology

Outbound in technology imminent to enhance capabilities

• Overview: The sector topped the charts recording the highest deal volume (27 deals), worth US$1 billion during the quarter.

• Key deal(s): The highlight deal of this sector was Essar Group’s divestment of Aegis USA Inc, the US-based operations of Aegis Ltd., to Teleperformance SA of France for US$610 million.

• Data analytics and software were in highlight: Data analytics and software emerged as attractive segments, accounting for above 75% of total technology targeted deals. Mid-size companies were active in acquiring relatively small players to build and develop their capabilities in segments, including mobile application, data analytics and business intelligence, and cloud platform. Key deals include Sonata Software’s acquisition of XYKA Software and Rezopia Inc; Zensar Technologies’ acquisition of Professional Access.

• Players to head toward untapped US healthcare industry: The prevailing regulations pertaining to healthcare insurance industry in the US have

provided a lucrative opportunity to IT players to improve their offerings and gain market share. Until now, Indian firms were not able to fully tap the potential emerging from these regulations, due to inadequate capabilities to serve the market segments including health exchanges, hospitals and medical devices manufacturers. However the recent US$2.7 billion acquisition of the US-based TriZetto by Cognizant will likely put pressure on players with cash-rich balance sheets and motivate them to focus on M&As and partnerships in the segment. Players, including Infosys, TCS and Wipro have cited their interest for buyouts in the healthcare and life sciences verticals.

• BPO industry to hunt for new markets in Latin America and Europe: These markets may see strong action from the Indian BPO players in the coming quarters as the US, the prime contributor of revenues (~ 60%) for the Indian BPO industry, is reaching its saturation level. Quest for market expansion and new capabilities will continue to be the thrust for inorganic growth.

Over the last quarter, we have seen more acquisitions and investments being made in the healthcare IT space. These opportunities created by the US healthcare regulations highlight a need for enhancing systemic efficiencies. Healthcare IT is going to remain a focus area for investments for most of the IT companies in the coming months.

Ashish BasilPartner - Technology Transaction Advisory Services

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• Overview: The sector clocked 17 deals, totalling US$112.3 million during the quarter, 13 being domestic in nature.

• Key deal(s): The largest deal of the sector was acquisition of an additional 20% stake by BIC SA of France in Cello Writing Inst & Cont Pvt Ltd, a manufacturer and wholesaler of pens, for US$72 million.

• E-tailers to see consolidation: Domestic e-tailers are increasingly indulging in acquisitions, with the objective of addressing the growing demand for online merchandise and counter the burgeoning competition. The hunger for balance between growth and profitability is pushing players to strengthen their core business along with diversifying their portfolio. Over the past few months, we have seen industry majors, including Flipkart strengthening their presence in the online fashion industry via inorganic route. The industry is further expected to see acquisitions in a broad range of segments, including grocery, furniture and jewellery, as the players strive to become one-stop shop and cater to the needs of new-age urban consumers.

Retail and consumer products

“While online and mobile share of consumer spending will continue to rise, the players across spectrum will need to connect with users through multiple channels simultaneously and hence omni-channel strategies will come into play. For retailers and brand owners, the future inorganic activity is likely to revolve around strengthening data and analytics driven capabilities and channel expansion”

• These players are also keen to develop the entire seller ecosystem, from supply chain to payment solutions. The industry is expected to see e-tailers acquiring these support services firms to minimize operational loop-holes and simultaneously maximize their margins. Several leading ecommerce websites such as Flipkart and eBay, have started setting up their own logistics units in different states to cater to the regional demand. As the demand mushrooms, they might also acquire small logistics firm to enhance their in-house capabilities. At the same time, Flipkart is also in talks to acquire ngpay, a mobile platform for ticketing, shopping and recharges and is likely to ink a deal soon to strengthen its payment processing mechanism.

• In conjunction, these players are also engaging in fundraising via private equity (PE) route to support their expansion plans. The sector has recently witnessed the largest ever PE funding by any Indian internet company — Flipkart raised US$1 billion in July 2014.

