PE backed IPOs India Trendbook 2018 - EY

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PE backed IPOs India Trendbook 2018 - EY
PE backed
   IPOs
   India Trendbook 2018

Disclaimer: This analysis excludes IPOs listed on the SME platform.   PE backed IPOs– India Trendbook 2018   1
PE backed IPOs India Trendbook 2018 - EY
Contents

2   PE backed IPOs– India Trendbook 2018   Disclaimer: This analysis excludes IPOs listed on the SME platform.
PE backed IPOs India Trendbook 2018 - EY
05                    Foreword

 06                    IPO activity overview – A historic perspective

 10                    Sector-wise analysis of IPO activity

 14                    Performance analysis of IPOs

 18                    Regulatory and tax update

 20                    Indian IPO trends and outlook 2018

 24                    About EY’s IPO Advisory Practice

 32                    About EY’s Investor Relations Practice

 36                    About EY’s Private Equity Services Practice

Disclaimer: This analysis excludes IPOs listed on the SME platform.   PE backed IPOs– India Trendbook 2018   3
PE backed IPOs India Trendbook 2018 - EY
4   PE backed IPOs– India Trendbook 2018   Disclaimer: This analysis excludes IPOs listed on the SME platform.
PE backed IPOs India Trendbook 2018 - EY
Foreword
                        Initial Public Offerings (IPOs) / stock market listings   in the emerging markets context, wherein the
                        are an important exit route for private equity (PE)       value add brought in by PE investors comprises
                        backed companies. In 2017, Indian companies               of operational improvements, putting in place
                        raised US$11.6 billion across more than 38 IPOs           governance structures and streamlined processes
                        (excluding SME IPOs) making it the best ever year in      and controls to take care of the pains and complexity
                        terms of IPO proceeds. Of this, IPOs by PE backed         that comes hand in hand with growth.
                        companies in 2017 represented 55% by volume and
                        38% by value. 2017 was also a record year for PE          Outlook for PE backed IPOs remains correlated with
                        investments and exits in India, one where aggregate       the fortunes of the Indian capital markets. As opined
                        PE investment equaled 1% of the country’s GDP. In         in the recently published Global IPO Trends: Q1
                        the period to May 2018, the strong momentum has           2018 report by EY Global, “the Indian IPO market
                        continued, with seven PE backed IPOs adding up to         is expected to remain robust in 2018 due to the
                        US$174 million.                                           resilient nature of the economy and strong domestic
                                                                                  liquidity. The IPO pipeline is healthy with dozens
                        This report provides a historical analysis of PE          of companies looking to go public later this year, a
                        backed IPOs in India over the past five years,            significant proportion of which are PE backed.” The
                        between 2013 and April 2018. This includes                capital markets are however impacted by certain
                        analysis of top PE backed IPOs by key sectors, value      global factors like the spike in oil prices, US Fed rate
                        and volume. We have also attempted to summarize           tightening, recent stance of the US on international
                        the top recent tax/regulatory changes impacting           trade policies, geopolitical tensions and local factors
                        either IPO exits by PE investors or impacting the         like the upcoming elections in 2019, all of which
                        general taxability of stock market investors.             have contributed to rise in volatility since February
                                                                                  2018. This volatility could potentially delay some
                        From a performance perspective, on an average             IPOs. However, the medium term outlook for PE
                        PE backed IPOs have outperformed non-PE backed            backed IPOs remains positive in our view.
                        IPOs, compared to their offer price across time
                        periods. Both PE backed and non-PE backed IPOs            We hope you enjoy reading this report and find it
                        have performed better than the Index1 (please see         useful. Do share your feedback with us.
                        page 15 for further details). This is not surprising

                                                 Vivek Soni                                            Sandip Khetan
                                                 Partner and National Leader                           Partner and National Leader,
                                                 Private Equity Services                               Financial Accounting Advisory
                                                 EY India                                              Services (FAAS), EY India

         1. Nifty 500

Disclaimer:
         Disclaimer:
            This analysis
                     Thisexcludes
                          analysis IPOs
                                   excludes
                                        listed
                                             IPOs
                                               on the
                                                  listed
                                                       SME
                                                         on platform.
                                                            the SME platform.                         PE backed IPOs– India Trendbook 2018   5
PE backed IPOs India Trendbook 2018 - EY
IPO activity overview
-A historic perspective
PE backed IPOs India Trendbook 2018 - EY
Value and volume of PE backed
IPO activity in India
Exhibit 1: PE IPO activity
  PE backed IPOs recorded strong uptick since the second quarter of 2015, with 2017 witnessing a sharp increase in both
  the number of IPOs and the issue size.

  3,000
                                                                                                                                                                           10

                                                                                                                                                              8

                                                                                    7
  2,000
                                                                                                                 6                                   6             6

                                                                                                           5                                5
                                                                                                                                                                           5
                                                                                                 4                      4
                                                                             4
  1,000                                                       3                            3

                        2                                                                                      1,381              2
                                                                                                                                                                  1,243
               1                                                   1    1                                                                       1,522
                    183                                                                                                       228
                                                                                   368
              15                0        0    0     0        112   54   33 293            306 284 730                 1,016            633               2,080
       0                                                                                                                                                                   0
              1Q        2Q   3Q      4Q       1Q     2Q      3Q    4Q   1Q   2Q     3Q    4Q     1Q    2Q        3Q    4Q        1Q     2Q       3Q       4Q       Till
                                                                                                                                                                  April
                         2013                           2014                     2015                      2016                             2017                   30,
                                                                                                                                                                  2018
                                                   Value of Proceeds(US$m)                Number of PE backed IPOs

  Source: EY Analysis of NSE and VCCEdge Data.

Exhibit 2: PE IPO activity as % of total IPO activity
  While most of the IPOs in the earlier years were PE backed, the buoyant capital markets encourage many non-PE backed
  IPOs in 2016 and 2017.

 120%

           100% 100%                                 100%
 100%                                                                                                      98%
           100% 100%                                                                88%
                                                                                                 82%       83%
  80%                                                                                                                                                    78%
                                                                                                     80%              60%
                                                                                   80%     60%                                67%
  60%                                                                                                                                                             57%
                                                                                                                72%
                                                                                                                                      39%
                                                                                                                                                56% 55%                   43%
  40%                                                                                      43%
                                                                                                                                                                          42%
                                                                                                                                      50%
                                                                                                                            33%
                                                                                                                                                30%               30%
  20%

                        0%          0%       0%         0%
    0%
         1Q        2Q     3Q        4Q       1Q    2Q        3Q    4Q   1Q   2Q     3Q     4Q     1Q       2Q     3Q        4Q        1Q        2Q       3Q       4Q       Till
                                                                                                                                                                          April
                    2013                             2014                         2015                          2016                                 2017                  30,
                                                                                                                                                                          2018
                               Value of PE backed IPO proceeds as % of total                   Number of PE backed IPOs as % of total

  Source: EY Analysis of NSE and VCCEdge Data.

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                                         PE backed IPOs– India Trendbook 2018                  7
PE backed IPOs India Trendbook 2018 - EY
Exhibit 3: Top 10 PE backed IPOs by IPO proceeds (2013 to April 2018)
 Company                                              Sector                        Listing date         Issue size (US$m)

 SBI Life Insurance Company Limited                   Financial services            03-Oct-17                     1,292

 ICICI Prudential Life Insurance Company Limited      Financial services            26-Sep-16                       932

 ICICI Lombard General Insurance Company Limited      Financial services            27-Sep-17                       877

 Bandhan Bank Limited                                 Financial services            27-Mar-18                       688

 PNB Housing Finance                                  Financial services            07-Nov-16                       462

 Equitas Holdings Limited                             Financial services            21-Apr-16                       335

 Au Financiers (India) Limited                        Financial services            10-Jul-17                       294

 Eris Life sciences Limited                           Pharmaceuticals               29-Jun-17                       268

 Laurus Labs Limited                                  Pharmaceuticals               19-Dec-16                       205

 BSE Limited                                          Financial services            03-Feb-17                       191
Source: EY Analysis of NSE and VCCEdge Data.

Exhibit 4: Top 10 PE backed IPOs in 2017 by IPO proceeds
 Company                                              Sector                        Listing date         Issue size (US$m)

 SBI Life Insurance Company Limited                   Financial services            03-Oct-17                     1,292

 ICICI Lombard General Insurance Company Limited      Financial services            27-Sep-17                       877

 Au Financiers (India) Limited                        Financial services            10-Jul-17                       294

 Eris Life sciences Limited                           Pharmaceuticals               29-Jun-17                       268

 BSE Limited                                          Financial services            03-Feb-17                       191

 Godrej Agrovet Limited                               Food and agriculture          16-Oct-17                       178

 Indian Energy Exchange Limited                       Power and utilites            23-Oct-17                       154

 Mahindra Logistics Limited                           Logistics                     10-Nov-17                       128

 Security and Intelligence Services (India) Limited   Business services             10-Aug-17                       120

 Tejas Networks Limited                               TMT                           27-Jun-17                       119
Source: EY Analysis of NSE and VCCEdge Data.

8   PE backed IPOs– India Trendbook 2018                          Disclaimer: This analysis excludes IPOs listed on the SME platform.
PE backed IPOs India Trendbook 2018 - EY
Exhibit 5: Ranking of PE houses by number of IPO issues
                                   Number of          Issue size
 Fund houses                                                            Issuer
                                   IPO exits          (US$m)
 Temasek                           5                  3,096             Healthcare Global Enterprises Limited, Godrej Agrovet Limited, SBI
 Holdings                                                               Life Insurance Company Limited, ICICI Prudential Life Insurance
 Advisors                                                               Company Limited
 IFC                               5                  1,484             Snowman Logistics Limited, Equitas Holdings Limited,Ujjivan
                                                                        Financial Services Limited, AU Small Finance Bank Limited,Bandhan
                                                                        Bank Limited
 Motilal Oswal Private             4                  365               Power Mech Projects Limited, Parag Milk Foods Limited, Dixon
 Equity Advisors                                                        Technologies India Limited
 Sequoia Capital                   4                  285               Just Dial Limited, Equitas Holdings Limited, Quick Heal Technologies
 India                                                                  Limited, Prataap Snacks Limited
 Netherlands                       3                  541               Equitas Holdings Limited, Ujjivan Financial Services Limited, MAS
 Development Finance                                                    Financial Services Limited
 Fairwinds Asset                   3                  229               Khadim India Limited, Shankara Building Products Limited, Amber
 Managers                                                               Enterprises India Limited
 Gaja Capital                      3                  102               TeamLease Services Limited, RBL bank Limited, CL Educate Limited
 Jacob Ballas India                3                  164               PNC Infratech Limited, Adlabs Entertainment Limited, S.P. Apparels
                                                                        Limited
 Warburg Pincus                    2                  499               Laurus Labs Limited, AU Small Finance Bank Limited
 WestBridge                        2                  432               Dr. Lal Path Labs Limited,Equitas Holdings Limited
 Ventures
Source: EY Analysis of NSE and VCCEdge Data.
Full IPO proceeds have been attributed to each private equity firm involved in the deal

Exhibit 6: PE backed IPOs in the pipeline
 Company name                                                PE investor                                   Sector
 AGS Transact Technologies Limited                           Actis Advisers, TPG Growth                    Technology
 TCNS Clothing Company Private Limited                       TA Associates                                 Retail and consumer products
 Nazara Technologies Limited                                 IIFL, Westbridge                              Technology
 CMS Info Systems Limited                                    Baring Private Equity Asia                    Technology
 Hinduja Leyland Finance Limited                             Everstone Capital Partners                    Financial services
 Barbeque Nation Hospitality Limited                         Clearwater and CX Partners                    Food and agriculture
 Krishna Institute of Medical Sciences                       Quadria Capital and ICICI Ventures            Healthcare
 Capricorn Food Products India Limited                       Quadria Investment Management                 Food and agriculture

 Seven Islands Shipping Limited                              Wayzata Investment Partners                   Automotive

 Gandhar Oil Refinery India Limited                          IDFC Alternatives Ltd.                        Oil and gas

 John Energy Limited                                         Singhi Advisors, Sage Capital                 Power and utilities

  ReNew Power Limited                                        GEF, Goldman Sachs and Canada                 Power and utilities
                                                             Pension Plan Investment Board (CPPIB)
 Crystal Crop Protection Limited                             Everstone Capital Partners                    Food and agriculture
 Varroc Engineering Limited                                  TATA Capital                                  Automotive
 Atria Convergence Technologies Limited                      True North, Olympus, TA Associates            TMT
Source: SEBI

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                          PE backed IPOs– India Trendbook 2018   9
PE backed IPOs India Trendbook 2018 - EY
Sector-wise analysis
of IPO activity
Sector analysis
(2013-April 2018)
Exhibit 7: Sector cut by number of IPOs

                                                         Financial services        Technology                                           5
                                13
         20                                              DIP                       Infrastructure
                                                                                                                                                  4
                                                                                                                  16
                   Number of                4            RCP                       Pharmaceuticals                           Number of
                   PE backed                                                                                               non–PE backed
                                            4                                                                                IPOs (39)                3
                   IPOs (66)                             Healthcare                Food and agriculture

                                        5                Media &                   Logistics
         8
                                                         entertainment                                                                        5
                  5              5                                                                                          3
                          4                              Others                                                                     3

  Source: EY Analysis of NSE and VCCEdge Data.                              RCP – Retail and Consumer Products | DIP – Diversified Industrial Products

  ►► Financial services was the most prominent sector across both PE backed and non-PE backed IPOs
  ►► Apart from financial services, while consumer facing industries like food and agriculture, RCP, healthcare and pharma
     were more prominent among PE backed IPOs, non-PE backed IPOs were dominated by infrastructure and technology

Exhibit 8: Sector cuts by IPO proceeds

                                                                                                                         1,436
                1,945                                        Financial services      Technology             454
  266
                                                             DIP                     Infrastructure       638                  Non-PE
  331                    PE backed                                                                                           backed IPO
                       IPO proceeds                                                                                           proceeds
  458                                                        RCP                     Pharmaceuticals
                      (US$10,481 m)                                                                       510              (US$10,284 m) 5,420
                                         5,587
   634                                                       Healthcare              Logistics            288
        301                                                  Automotive              Aeronautics
          356                                                                                                   1,157
             251                                             Power                   Others
                   353                                       and utilites                                                383

  Source: EY Analysis of NSE and VCCEdge Data.                              RCP – Retail and Consumer Products | DIP – Diversified Industrial Products

  ►► Financial services recorded some of the largest IPOs between 2013 and April 2018
  ►► Financial services IPOs that were PE backed were primarily of banks and NBFCs while the non-PE backed IPOs were of
     large public sector insurance companies

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                                PE backed IPOs– India Trendbook 2018   11
Financial services accounted for more than 50% of all IPO proceeds raised by both PE backed and non-PE backed companies

  Top 3 PE backed IPO sectors by proceeds                              Top 3 non-PE backed IPO sectors by proceeds

                            Financial services                                                    Financial services
                              Issue size (US$m) PE IPOs (#)                                        Issue size (US$m) PE IPOs (#)
                                   5,587           13                                                    5,420                    5

                            Food and agriculture                                                  Infrastructure
                              Issue size (US$m) PE IPOs (#)                                        Issue size (US$m) PE IPOs (#)
                                     912            8                                                    1,157                    5

                            Pharmaceuticals                                                       Aviation
                              Issue size (US$m) PE IPOs (#)                                        Issue size (US$m) PE IPOs (#)
                                     634            4                                                      638                    1

Source: EY Analysis of NSE and VCCEdge Data.