Nitin GuptaPartner - Retail and Consumer Products, Transaction Advisory Services

E-tailers to see consolidation


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• Overview: Overview: The sector recorded nine deals, with an aggregate disclosed value of US$257.6 million, eight were domestic in nature.

• Key deal(s): The largest deal in the sector was Strides Arcolab Ltd.’s acquisition of Shasun Pharmaceuticals Ltd. for US$197.2 million.

• Desire for expansion to drive acquisitions: Indian pharmaceutical companies are likely to enter mid-sized deals aimed at acquiring manufacturing units and brands of local and overseas players in order to grow their business both in existing and new markets. The move will also help them gain economies of scale and withhold cost pressures under the prevailing price control policy. We have seen a number of such deals in recent times, including Strides Arcolab Ltd.’s acquisition of Indian branded generics business of Bafna Pharmaceuticals Ltd., Cipla Ltd.’s acquisition of two plants from Osaka Pharma Pvt. Ltd. and HLL Lifecare Ltd.’s acquisition of majority stake in Goa Antibiotics and Pharmaceuticals

Ltd. Considering the presence of a large number of small companies in the market, where industry players are continuously looking for business expansion, we expect this trend to continue in the coming quarters.

• Off-patented drugs on sale — a lucrative opportunity: With a large number of drugs going off-patent in recent years, global players, including AstraZeneca, GlaxoSmithKline, Abbott Laboratories, Merck, and Sanofi, have expressed interest to sell-off their off-patented drug portfolios. This represents an attractive opportunity for Indian generic players to acquire these drugs and further expand in overseas markets, primarily the US. This would also provide companies the exact formulation and chemical ingredients for manufacturing the drug. However if a company chooses not to acquire these drugs, re-engineering the formulation would be a high-priced and time consuming process, clouded by the risk of its failure. In this regard, Lupin Ltd. is weighing the prospects to acquire a range of matured drugs being auctioned by GlaxoSmithKline.

Pharmaceuticals

Expansion drives acquisitions in pharmaceuticals

The pharmaceutical industry around the world is getting increasingly globalised, with the regulated markets (namely the US, the EU and Japan) evolving into the centres of innovation of cutting-edge technologies/ products, China having established itself as the manufacturer of large-scale raw materials, and India evolving into the best destination of development and manufacture of complex APIs as well as generic formulations. The M&A strategies of pharma companies around the world are driven off one or more of these underlying industry trends. In addition, the attractive growth prospects in under-penetrated emerging markets such as China, Latin America and India are also driving M&A behaviour. Notwithstanding the furore around the subjects of IPR/ Compulsory Licensing and drug price-control, we believe that the Indian pharma industry is attractively positioned to able to attract more and more foreign investment (greenfield as well as brownfield) to fund its global growth aspirations.

Krishnakumar VPartner – Lifesciences

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• Overview: The infrastructure group, comprising of engineering services, diversified infra, logistics, power and utilities, and roads and highways sectors, saw 34 deals during the quarter with an aggregate disclosed value of US$1.6 billion. Power generation segment accounted for most of the value with nine deals worth US$1.3 billion.

• Key deal(s): The highlight of the sector’s M&A activity in 3Q14 was Lanco Infratech Ltd.’s (Lanco) sale of its Udyapi thermal power plant to Adani Power Ltd. for US$982 million to reduce its debt burden.

• Domestic power players raise funds to resolve debt and liquidity issues: The players are selling their respective power plants in an urge to scale down their debt burden and infuse the much needed liquidity. The sector saw few divestments including the aforementioned sale by Lanco and the sale of Jaypee Group’s (Jaypee) hydro-power plants to JSW Energy Ltd. (JSW) for an undisclosed amount. JSW won the bid to acquire these assets post Reliance Energy Ltd. and Abu Dhabi National Energy Co. withdrew their

A large number of infrastructure projects in the Indian market today that are either operational or under advanced stages of construction, are attracting local and foreign investors. This trend will intensify even more in the future as the government begins to undertake policy initiatives to make infrastructure sector more attractive to investors.

agreements to acquire these assets. At the same time, the sector has also witnessed players raising funds via PE and qualified institute placement’s (QIP) route. These included, ReNew Power Ventures’ PE funding and QIP fundraising by GMR Infrastructure Ltd. With resilient equity markets, the sector is expected to see this trend to continue as power players will likely divest more assets in an attempt to deleverage their debt-heavy balance sheets in near future.

• Foreign players continue to exhibit interest in the power generation sector: The players are increasingly looking to enter and expand their operations in the country, attracted by the favorable tax-breaks announced by the Government. However, we are likely to see investments mostly in operational and under-construction projects as some clarity is needed for the issues related to land acquisition. In this quarter, we saw foreign companies, including the UK-based Solargise Ltd. and Singapore-based Sembcorp Industries Ltd., expanding their presence in India. We see this trend to continue in the coming months.

Kuljit Singh,Partner – Power and utilities, Transaction Advisory Services

Infrastructure

Divestitures gain prominence in power segment


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Analysis by geography

Cross-border scenario steady; the US was the most active M&A partner

Outbound

Inbound

Both inbound and outbound

Only inbound or outbound

Deal flow

USInbound: 13 deals, US$131mOutbound: 4 deals, undisclosed value

UKInbound:5 deals, US$200mOutbound:3 deals, US$7.3m

BrazilInbound: 1 deal, undisclosed value

GermanyInbound: 2 deals, undisclosed valueOutbound:2 deals, US$19.8m

JapanInbound: 10 deals, US$280m

• Inbound deal activity remained steady in 3Q14, as the deal volume increased to 54 in the quarter from 45 in the same period last year, with the cumulative inbound deal value increasing to US$2.1 billion from US$1.7 billion. Foreign buyers continued to look for businesses with the objective of establishing a presence in the Indian market. Technology and health care reported maximum inbound flow in terms of volume.

• Outbound deals were up in terms of volume but declined in value. Aggregate disclosed deal value of outbound deals was US$262 million in 3Q14, down from US$2.7 billion in 3Q13, while deal count increased to 25 deals from 21 deals. Indian companies continue to remain cautious while considering outbound acquisitions as they are focussing more on deleveraging their balance sheets and improving operations.

Indian M&A snapshot

Source: ThomsonONE.con and EY analysis


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Exhibit 1: Industry break-up (3Q14) – Overall M&A

By value (in US$m)

505

1041

182

258

174

175

1644

256

373

132

0 500 1000 1500 2000

Others

Tech

RE

Pharma

M&M

M&E

Infra #

Healthcare

DIP

CBP

By count

46

27

17

11

9

15

34

10

14

20

0 20 40 60

Others

Tech

RCP

PS

Pharma

M&E

Infra #

Healthcare

FS

DIP

Domestic Inbound Outbound Total

3Q13 101 45 21 167

4Q13 97 48 21 166

1Q14 104 59 34 197

2Q14 124 64 25 213

3Q14 124 54 25 203

Domestic Inbound Outbound Total

3Q13 1.0 1.7 2.7 5.4

4Q13 3.1 3.6 1.2 7.9

1Q14 0.8 1.0 0.1 2.0

2Q14 6.2 4.2 1.0 11.4

3Q14 2.4 2.1 0.3 4.7

Exhibit 2: Deal type composition

Deal count Deal value (US$ b)


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CBP-Cement and building products, DIP-Diversified industrial products, FS-Financial services, Infra-Infrastructure (# consist of multiple sectors, including engineering services, diversified infra, logistics, power and utilities and roads and highways), M&E-Media and entertainment, M&M-Metals and mining, O&G-Oil and gas, PS- Professional services, RCP- Retail and consumer products, RE- Real estate; * Includes deals with undisclosed value; ** Does not include deals with undisclosed value



Exhibit 3: Industry break-up (3Q14) – M&As below US$200 million*

By value (in US$m)