Exhibit 9: Sub-sectors of top PE backed IPO sectors by proceeds
 Sectors                                        Sub-sectors                             US$m                  Volume(#)

 Financial services                             Insurance                               3,101                 3

                                                Banks                                   875                   2

                                                NBFC                                    765                   3

                                                Miscellaneous                           528                   5

                                                Home finance                            504                   2

 Food and agriculture                           Food processing                         434                   4

                                                Food and beverages                      245                   2

                                                Agriculture                             178                   1

                                                Pesticides and agro chemicals           54                    1
Source: EY Analysis of NSE and VCCEdge Data.

12   PE backed IPOs– India Trendbook 2018                                       Disclaimer: This analysis excludes IPOs listed on the SME platform.
Exhibit 10: PE backed IPOs - Split by sector and volume
 Sectors                             2013                  2014       2015    2016             2017           Till April 2018

 Automotive                          -                     -          -       1                -              1

 Chemicals                           -                     -          2       -                -              -

 Diversified industrial              -                     -          2       -                1              1
 products

 E-commerce                                                                   1

 Education                           -                     -          -       -                1              -

 Financial services                  1                     -          -       5                6              1

 Food and agriculture                                      1          3       2                2              -

 Healthcare                          -                     -          1       3                -              1

 Hotels                              -                     -          -       -                -              1

 Infrastructure                      -                     -          2       1                2              -

 Logistics                           -                     1          1                        2              -

 Media & entertainment               -                     1          3       -                -              -

 Pharmaceuticals                     -                     -          1       2                1              -

 Power and utilities                 -                     -          -       -                1              -

 Business services                   -                     -          -       2                1              -

 Retail and consumer                 1                     1          -       1                2              -
 products

 Technology                          1                     -          -       1                1              1

 Telecom                             -                     -          -       -                1              -

 Grand total                         3                     4          15      19               21             6

  ►► 2017 recorded highest level of PE backed IPO activity. It was also the year to record IPOs across most sectors
  ►► Financial services was the leading sector, recording PE backed IPOs in most of the years during the study period
Source: EY Analysis of NSE and VCCEdge Data.

Disclaimer: This analysis excludes IPOs listed on the SME platform.                          PE backed IPOs– India Trendbook 2018   13
Performance
analysis of IPOs
Percentage increase or decrease in
IPO issue price post listing
Exhibit 11: Average absolute performance of PE backed IPOs relative to index (Nifty 500)

    70%

                                                                                                                               60%
    60%
                                                                                                                   53%                             52%
                                                                                                         51%
    50%                                                                                      48% 47%            46%
                                                                                                                                         44%
                                                                                      41%
                                                                            40%
    40%                                                                                                35%                34%
                                                   32%
                                                             29%      28%          29%                                                 28%
    30%

                                         21%                                                                                                    21%
                                                          19%
    20%
                                   14%           16%
                             10%
    10%                 7%
             1% 1%
     0%
            1 month       1qtr      2qtrs         3qtrs    4qtrs       5qtrs         6qtrs    7qtrs     8qtrs    9qtrs        10qtrs   11qtrs    12qtrs

                                               Non-PE backed IPOs                 PE backed IPOs          Index (Nifty 500)

  Source: EY Analysis of NSE and VCCEdge Data.
  Methodology: Average of absolute returns considered from the date of listing

  ►► While PE-backed IPOs performed better compared to the index on a consistent basis, performance of non-PE
     backed IPOs was more in line with index performance since the date of listing
  ►► PE backed IPOs have also outperformed non-PE backed IPOs on a consistent basis
  ►► The sharp decline in returns recorded by non-PE backed IPOs post the seventh quarter is primarily due to lim-
     ited vintage of some of the best performing non-PE backed IPOs (less than 25% of non-PE backed IPOs have a
     vintage of more than seven quarters and less than 40% of non-PE backed IPOs have a vintage of over a year)
  ►► As on 30 April 2018:
       ►► Ten PE backed IPOs are trading above 100% of their offer price with an average return of 270%
       ►► Nine non-PE backed IPOs are trading above 100% of their offer price with an average return of 173%
       ►► Between 2013-April 2018 highest return by a PE backed IPO was 10x while that by a non-PE backed IPO
          was ~4x

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                                   PE backed IPOs– India Trendbook 2018   15
Exhibit 12: Average absolute performance of IPOs in the financial services sector
                                                                                                                                336%
 335%
                                                                                                                                            304%
                                                                                                                    289%
 285%                                                                                                                                                  267%

 235%

 185%
                                                                                                         153%

 135%                                                                                      122%

     85%                                                               66%         67%
                                                 48%         48%                                            42%                    42%         44%         47%
                                   31%                                                          37%                     39%
                        21%                                              24%         29%
     35%                                             11%      16%
             6% 1%     3% 3%      1% 6%
 -15%      -10%
            1 month      1qtr       2qtrs       3qtrs       4qtrs      5qtrs      6qtrs    7qtrs         8qtrs       9qtrs     10qtrs      11qtrs      12qtrs

                                               Non-PE backed IPOs              PE backed IPOs         Nifty FS Index

 Source: EY Analysis of NSE and VCCEdge Data.
 Methodology: Average of absolute returns considered from the date of listing

 ►► PE backed IPOs in financial services have significantly outperformed the sectoral index
 ►► Non-PE backed IPOs have a limited vintage of only two quarters. However, during those two quarters also PE backed
    IPOs significantly outperformed non-PE backed IPOs

Exhibit 13: Average absolute performance of IPOs in the retail, consumer and food sectors

                      165%
 170%

 150%                            143%

 130%

 110%                                                      102%
                                                                                                                     89%                     86%         85%
     90%                                       80%                                                                               78%
     70%                                                                                                 58%
           46%                                                                             49%
     50%
                                                                                                                                    29%        33%         32%
                                                                                                25%         28%         27%
     30%                                                               20% 16% 18% 19%
                                    10%          8% 8%       12% 12%
     10%         1%      2% 2%            5%

 -10%         -1%
            1 month      1qtr      2qtrs        3qtrs       4qtrs      5qtrs      6qtrs    7qtrs         8qtrs       9qtrs      10qtrs     11qtrs      12qtrs

                                               Non-PE backed IPOs          PE backed IPOs           Nifty FMCG Index

 Source: EY Analysis of NSE and VCCEdge Data.
 Methodology: Average of absolute returns considered from the date of listing

 ►► PE backed IPOs in retail, consumer and food sectors have significantly outperformed the FMCG index
 ►► Non-PE backed IPOs have a limited vintage of only four quarters. However, during those quarters they significantly
    outperformed PE backed IPOs, largely influenced by Avenue Supermarts Limited and Apex Frozen Foods Limited

16    PE backed IPOs– India Trendbook 2018                                                      Disclaimer: This analysis excludes IPOs listed on the SME platform.
Exhibit 14: Average absolute performance of IPOs in the technology sector
                                                                                                   99%
 100%
                                                                           83%
  80%
                                                  62%                                   66%
                                                              58%                                                55%
  60%                                                                                                 52%                               54%
                                                                                     48%
  40%                                                                                                                      35%
                                      27%
  20%                                                                   15%                                                                                    16%
                                                                                                                                          10%       13%
                          4% 2% 2%        5%     7%    4%          2%           1%           3%          4%          4%           5%                         5%
                 1%
    0%
              -4%
 -20%     -14%     -14%                                                                                                                          -13%
           1 month   1qtr            2qtrs        3qtrs      4qtrs        5qtrs         6qtrs       7qtrs        8qtrs     9qtrs       10qtrs   11qtrs     12qtrs

                                                  Non-PE backed IPOs                 PE backed IPOs            Nifty IT Index

  Source: EY Analysis of NSE and VCCEdge Data.
  Methodology: Average of absolute returns considered from the date of listing

  ►► PE backed IPOs in the technology sector have significantly outperformed the IT index as well as non-PE backed IPOs
  ►► However the outperformance of PE backed IPOs is mainly due to the outperformance of Just Dial while the other tech-
     nology IPOs recorded a modest return in line with the index