427

431

182

258

174

175

462

256

132

115

0 200 400 600

Others

Tech

RE

Pharma

M&M

M&E

Infra #

Healthcare

CBP

Auto

By count

46

26

17

11

9

15

32

10

14

19

0 20 40 60

Others

Tech

RCP

PS

Pharma

M&E

Infra #

Healthcare

FS

DIP

Exhibit 4: Deal size composition (below US$200 million)**

8465685149

61% 54%

27%40%

26%

25%25%

24%23%

29%

15% 21%

49%38% 45%

3Q13 4Q13 1Q14 2Q14 3Q14

0-50 50-100 100-200

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Global M&A softened in 3Q14; year-till-date (YTD) value well above previous year’s level

• Global M&A activity slowed down in 3Q14, as macroeconomic and geo-political uncertainties across the globe forced companies to pause for breath in an exceptional year for deal activity. The quarter witnessed 8,894 deals worth US$834 billion, representing a decline of 11% in deal volume and 22% in deal value as compared to 2Q14.

• However, 2014 remains a positive year for M&A, as strong boardroom confidence, buoyed market sentiments and an otherwise stable economic environment has led to a

2Chapter

Source: ThomsonONE.com and EY analysis*EMEIA is Europe, Middle East, India and Africa; **Asia-Pacific includes JapanNote: Data is continuously updated and therefore subject to change.

Source: ThomsonONE.com

• Global M&A activity slowed during the quarter, registering a decline of 11% in volume and 22% in value.

• The Americas lead the activity in terms of value; EMEIA was on top in volume terms.

Global M&A scenario

Deal environment by sector and area by value, 3Q14 Top 5 announced deals by value, 3Q14

• US M&A should remain firm, supported by improving fundamentals. With strong 2Q14 corporate earnings, up-scaled GDP growth and an interest rate rise still not expected till early-2015, we expect to report high levels of sustained activity over the coming months.

• European M&A activity will likely remain steady through the year end, backed by continued investor confidence, and low market volatility. However with significant economic and geo-political obstacles to navigate in the region, there remains a downside risk in the near future.

• M&A activity in the Asia-Pacific region is expected to hold its ground through the remaining year, with major regional players showing signs of improved economic strength.

substantial number of mega deals, which helped push M&A value to the highs seen during pre-crisis levels. YTD14 deal value stood at US$2.6 trillion, 53% higher than YTD13 and the highest value seen since YTD07 (US$3.4 trillion).

• The Americas dominated the activity in terms of value, primarily driven by increased investor confidence in the US, bolstered by the solid economic fundamentals and resilient equity markets of the country. With 2,813 deals worth US$528 million during the quarter, the region accounted for 63% of total global deal value.

• Despite recent challenges, global M&A outlook looks positive. According to EY’s 11th biannual Global Capital Confidence Barometer (CCB), a survey of more than 1,600 senior executives in over 60 countries, 49% of respondents anticipate pursuing acquisitions in the next 12 months — the highest number for three years.

Americas EMEIA* Asia-Pacific**

Total

Oil and gas 14% 1% 1% 16%

Real estate 8% 5% 3% 16%

Consumer products and retail

9% 3% 2% 14%

Telecommunications 9% 1% 0% 10%

Technology 6% 1% 2% 9%

Diversified industrial products

6% 2% 1% 9%

Others 12% 8% 6% 26%

All sectors 63% 20% 16% 100%

Target Sector Nation Acquiror Value (US$b)

Kinder Morgan Energy Partners

Oil and gas US Kinder Morgan Inc

58.6

T-Mobile US Inc Telecommunications US Iliad SA 35.0

Lorillard Inc Consumer products and retail

US Reynolds American Inc

27.7

Sigma-Aldrich Corp

Diversified industrial products

US Merck KGaA 16.5

Tim Hortons Inc Consumer products and retail

Canada Burger King Worldwide Inc

14.6


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US1,682 deals, US$288.9b359 deals, US$167.9b

47 deals, US$2.3b

339 deals, US$13.4b210 deals, US$14.5b

4 deals

UK326 deals, US$4.0b

58 deals, US$0.5b

3 deals, US$0.7m

Russia


8 deals, US$72.8m

China

Domestic Cross-border Unknown

South Africa


1 deal, US$4.8m

India


Brazil

56 deals, US$11.3b

61 deals, US$6.6b

1 deal, US$40.3m

Key global transaction destinations (3Q14)

Source: ThomsonONE.com and EY analysis

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3Chapter

• India’s economy registered some green shoots in 3Q14, indicating that a possible recovery is on the cards. The recently released real GDP growth and current account deficit data exceeded expectations. Furthermore, equity markets scaled new peaks in September indicating optimism for growth over hopes for implementation of better reforms by the new government.

• GDP accelerated to 5.7% year-on-year (y-o-y) growth in 2Q14, the highest in the past two-and-a-half years, primarily due to front-loading of government expenditure. All sectors reported growth during the quarter. Improvement in key sectors of the economy, accompanied by policy reforms taken by the new government, can deliver sustained growth in the coming months.

• Current account deficit (CAD) also improved to 1.7% of GDP in 2Q14

from 4.8% in the corresponding quarter last year, on the back of sharp decline in imports due to weak demand and the Government’s policy on curbing gold imports. This trend is likely to continue in the coming months, as the GoI is expected to continue its efforts to monitor CAD, by imposing import restrictions on non-productive goods, including gold.

• India recorded foreign direct investment (FDI) inflow of US$11.5 billion during first four months in FY15 (April-July 2014), up from US$8.4 billion over the same period in FY14 on the back of improved investor confidence. Telecommunications, pharmaceuticals, and financial and business services were three largest recipients. FDI inflows are likely to see further momentum in the coming months with recently introduced reforms on relaxation of FDI norms in insurance and defence sectors.

• On the other hand, other macroeconomic indicators, including industrial production and inflation were relatively muted. While, industrial production registered a 0.5% y-o-y growth in July, the slowest in four months, consumer price inflation continued to remain high, reaching 7.8% in August. With the household inflationary expectations remaining high, the Reserve Bank of India is expected to keep its reserve rates unchanged.

• India’s economy appears to be recovering from a period of sluggish growth, though it will continue to face challenges with persistently high inflation and tight monetary policy. The GoI’s moves to foster investment inflows, infrastructure development and establish a robust decision-making mechanism, to improve ease of doing business, are expected to boost economic growth of the country.

Real GDP growth by region (% change y-o-y)

-0.3%

5.5%

2.5%

7.3%

-0.4%-2%

0%

2%

4%

6%

8%

10%

2Q11

4Q11

2Q12

4Q12

2Q13

4Q13

2Q14

4Q14

2Q15

World India RussiaChina Brazil

Source: Oxford economics

IIP and CPI

0000000000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Oct13

Dec13

Feb14

Apr14

Jun14

Aug14

CPI IIP

Source: CMIE

Current account deficit

Source: RBI (FY09-13), Prime Minister’s Economic Advisory Council (FY14 estimate)

29.838.4

46.0

78.287.8

70.02.3%

2.8% 2.7%

3.5%

4.8%

3.8%

0%

1%

2%

3%

4%

5%

6%

0

20

40

60

80

100

120

140

FY09 FY10 FY11 FY12 FY13 FY14e

CAD (in US$b) CAD (% of GDP)

India economy promises a turnaround

Transactions quarterly – 3Q13

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4Chapter

The prospects for India look encouraging, with the new leadership demonstrating its commitment to put the economy back on track towards high growth. The new Government is working towards reforms to attract more private investment, accelerate GDP growth rate and reduce fiscal deficit. Subsequently, equity markets also reported a substantial uptick in the last quarter over hopes of an improvement of the pace of economic recovery. We have also seen Standard & Poors upgrading India’s rating recently, acknowledging the evolving facelift of the financial state of India.