Exhibit 15: Average absolute performance of IPOs in the infrastructure sector
 110%
  90%
  70%                                                         56%          54%          55%
                                                  48%
  50%
                                                 32%
  30%                               25%
                      13%                                                        12%          13%        16%        17%         12%
           7%                         9%                            7%                                                                    11%        9%
  10%            1%            1%           2%         4%

 -10%
                         -6%
             -16%                                                                                                          -12%        -14%
 -30%                                                                                             -28%
                                                            -26%         -26%
                                                                                      -31%           -34%        -33%
 -50%
                                                                                                                                                 -52%
 -70%
           1 month       1qtr        2qtrs        3qtrs      4qtrs        5qtrs         6qtrs       7qtrs        8qtrs     9qtrs       10qtrs   11qtrs      12qtrs

                                                 Non-PE backed IPOs              PE backed IPOs               Nifty Infra Index

  Source: EY Analysis of NSE and VCCEdge Data.
  Methodology: Average of absolute returns considered from the date of listing

  ►► Both PE backed and non-PE backed IPOs have recorded an erratic performance outperforming the sectoral index over
     few quarters and generating negative returns in other time periods

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                                          PE backed IPOs– India Trendbook 2018   17
Regulatory and
tax update
Tax implications

Implication of capital gains on                                                      ►► Please note that the cost of acquisition is relevant from
                                                                                           grandfathering past gains standpoint
sale of Indian company shares in                                                     ►►    Considering the ambiguity, two broad views emerging
an “offer for sale” under IPO                                                              are as under:
                                                                                           ►► In absence of determination of cost as on
►► Historically, long-term capital gains on listed equity                                     31 January 2018, the charging mechanism fails
     shares held for more than 12 months were eligible for a                               ►► Fair Market Value shall be the price that the shares
     tax exemption, subject to payment of securities transac-                                 would ordinarily fetch on sale in the open market
     tion tax (STT)
                                                                                           ►► We are awaiting clarifications from the Central
►► Subsequently, Finance Bill 2018 introduced levy of tax
                                                                                              Board of Direct Taxes (being the apex body) in this
     at the rate of 10% (excluding applicable surcharge and                                   regard to ensure clarity and certainty
     cess) on long-term capital gains from disposal of equity
     shares, subject to payment of securities transaction
     tax2. The aforesaid regime has been enacted with effect                         Computation of period of holding
     from 1 April 2018
►► Deemed cost of acquisition as on 31 January 2018                                  ►► Capital gains shall be treated as long term in nature
     is prescribed for listed and unlisted equity shares to                                provided the relevant equity shares have been held for
     grandfather past gains (if any)                                                       atleast twenty four months prior to the relevant date of
►► On 24 April 2018, the Central Board of Direct Taxes                                     “offer for sale” under IPO
     issued draft notification that protects genuine cases on                        ►► If the gains are treated as short term in nature (i.e.,
     non STT based acquisitions (such as bonus issue, rights                               shares are held for less than twenty four months prior
     issue, etc.)                                                                          to the relevant date of “offer for sale”), the applicable
                                                                                           capital gains tax rate shall be 15% (excluding applicable
                                                                                           surcharge and cess)
Capital gains on sale of equity                                                      ►► Irrespective of the above, the relief under relevant tax
shares in an IPO                                                                           treaties may continue to be available, subject to satis-
                                                                                           faction of all conditions for claiming benefit under the
►► The shares sold in an “offer for sale” under IPO are of                                 treaty
     an unlisted company (as on that date) and are subject to
     payment of securities transaction tax
►► The aforesaid provisions do not prescribe mechanism
     to compute cost of acquisition as on 31 January 2018
     of such equity shares (being unlisted as on the date of
     transfer)

2. On 24 April 2018, Central Board of Direct Taxes have issued draft notification that protects genuine
cases on non STT based acquisitions (such as bonus issue, rights issue etc.).

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                                PE backed IPOs– India Trendbook 2018   19
Indian IPO trends
and outlook
Indian IPOs

Trends                                                                    for 14% of total IPOs in 2Q2018 and 16% of IPOs
                                                                          in 1H2018. In terms of proceeds, Indian exchanges
►► Overall, Indian IPO activity in 1H2018 was at a
                                                                          accounted for 5% of global proceeds in both 2Q2018
     comparatively higher level than 1H2017 and saw 90                    and 1H2018
     IPOs raise US$3.9 billion driven by solid activity in            ►► Out of 90 IPOs that were listed in 1H2018, 15 listed
     1Q2018. This was 27% and 28% higher than 1H2017                      both on National (NSE) and Bombay (BSE) accounting
     activity in terms of number of issues and proceeds                   for 93% of the total proceeds for 1H2018. National SME
     respectively, as companies tried to take advantage                   recorded 47% (42) of all IPOs listed, contributing a mere
     of the liquidity in the markets on the back of a solid               5% to the country’s proceeds in 1H2018. Similarly,
     2017                                                                 Bombay SME recorded 37% (33) of all IPOs listed,
►► However, activity slowed down a bit in 2Q2018
                                                                          contributing 2% to the total proceeds
     primarily owing to increased volatility in the stock             ►► For 1H2018, top five sectors in terms of number of
     markets. 2Q2018 saw 36 IPOs raise US$1.7 billion                     IPOs were – industrials (27), consumer staples (18),
     which was 33% and 24% lower than 1Q2018 in terms                     materials (14), consumer products (10) and technology
     of number of issues and proceeds respectively. This                  (5)
     was mainly due to the sharp correction in the last               ►► By way of proceeds, the top sectors were – industrials
     couple of months, thereby wiping out whatever gains                  (US$1.5 billion), financial sector (US$1.5 billion),
     the fresh issues had garnered                                        consumer staples (US$279 million), TMT (US$160
►► Compared with 2Q2017, Indian IPO activity                              million) and health care (US$158 million)
     witnessed mixed results in 2Q2018. While the                     ►► First day average returns for companies that have
     activity was up by 6% in terms of number of IPOs, it                 started trading by 31 May are at +6.2%, while the
     was down by 29% in terms of proceeds                                 current YTD returns (as of 31 May 2018) are at +3.0%.
►► Globally, Indian exchanges recorded the highest IPO                    Comparatively, BSE Sensex gave +4% returns during
     activity in terms of number of issues, accounting                    this period while Nifty 50 gains were at +3%

Disclaimer: This analysis excludes IPOs listed on the SME platform.                              PE backed IPOs– India Trendbook 2018   21
Outlook
►► Several companies have lined up for IPO plans worth
                                                                   The outlook for the rest of 2018 looks positive, driven by
     US$5 billion in the coming months, consequently the           relatively stable equity markets and sound corporate earn-
     prospects for India IPO activity are bright for the rest of   ings. Stripping away the volatility driven by global factors
     the year. The stock market is seeing a lot more volatility    seen since February 2018, steady investor confidence and
     this year and thus the time window for listings will get      the rise in domestic capital participation in the equity mar-
     shorter as compared to last year. Also, a certain level       kets is encouraging a healthy IPO pipeline across sectors
     of uncertainty surrounding the next year’s general elec-      and markets. In general, earnings growth across key sectors
     tions may impact the overall IPO activity in the country      has been positive. Conversely, while the micro is improving /
                                                                   expected to improve, the macro is facing headwinds
►► However, going by the response last year, the deal sizes
     are expected to get larger. Inflows of domestic capital       In general, India should continue its IPO boom due to the
     remains strong leading to many opportunities for com-         resilient nature of the economy, strong domestic liquidity
     panies to take the IPO route                                  and a strong pipeline of DRHPs filed with SEBI
►► PSUs expected to go for listing this year include six
                                                                   On the downside, new geopolitical tensions and uncer-
     state-owned entities — Indian Renewable Energy De-
                                                                   tainties on the EY IPO Sentiment Radar TM
     velopment Agency (IREDA), Rail Vikas Nigam, IRCON
                                                                   can play spoilsport
     International, RITES, Garden Reach Shipbuilders and
     Engineers and Mazagon Dock - as the government                ►► Trade wars between the US and China / Europe / rest
     intends to unlock the true value of such PSUs and bring           of the world could impact global trade and slowdown
     in greater accountability                                         growth across economies
►► Financial services, infrastructure and consumer compa-          ►► Italy’s debt crisis and UK’s progress on Brexit could
     nies with strong growth continue to be favourable bets.           cause a flight to safety making emerging market curren-
     We do expect some pressure on deals in sectors where              cies like India extremely vulnerable to adverse fluctua-
     companies have failed to deliver earnings or are prone            tions
     to corporate governance concerns                              ►► Spike in oil prices can cause India’s fiscal deficit to bal-
►► The rising renewable energy industry is likely to witness           loon as well as stoke inflation
     a surge in IPO activity as they look to tap the country’s     ►► Unwinding of the stimulus by the US Fed can have far
     capital markets. Many companies in this sector are                reaching impact on emerging markets
     preparing for initial public offerings. However, they may     ►► Impending general elections and any fears of a frac-
     face challenges given the volatile equity markets, lack           tured mandate could suddenly cause the investor senti-
     of clarity on long term policies, industry outlook and            ment to turn negative
     overvaluation issues
►► A few IPOs are also expected from the seafood indus-
     try as companies try to take advantage of the boom in
     shrimp exports. According to sources, Indian aquacul-
     ture production is estimated to touch a record seven
     lakh tonne during the current fiscal and reach one mil-
     lion tonne by 2020. Amongst the companies that have
     filed with SEBI are Nekkanti Sea Foods, Devi Seafoods
     and Sandhya Marines. They are expected to raise a total
     of around US$250 million. However, they may face
     headwinds in the form of increased US tariffs on Indian
     shrimp exports, softer global pricing and stock market
     volatility

22   PE backed IPOs– India Trendbook 2018                                   Disclaimer: This analysis excludes IPOs listed on the SME platform.
EY IPO
Sentiment
RadarTM                                                                          Potential impact
                                                                                 ►► Consider a number of alternative funding or
                                                                                    exit options
Our radar contains a variety of market factors that                              ►► Preserve optionality with early IPO
may impact investor sentiment for IPOs.                                             readiness preparations
Pre-IPO companies should analyze how these factors                               ►► Prepare early to complete your IPO quickly
may affect their business and ultimately their impact                               in narrow IPO windows
on the timing and value of their transaction in view of                          ►► Be flexible in timing and pricing
their chosen IPO destination.

                                               Oil prices

                                                                      Geopolitical tensions

                  Interest rate hikes

          Currency

                                                                                           Political instability

                                      Elections
                                                                                                           Regulatory
                                                                                                           changes

                                                Short-term volatility

Disclaimer: This analysis excludes IPOs listed on the SME platform.                                       PE backed IPOs– India Trendbook 2018   23
About EY’s IPO
Advisory Practice
Why IPO
►► For fast-growing private companies seeking to raise
    capital, an initial public offering (IPO) can propel their                An IPO being a special transaction requires seasoned
    growth.                                                                   professionals to make it a success. There are multiple
                                                                              advisors who are party to this transaction:
►► An IPO is not simply a one-time financial transaction,
    rather it’s a milestone in a complex transformation                       1.    Bankers
    from private to public company.                                           2.    Legal Counsels
►► While the market looks promising, companies that are                       3.    Auditors
    fully prepared will be best able to leverage the window                   4.    Regulators
    of the current IPO opportunity

                                                                  IPO readiness
                                                                       gaps

                                   Strong equity                                                 IPO project
                                       story                                                      execution

                                                         GAAP analysis     Reporting and
                                                                           co-ordination                                 IPO offering
                Reporting
               acceleration                                                                                             documents and
                                                                                                                          disclosures
                                          Timely and                                        Data room
                                       accurate financials                                  management

                              Audit committee                                                     Prospectus

        Financial                                                                                                                    Audit
                                                              What’s changing                                                     preparations
     communications
                                                                  for you
                                                                                                  Stock exchange
                              Investor relations                                               listing requirements

                                        Indian GAAP /                                         SEBI /
                                         Ind-AS / IFRS                                     ICDR / LODR
              Governance                                                                                                   Disclosure
             and reporting                                Estimates and     Demerger /                                      controls
                                                           assumptions       Business
                                                                            acquisitions

                                   Accounting
                                                                                                  Optimal tax
                                   policies and                                                   structuring
                                   procedures
                                                                   Restatement
                                                                    of financial
                                                                    statements

                                                                                                                      PE backed IPOs– India Trendbook 2018   25
EY IPO Solutions
EY has a dedicated team of cross functional specialists to help you throughout your IPO journey

      IPO Readiness Assessment                   Project Management Office                    Staff augmentation

     ►► Understand current state and            ►► Coordination amongst                     ►► ►Accounting close assistance
         the IPO plan                               all internal and external               ►► ►GAAP Conversion (Indian GAAP/
     ►► ►Perform diagnostics and gap                stakeholders                                Ind-AS)
         analysis                               ►► ►Data room management                    ►► ►Assist in the preparation of
     ►► ►Develop plans to address gaps          ►► ►Milestone monitoring                        financial information required in
     ►► ►Recommendations                        ►► ►Dashboards                                  IPO
                                                ►► ►Staff augmentation                      ►► ►KPI mapping and alignment
                                                                                                based on company strategy

      Governance, risk and controls              Tax planning and restructuring               Benchmarking

     ►► ►Board composition;                     ►► ►Structuring of the proposed             ►► Benchmarking accounting
         committee formation                        business acquisition                        policies disclosures, processes and
     ►► ►Board governance guidelines,           ►► ►Review of documents                         KPI in relation industry peers
         committee charters, code of            ►► ►Evaluate alternate options              ►► ►Recommendations to improve
         conduct, etc.                                                                          processes based on
                                                ►► ►Recommendation and
     ►► Enterprise Risk Management                                                              market and peer comparison
                                                    finalization of proposed option
     ►► ►Policies & processes (e.g.
         insider trading, manuals, etc.)

      Fraud Investigation & Dispute Services (FIDS)

     ►► ►Anti-bribery and Anti-corruption Compliance Services       ►► ►Whistle-blowing Services
     ►► ►Anti-Corruption (FCPA) due diligence                       ►► ►Third-party Due Diligence
     ►► ►Anti-Corruption compliance program advisory                ►► ►Background Research Services- Reputation checks of
     ►► ►Anti-Corruption investigation                                     companies and individuals

26   PE backed IPOs– India Trendbook 2018
Benefits of having EY

Save time             Reduce cost and                   Increase transaction                               Share
                         pressure                             certainty                                  knowledge

                                 Merchant                        Reputed
                                 Banking &                     professional
                             Transaction Tax                   firm having
                              Services under                     a global
                              single umbrella                   footprint

                                                                                        Focused Capital
                                                                                         Markets Team
                                                                                            having
          Offering                                                                       experience of
         merchant                                                                       more than 100
          banking                                                                           years
         services*

                                                 Well
                                              positioned
                                                                                                      Updated
                                                                                                 knowledge base in

                                               to advise
                                                                                                 the ever-changing
                                                                                                     regulatory
    No conflicts of                                                                                  environment
       interest

                                                                                     Experienced
                                                                                    professionals,
                                                                                       industry
                                                                                    databases and
                      Impeccable                                                    best practices
                     track record                       Recognized
                                                          among
                                                        regulators,
                                                      exchanges and
                                                     inter-mediaries

  *EY Merchant Banking Services is a Securities Exchange Board of India (SEBI) registered merchant banker

                                                                                        PE backed IPOs– India Trendbook 2018   27
IPO readiness

28
                                                              1 IPO readiness and destination assessment and diagnostics .............................................................................................
                                                              2 Analyze capital structure options (debt vs. equity mix options) ......................................................................................
                                                              3 Support in preparing IPO beauty contest (e.g., organization, questionnaire for investment banks, lawyer, IR agency) ....                                                      Strategy
                                                              4 Peer group analysis covering readiness aspects (e.g., KPIs, segment reporting, GAAP and IR) ....................................................                              Align operational
                                                              5 Support for and creation of a holistic integrated IPO fact book and brief investor presentation ....................................................                          goals with your

                                           Strategy
                                                              6 Assistance with and review of IPO valuation models (e.g., use of multiple methods to find own valuation range) ..........................                                     finance strategy
                                                              7 Support for business plan and creation of KPIs (pre- and post-money view) .......................................................................................
                                                              8 Evaluation of sustainability story and reporting requirements, plus regulatory analysis ........................................................................