In addition, the Government has launched the ‘Make in India’ campaign to give momentum to long-term growth of the country. The campaign, through the introduction of new industry licencing procedures, increasing focus on infrastructure development and relaxed FDI reforms, aims at fostering innovation, protecting intellectual property, and creating more jobs via building best-in-class manufacturing facilities.

The Prime Minister of India’s (PM) recent meetings with China, Japan and US leaders has set a stage for collaboration and investments from these countries. The Japanese government has announced its decision to double its investment in India to around US$35 billion over the next five years.

India also signed agreements with China, according to which China will invest US$20 billion in India’s infrastructure over five years. These measures have created a positive environment for increased inbound activity.

Domestically, companies took the M&A route to enhance presence and growth. This trend is expected to continue and lead to consolidation in industries such as e-commerce, retail and telecom in the coming months. Additionally, with highly leveraged balance sheets, corporate entities are divesting to raise funds and deleverage. This strategy is likely to be followed to sustain and enhance growth with the objective of creating value for stakeholders.

On the outbound front, Indian IT-BPO players’ hunt for international businesses is expected to gather pace as they are look for inorganic growth in various verticals and capabilities in the Americas and Europe. Furthermore companies in the natural resources space are likely to continue looking for overseas assets to secure supplies, primarily driven by India’s escalating energy needs.

As we look ahead, M&As over the next few quarters are expected to ride on the wave of improved investor confidence, fuelled by a relatively stable political scenario. Moreover, with the Government’s continued focus on policy reforms and companies’ hunger for growth via investments and acquisitions, we foresee M&A to strengthen as we sail through FY15.

Policy reforms coupled with quest for growth bodes well for deal activity

Outlook

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About EY’s Transactions Advisory Services in India

We have extensive experience in structuring domestic, as well as cross-border deals. Our matrix structure, organized around key transactions services and industry verticals, enables EY to offer an unparalleled blend of deep functional expertise and sector focus.

We offer our experience and support across multiple areas, including finance and accounting, taxation, IT, operations, human resources, transaction integration, real estate and market assessment.

EY‘s Transaction Advisory Services team in India offers high-quality transaction advice to local and foreign private investors, private equity firms and corporations.


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Our portfolio of services include:

• Raising capital — equity, debt and mezzanine financing through various channels

• Deploying capital — complete planning and structuring of mergers, acquisitions and alliances including partner search, due diligence, valuations, capital structure implications

• Optimizing capital — divestments, feasibility studies and strategic reviews, working capital management, tax structuring

• Preserving capital — liquidity management, refinancing or restructuring of financial obligations, valuation reviews

At EY, we believe that we are best placed to provide you with the necessary expertise to meet your capital agenda.

• Ranked #1 on deal count, for the 12th consecutive year (2002-2013), in the Indian M&A financial advisory league tables Bloomberg

• Ranked as #1 brand for Transaction Advisory Services in India for two consecutive editions of the biennial TNS Global Brand Survey 2013, 2011

• International Accounting / Due Diligence firm of the year, 2012 – M&A Advisory

• Financial Advisor of the Year, India – 2012 AVCJ India Private Equity & Venture Capital Awards

• Most Active Transaction Advisor Award – PE and M&A for 2012, 2011, 2010 and 2009 by Venture Intelligence

• Financial Advisor of the Year M&A Award India, in 2011, 2009 and 2008 – Financial Times & Mergermarket

• Investment Bank of the Year – Private Equity, 2011 – VCCircle Awards

• Cross Border Deal of the Year – Middle Markets, 2011, India M&A Atlas Awards

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Methodology

Transactions quarterly is based on EY’s analysis of ThomsonONE.com’s M&A data.

• Data used in this edition is for the period 1 July 2014 to 30 September 2014.

• Deals have been taken from ThomsonONE.com through the “Advanced M&A” search, where an Indian company was either a target, acquirer, target’s ultimate parent or acquirer’s ultimate parent. The terminated deals have been excluded.

• Deals have been taken where “deal status” as per ThomsonONE.com was either pending, partially complete,

completed, pending regulatory or unconditional.