PE backed IPOs– India Trendbook 2018
                                                              1 Tax optimization of shareholder and exit structure ..........................................................................................................
                                                                                                                                                                                                                                              Structures
                                                              2 Creation and optimization of transparent company structure in line with segment reporting and equity story ..............................                                     and taxes
                                                              3 Support in creating the potential issuer (country of registration) and chosen capital structure ....................................................                          Establish a
                                                              4 Support in creating the issuer's legal form, articles and bylaws of corporate governance system chosen ..................................                                     transparent

                                               taxes
                                                              5 Support for specific IPO issues of tax accounting (review and assistance) ...................................................................................                 company
                                                              6 Design and creation of corporate governance structure and specific rules of procedure for the management board ............................                                   structure and

                                          Structures and
                                                              7 Design of future shareholders' influence following IPO (articles, voting rights, share classes and majorities) .........................................
                                                                                                                                                                                                                                              optimize taxes

                                       Structures and taxes
                                                                                                                                                                                                                                                                  listing services overview

                                                              1 GAAP and IFRS conversion (diagnostic reviews, conversion implementation plans and full conversion) ..............................
                                                              2 Assistance with fast and advanced closing process for financial statements ...................................................................
                                                              3 Support for and preparation of required reports and financial statements disclosures for prospectus ................................                                          Financial
                                                              4 Support for and improvement of forecasting systems and capabilities (including working capital model) .....................................                                   Prepare all
                                                              5 Evaluation of IPO accounting issues (e.g., segment reporting and revenue recognition) ............................................................                            finance-related

                                           Financial
                                           Financial
                                                              6 Audit and assurance services for financial statements required during and post-IPO ..........................................................................                 infrastructure
                                                              7 Opinion on annual financial statements, internal controls and management letter .............................................................................
                                                              8 Evaluation of the appropriateness and suitability of current debt facilities ..........................................................................................

                                                              1 IT effectiveness assessment and process improvement services ......................................................................................
                                                                                                                                                                                                                                                                  Your IPO work plan and EY’s IPO and

                                                              2 Assistance with operational carve out and separation issues (e.g., IT and HR) ............................................................................                    Systems
                                                              3 Transfer pricing analysis and documentation for ongoing related party transactions ..................................................................                         Build the right
                                                              4 Support for and testing and improvement of risk management systems .....................................................................................                      supporting
                                                              5 Support for and testing and improvement of compliance systems (including fraud and bribery) .........................................................                         systems to

                                           Systems
                                                              6 Identification and documentation (e.g., entity-level controls, IT general controls and business process controls) ..................................                          fulfill ongoing
                                                              7 Evaluation of existing controls, identification of weaknesses and ongoing testing of control effectiveness ............................................                       requirements
                                                              8 Internal audit planning and performance of internal auditing ..............................................................................................................

                                                              1 Assistance with setting up IR (internal organization, processes, infrastructure and ownership) ..........................................
7 Evaluation of existing controls, identification of weaknesses and ongoing testing of control effectiveness ............................................
                                                    8 Internal audit planning and performance of internal auditing ..............................................................................................................

                                                    1 Assistance with setting up IR (internal organization, processes, infrastructure and ownership) ..........................................
                                                    2 Preparation of whistle-blower program and hotline ...................................................................................................................                        Functions
                                                    3 Support with establishing compliance officer and internal compliance levels ...............................................................................                                  Manage investor
                                                    4 Support with IR strategy (e.g., equity story building, KPIs, media plan, communication lines and policies) ....................................                                              relations,
                                                    5 Review of effectiveness of investor relations with regard to meeting investor demands .......................................................................                                Compliance,
                                                    6 Training of external reporting process owners in IFRS for capital market communication ....................................................................                                  and boards and

                                       Functions
                                                    7 Setup of an internal and external IPO communications plan ...............................................................................................................
                                                                                                                                                                                                                                                   committees
                                                    8 Review requirements for corporate secretarial and legal resources ...................................................................................................

                                                    1 Review of the incentive schemes of key people ...............................................................................................................
                                                    2 Assistance with recruiting new hires (board composition, supervisory board members and IR officer) ..........................................
                                                    3 Creation of long-term employee incentive plan .......................................................................................................................                        Leadership
                                                    4 Creation of stock option plans according to company’s goals and capital market eligibility ..........................................................                                        Build credibility
                                                    5 Training of employees on capital market issues (e.g., insider regulation, ad hoc disclosure and directors dealings) .............................                                            and board
                                                    6 Documentation of new capital market status in employment contracts and compliance levels ..............................................................                                      independence

                                       Leadership
                                                    7 Development of relevant internal policies and manuals (e.g., code of conduct, ethics, ESG and CSR) ...................................................
                                                    8 Board support (finance policy, corporate governance report, committee and CEO instructions) ..........................................................

                                                    1 IPO time line development and tracking of milestones ......................................................................................................
                                                    2 Preparation, organization and operation of IPO data room ...............................................................................................
                                                    3 IPO due diligence services (e.g., financial and taxes) according to issuer's and IPO intermediaries‘ requests.................................                                               Timing
                                                    4 Strategic IPO advisory providing coaching for the board and assistance with IPO project management ......................................                                                    Design your IPO

                                       Timing
                                                    5 Dual-track organization of IPO and plan B ..............................................................................................................................                     value journey
                                                    6 Review of registration statement for compliance with rules and regulations of specific exchange and regulator …................................
                                                    7 Setup of a corporate communication calendar for the entire infrastructure from day one .................................................................

                                       What is IPO readiness?                                                                                                                                                                    IPO considerations and planning
                                       You will save time, reduce costs and increase transaction certainty by adopting a structured approach to                                                                                  12–24 months prior to IPO

                                       your IPO journey. We recommend that you start this journey with EY’s IPO readiness service, which covers                                                                                  IPO execution
                                       all areas specific to the IPO case and is designed to guide your company through a successful                                                                                             6–12 months leading up to IPO
                                       transformation from private to public status.                                                                                                                                             IPO
                                                                                                                                                                                                                                 Being public

PE backed IPOs– India Trendbook 2018
29
IPO Co-ordination
(EY project management)

People                                                       Process
►► Dedicated client resource(s) with support from EY         ►► The IPO Co-ordination Team will use the roadmap to
     (“IPO Co-ordination Team”) to help monitor and report       enable progress discussions and hold workstreams
     progress, address risk, and support realization of          accountable to delivering on target
     roadmap benefits                                        ►► The IPO Co-ordination Team executes bi-weekly status
                                                                 reporting to accurately communicate program health
                                                                 (e.g., progress, risks, and upcoming milestones)
                                                             ►► The IPO Co-ordination Team facilitates the risk
                                                                 management process to look ahead and proactively
Tools                                                            identify program risks and develop effective mitigation
                                                                 plans

Roadmap monitoring

Bi-weekly status reporting

30   PE backed IPOs– India Trendbook 2018
IPO thought
leadership

                                                                            IPO destination
                                                Global IPO                  guide
                                                trends report
                                                                            Helps you to
                                                Explores the                determine which
                                                major themes                capital market
                                                and trends                  or listing zone,
                                                currently shaping           stock exchange
                                                the market                  and segment
                                                through analysis,           will support
                                                articles and                your company’s
                                                interviews.                 strategy.