• Private equity deals or deals with a financial sponsor have been excluded.

• Deal values have been taken as stated in ThomsonONE.com (accessed 1 October 2014) or as per the company press release in certain cases. All amounts are in US$ unless otherwise stated. The conversion rate of non-US$ deals are in accordance with ThomsonONE.com guidelines — the foreign exchange rate as on the deal announcement date.

• For our analysis, deals have been classified into:

• Sectors: based on target’s business

• Inbound, outbound and domestic: based on target/acquirer/target’s ultimate parent and acquirer’s ultimate parent countries

• Deal size: based on announced deal values

• Average deal size has been calculated as total deal value divided by number of deals with disclosed value.

• The numbers have been rounded off unless otherwise indicated.

• For any further details on the deal inclusion criteria used by ThomsonONE.com, contact us at [email protected]..


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Kolkata 22, Camac Street 3rd Floor, Block C” Kolkata-700 016 Tel: +91 33 6615 3400 Fax: +91 33 2281 7750

Mumbai 14th Floor, The Ruby 29 Senapati Bapat Marg Dadar (west) Mumbai-400 028, India Tel: +91 22 6192 0000 Fax: +91 22 6192 1000

5th Floor Block B-2 Nirlon Knowledge Park Off. Western Express Highway Goregaon (E) Mumbai-400 063, India Tel: +91 22 6192 0000 Fax: +91 22 6192 3000

NCR Golf View Corporate Tower – B Near DLF Golf Course Sector 42 Gurgaon–122 002 Tel: +91 124 464 4000 Fax: +91 124 464 4050

6th floor, HT House 18-20 Kasturba Gandhi Marg New Delhi-110 001 Tel: +91 11 4363 3000 Fax: +91 11 4363 3200

4th & 5th Floor, Plot No 2B Tower 2, Sector 126 NOIDA-201 304 Gautam Budh Nagar, U.P. India Tel: +91 120 671 7000 Fax: +91 120 671 7171

Pune C—401, 4th floor Panchshil Tech Park Yerwada (Near Don Bosco School) Pune-411 006 Tel: +91 20 6603 6000 Fax: +91 20 6601 5900

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2nd floor, Shivalik Ishaan Near. C.N Vidhyalaya, Ambawadi Ahmedabad-380015 Tel: +91 79 6608 3800 Fax: +91 79 6608 3900

Bengaluru 12th & 13th floor “U B City” Canberra Block No.24, Vittal Mallya Road Bengaluru-560 001 Tel: +91 80 4027 5000 +91 80 6727 5000 Fax: +91 80 2210 6000 (12th floor) Fax: +91 80 2224 0695 (13th floor)

1st Floor, Prestige Emerald No.4, Madras Bank Road Lavelle Road Junction Bengaluru-560 001 India Tel: +91 80 6727 5000 Fax: +91 80 2222 4112

Chandigarh 1st Floor, SCO: 166-167 Sector 9-C, Madhya Marg Chandigarh-160 009 Tel: +91 172 671 7800 Fax: +91 172 671 7888

Chennai Tidel Park, 6th & 7th Floor A Block (Module 601,701-702) No.4, Rajiv Gandhi Salai Taramani Chennai-600113 Tel: +91 44 6654 8100 Fax: +91 44 2254 0120

Hyderabad Oval Office 18, iLabs Centre Hitech City, Madhapur Hyderabad - 500081 Tel: +91 40 6736 2000 Fax: +91 40 6736 2200

Kochi 9th Floor “ABAD Nucleus” NH-49, Maradu PO Kochi - 682 304 Tel: +91 484 304 4000 Fax: +91 484 270 5393

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This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither Ernst & Young LLP nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

Artwork by: JG

EY refers to the global organization, and/or one or more of the independent member firms of Ernst & Young Global Limited

Edition 19 July-September 2014 October-December 2013 ... · Transaction analysis: Sector analysis 5 ... Indian economy: India economy promises a turnaround 14 ... Cipla Ltd.’s

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