                                                EY’s guide to
                                                going public

                                                Guides you                  Investor
                                                through the                 Relations
                                                critical factors
                                                that go into a              Exploring how
                                                successful initial          investor relations
                                                public offering             is organised in
                                                and the EY IPO              companies pre
                                                value journey.              and post IPO.

                                                IPO: With you all
                                                the way

                                                Reflects upon
                                                the various areas
                                                that need to be
                                                considered in
                                                your preparation
                                                for an IPO.

Disclaimer: This analysis excludes IPOs listed on the SME platform.   PE backed IPOs– India Trendbook 2018   31
About EY’s
Investor Relations
Practice
Why Investor Relations

Absence of visibility has its downsides

  Incomplete information               Uncertainty                    Risk motivates                    Results in a higher
  fosters uncertainty                  creates risk                   investors to demand a             cost of capital and
                                                                      higher rate of return             lower security prices

Investor access and education is the key:
►► Globalization and coverage of companies by analysts all over the world
►► Consolidation/alliances: What it means for your firm, be aware of trends in competition
►► Better valuations
►► Higher liquidity for shares
►► Showcases a good story to investor community

Why Investor Relations
Information required vs. available information

   What investors want                                                What companies provide
   ►► Assess a company’s future performance                           ►► Detailed financial statements
   ►► Get a sense of real growth potential                            ►► Some firms give guidance
   ►► Determine value of intangibles                                  ►► “Inflated” market share whenever given
   ►► Get a big-picture, beyond the company’s                         ►► Enough information to meet regulatory
      financials                                                         requirements
   ►► Assess value on non-financial information
   ►► Assess value of peer comparisons
   ►► Get the right information fast enough
   ►► Determine a company’s market share

                                                                                              PE backed IPOs– India Trendbook 2018   33
Proposition and services offered
                                                                        High value investor relations advisory and research
                                                                        help the businesses to improve their visibility and
Services offered                                                        access to the capital markets
►► Design and establish an appropriate IR program                       EY’s Investor relations practice is grounded in the
         that help the clients meet the rigorous demands of             fundamental equation:
         the financial community

                                                                                               +
►► Draws upon our experience in establishing IR                            Company’s financial performance
         programs to bring together a range of ongoing IR
         support services
►► Our experience with investor and analyst perspec-
         tives, coupled with our proven methodology helps                How that performance is interpreted

                                                                                               =
         drive shareholder value for our clients                           by the investment community

                                                                           Company’s equity value

IR’s build process

     Where does the IR function stand
     compared to the best practices?                How should IR capability be           How should ongoing activities in
       What should the IR capability                designed and implemented?              the IR function be managed?
               look like?

                        As – is Assessment         Design and build IR function                Ongoing run support

                            4 weeks                           4 weeks                                      TBD

                                 Assess current
                                  IR state and                 IR Function Definition
                                 align with best
     Project kick-off

                                    practices                                                                    IR
                                                     IR Master Plan design and implementation
                                                                                                             Governance
                                                                                                              - Support
                                   Understand                   Knowledge Transfer
                                 business needs,
                                    IR vision/
                                     strategy                 IR Governance Definition

                                                                                                        Management Review

34      PE backed IPOs– India Trendbook 2018
EY’s
competencies

                   Real-world skills and                                         Full-service
                  experience of research,                                    high-value offering
                    corporate investor
                   relations and capital
                          markets

                                                                     EY’s
                                                                  competencies

                                  Measureable                                Core team comprising
                                  performance                                 of MBAs/CAs, rich
                                                                                 in experience

Disclaimer: This analysis excludes IPOs listed on the SME platform.                     PE backed IPOs– India Trendbook 2018   35
About EY’s Private
Equity Services
Practice
About EY’s Private Equity
Services Practice
EY has been working with the private equity industry for           world. EY has 16 offices spread across 10 cities in India.
more than 25 years, with approximately 25,000 seasoned             Worldwide, our 247,570 people across 150+ countries
professionals worldwide dedicated to the industry and its          and 700+ cities are united by our shared values and their
business issues. EY serves 74% of the top 300 PE firms             unwavering commitment to quality.
included in the Global PEI 300 firms list. Private equity          ►► EY’s India Private Equity Services Practice has been
firms, portfolio companies and investment funds face                     among the top advisors for private equity deals over the
complex challenges. They are under pressure to deploy                    past ten years. EY has been awarded the “Most Active
capital amid geopolitical uncertainty, increased competition,            Transaction Advisor” award by Venture Intelligence for
higher valuations and rising stakeholder expectations.                   2009-2013 and also the “Investment Bank of the Year,
Successful deals depend on the ability to move faster,                   Private Equity” award by VC Circle in 2012 and 2017.
drive rapid and strategic growth and create greater value
                                                                   ►► EY’s India Private Equity Services Practice provides val-
throughout the transaction life cycle. EY taps its global
                                                                         ue to PE funds and their portfolio companies through its
network to help source deal opportunities and combines
                                                                         deep sector and service expertise. EY India is organized
deep sector insights with the proven, innovative strategies
                                                                         around key industry verticals in a matrix structure that
that have guided the world’s fastest growing companies.
                                                                         enables us to offer an unparalleled blend of industry
In India, EY is among the leading providers of advisory, tax,            expertise and functional skills. We actively track about
transactions and assurance services. The organization is                 15 sectors with sector leads driving our penetration in
also the number one professional services brand* in India,               each of those sectors.
which is a testimony to our relentless commitment to deliver
exceptional client service and create a better working

 EY has been ranked as #1 Financial Advisor for over a decade across Mergermarket, Thomson Reuters and Bloomberg**.
 Our position as the foremost M&A advisor in the Indian mid-market enables us to create a robust deal origination pipeline
 for our PE/VC clients, acting as the tip of the spear of what is India’s dominant PE Services practice.

               Merger market                         Thomson Reuters                                   Bloomberg
                                                                                                       38
                                                                                          34                     34
                40                                                49
                          39
                                                41      43                                                  28
                                                                                                                            26
        29                       29
                                                                           33                  21                     21
                     24
          18                19                                                                                                 15
                                                             21     20
                                                  18                          19
                                    12

       2014     2015      2016   2017          2014     2015      2016     2017          2014         2015       2016      2017

                                                                                               EY           Closest compete

 ►► # 1 advisor on deal count in Financial advisory league tables across databases
 ►► Consistently maintaining a significant lead from closest compete
 ►► Adjudged as the Investment Bank of the Year at the VC Circle Awards 2017

                                                                                                    PE backed IPOs– India Trendbook 2018   37
EY services for Private Equity
We offer an array of services to Private Equity funds and their portfolio/investee companies through our various service lines.

     Partners                                                                                           Fund assurance
     (Personal tax)�                                                                                    (Assurance and Tax
                                                                                                        Structuring)
     Fund Raising
     (Audit of fund performance)

                                                                      Funds
                                                                                                        Buyside support
                                                                                                        (Financial Due Diligence,
     Buyside advisory                                            Transaction                            Tax Structuring and Diligence,
     (M&A and valuations,
     Fraud, Investigation and                                     Advisory                              Business DD, Environmental
     Dispute Services)                                             Services                             Compliance,CDM Human
                                                                                                        Capital, Valuations)

                                                               Portfolio Services
     Exit readiness                                                                                     Transition
     (IPO, GAAP Conversion,                                                                             (Transaction Integration,
     SOX Compliance, VDD,                                                                               GAAP Conversion, Governance,
     Sale Mandates, Clause 49)                                                                          Controls Assessment, MIS
                                                                                                        Development, Process Advisory,
                                                                                                        Standard Operating Procedures)

     Distressed                               Assurance                                                 Growth
     (Bank intermediary, working              (Assurance, Tax Compliance, Risk Management,              (Strategic Options, Technology
     capital, cost reduction)                 Corporate Governance Advisory, Internal Audits            Security, IT Strategy, Operational
                                              and Fraud reviews)                                        Improvement, Market Entry
                                                                                                        Options & WCM)

                                                           A     B

  Operating model           Global compliance Deal                          Integrated              Value                   Exit readiness
  and automation            and reporting     origination�                  due diligence           creation�               and IPO
 Alternative asset           Large asset             Large asset            Private equity firms     Private-equity firms     Private equity firms
 managers need to            managers have           managers have          conduct diligence on    face increasing         must plan exits
 drive efficiency             hundreds of non-US      hundreds of            assets across           pressure to attract     rigorously in order to
 through multi-year          legal entities in       non-US legal           strategic, financial,    fresh capital. This     successfully monetize
 target operating            multiple countries      entities in multiple   tax, operational and    requires generating     their investment
 models and                  and continually         countries and          HR issues. Firms        greater investment      during the exit
 infrastructure              create new ones –       continually create     historically used       returns and             process in today’s
 strategies to remain        all with different      new ones – all with    issue-based             demonstrating a         challenging
 competitive. These          compliance              different              advisors, managing      consistent track        environment.
 align with strategic        obligations. Many       compliance             different parties and   record in creating      Executives must
 growth plans by             are outsourced and      obligations. Many      consolidating           value in their          identify key short-
 leveraging vendor           require local           are outsourced and     findings at the end      portfolio. EY’s value   and long-term
 and service provider        knowledge. EY           require local          of the process.         creation solution       priorities prior to
 activities. EY              gathers the data,       knowledge. EY          Employing EY’s          addresses these         undertaking an IPO
 defines and                  leverages local EY      gathers the data,      integrated diligence    challenges across all   or alternative
 monitors data               teams familiar with     leverages local EY     approach at the         five stages of the       transaction. EY can
 analytics and key           accounting and tax      teams familiar with    early stages of a       deal life cycle,        advise deal teams
 performance                 laws, performs data     accounting and tax     transaction provides    including deal          and portfolio
 indicators to               analytics to identify   laws, performs         more effective,         origination,            companies on exit
 annually assess             trends, risks and       data analytics to      comprehensive           diligence, inception,   alternatives, assess
 data governance             opportunities and       identify trends,       diligence on an         optimization and        exit readiness,
 and risk against            monitors filing          risks and              asset, giving firms a    exit strategy.          prepare a business
 these target                requirements.           opportunities and      distinct competitive                            for exit/IPO and
 models.                                             monitors filing         advantage.                                      create a value story
                                                     requirements.                                                          for targeted buyers.

38    PE backed IPOs– India Trendbook 2018
Delivering issue-based solutions to the entire PE enterprise
EY has established six distinct solutions reflecting the holistic set of challenges that PE firms face across all levels of the
organization – the management company, the funds, and their portfolio companies.

     Operating model and automation              Global compliance and reporting                    Deal origination
      Alternative asset managers need               Large asset managers have                  The intense competition for a
      to drive efficiency through multi-        hundreds of non-US legal entities in          limited number of deals raises
         year target operating models           multiple countries, and continually           stakes to win for private equity
       and infrastructure strategies to         create new ones – all with different         firms. A proprietary investment
       remain competitive. These align             compliance obligations. Many                 approach, driven by sector
        with strategic growth plans by            are outsourced and require local               insights, enables firms to
        leveraging vendor and service             knowledge. EY gathers the data,             confidently place winning bids
     provider activities. EY defines and         leverages local EY teams familiar         that generate appropriate returns.
       monitors data analytics and key             with accounting and tax laws,           EY’s global origination team turns
     performance indicators to annually         performs data analytics to identify            opportunities into actionable
      assess data governance and risk           trends, risks and opportunities and             strategies. Our proprietary
         against these target models.              monitors filing requirements.           knowledge and advanced analytics
                                                                                               help develop strategic capital
                                                                                               options to help firms achieve
                                                                                                          success.

          Integrated due diligence                        Value creation                         Exit readiness and IPO
         Private equity firms conduct                Private-equity firms face                 Private equity firms must plan
           diligence on assets across             increasing pressure to attract                 exits rigorously in order to
     strategic, financial, tax, operational         fresh capital. This requires                successfully monetize their
       and HR issues. Firms historically          generating greater investment             investment during the exit process
           used issue-based advisors,              returns and demonstrating a             in today’s challenging environment.
        managing different parties and          consistent track record in creating         Executives must identify key short-
       consolidating findings at the end        value in their portfolio. EY’s value          and long-term priorities prior to
        of the process. Employing EY’s          creation solution addresses these            undertaking an IPO or alternative
       integrated diligence approach at         challenges across all five stages of          transaction. EY can advise deal
       the early stages of a transaction         the deal life cycle, including deal          teams and portfolio companies
            provides more effective,             origination, diligence, inception,           on exit alternatives, assess exit
        comprehensive diligence on an             optimization and exit strategy.            readiness, prepare a business for
          asset, giving firms a distinct                                                     exit/IPO and create a value story
            competitive advantage.                                                                  for targeted buyers.

                                                                                                   PE backed IPOs– India Trendbook 2018   39
Focused advisory solutions for private equity backed portfolio companies

                                     EY’s IPO readiness service is the first step in what we describe as the “IPO value journey”
                                     and is designed to guide the client through a successful transformation from private to
     IPO readiness:                  public status. Achieving readiness will ensure a strong debut in the capital markets. Getting
     The first step                  IPO readiness right means implementing change throughout the business, organization
     in the IPO                      and the corporate culture. As a public company, the client will be subject to increased filing
     value journey                   requirements, transparency, compliance, scrutiny by investors and analysts and overall
                                     accountability for delivering on promises. Successful businesses start to prepare typically 12
                                     to 24 months before the IPO — in many cases with an IPO readiness assessment.

                                     Depending on objectives and business context, EY helps the client develop a combination of
     Performance                     short-term and long-term strategies to reduce costs, optimize process and bring in efficiency
     improvement                     and effectiveness across all layers of business to deliver positive impact on EBITDA by
                                     ensuring optimal utilization of both tangible and intangible resources.

     Analytics:                      EY helps clients build data and information strategies using various analytics tools to
     Generate                        deal with big data to address various areas of business, ranging from opportunity sizing
     insights to make                and feasibility, operations and customer modelling, executive decision making, merger
     smarter, faster                 acquisition and valuation. EY helps across the capability value chain ranging from strategy,
     decisions                       implementation, hosting and running the analytics functions.

     Growth                          Having a broader perspective on the drivers of growth in your business and finding
     Navigator:                      innovative ways to accelerate and sustain that growth can give you a competitive advantage.
     Achieving your                  That’s why we’ve developed EY Growth Navigator™, an interactive experience that uses the
     growth                          EY 7 Drivers of Growth to help you and your leadership team assess your business’s current
     ambitions                       and aspirational position, and create a strategic road map to help you get there.

     Route to Market
                                     EY identifies focused opportunities for optimizing cost and growth after full assessment;
     (RTM):
                                     designs new RTM, including different approaches for different segments (customers, regions,
     Deliver a
                                     seasonal demand); identifies the optimal concessionaires’ model taking into account different
     successful
                                     distribution approaches; and supports the implementation of the RTM by providing IT specs
     strategy for your               and additional services (e.g., stock management options).
     business

                                     EY assists internal teams to build cyber awareness and conduct company-wide training, as
                                     well as training of board of directors. EY supports in building regulations and compliance
     Cyber                           requirements with audit and readiness services. EY helps transform the security program
     security                        and integrate information security and IT risk across the enterprise as well as help implement
                                     globalized data protection strategies to protect information that matters, while considering
                                     regulatory and industry compliances.

40   PE backed IPOs– India Trendbook 2018
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