“Private equity: way to Indian markets”

TABLE OF CONTENTS

Acknowledgement …………………………………………………….....3 Abstract..................................………..…………………………………..4 Objective………………………………………………………………....6 Methodology……………………………………...………………………7 Understanding private equity

Definition ………………………………………………………………...8 Industry size …………………………………………………………….11 Investment Patterns……………………………………………………13 Taxation issues …………………………………………………………15 Indian perspective ………………………………………………………16 SEBI’s concern …………………………………………………………17
Stages of PE investment in Indian scenario …………………………....18 Role’s played by private equity in Indian economy ……………………20 Role’s played by private equity in growth of Indian economy ……...…26 Some other roles ……………………………………………………..…27 PE capital is more than just money …………………………………….29 PE investments: Current Trends ………………………………………..31 Comparison with senior debt …………………………………………..36 Why PE firms choose India: Warburg & Bharti’s case …………….…..38 References ……………………………………………………………..43

Abstract

India has been witnessing dramatic shift in the size and composition of foreign investment inflows over the couple of years. Institutional investors in developed countries, for their portfolio diversification, are continuously seeking new destinations and innovative and alternative asset class. The Private Equity is the best alternative for raise money from an investment. The Private Equity sector is broadly defined as investing in a company through a negotiated process. Investments typically involve a transformational, value-added, active management strategy. Typical forms of private equity include venture capital, growth and mezzanine capital, angel investing and private equity funds. The major PE investments influencing the deal values are Real Estate, IT/IT Services and Energy sectors. The other sectors, which have significantly contributed to private equity deal value, are Logistics and Telecom. The most active sectors in terms of deal volume were IT/IT Services and Manufacturing. Other sectors contributing significantly to deal volume were Banking, Finance and Insurance and Real estate. The PE investment pattern follows various stages, which are: seed, start-up, expansion and replacement stages. It also follows a definite process, which is Deal Origination (Deal Sourcing), Due Diligence, Deal Negotiation, Deal Closing (Acquisition), Post Acquisition Monitoring and Exit (IPO, Trade Sale or Buy back).

OBJECTIVE

their particular strategies.The objective of this project is to study the role of private equity in India. this would help to understand the investment pattern and than the exit strategies of the PE firms. analyzing their investment strategies. The project would also deal with some of the major deals in India. . regulatory norms in India and how it is beneficial of Indian companies.The project would also help to understand us what could be the scenario of the private equity investments in the near future. by studying their entry strategies into India financial markets.

expand. Others. buy out a division of your parent company. encompassing both “venture capital” (the seed to expansion stages of investment) and management buy-outs and buy-ins. buy into a business.e. What is private equity? Private equity provides long-term. The Private Equity sector is broadly defined as investing in a company through a negotiated process. value-added. the investors’ returns are dependent on the growth and profitability of your business. synonymous with “private equity”. the term “private equity” is used throughout this Guide to describe the industry as a whole. Obtaining private equity is very different from raising debt or a loan from a lender. turnaround or revitalize a company.Introduction to Private Equity Definition Private equity is medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies. to help unquoted companies grow and succeed. active management strategy. committed share capital. in Europe but not the USA. If you are looking to start up. Private equity is invested in exchange for a stake in your company and. i. as shareholders. such as a bank. Lenders have a legal right to interest on a loan and repayment of the capital. Some commentators use the term “private equity” to refer only to the buy-out and buy-in investment sector. The acquisition normally entails a change of ownership . private equity could help you to do this. irrespective of your success or failure. use the term “venture capital” to cover all stages. Private Equity investments can be divided into the following categories: • Venture capital: an investment to create a new company. To avoid confusion. or expand a smaller company that has undeveloped or developing revenues • Buy-out: acquisition of a significant portion or a majority control in a more mature company. Investments typically involve a transformational. In the USA “venture capital” refers only to investments in early stage and expanding companies.

) Private equity firms generally receive a return on their investments through one of three ways: an IPO. such as stocks and bonds. or a company where value can be unlocked as a result of a one-time opportunity (Changing industry trends. • Consistent with the risks outlined above. The risk of loss of capital is typically higher in venture capital funds. Unlisted securities may be sold directly to investors by the company (called a private offering) or to a private equity fund.• Special situation: investments in a distressed company. which provide interim investments to companies which have already proven their viability but have yet to raise money from public markets.000) plus further investment for the first few years of the fund. with the best private equity managers significantly outperforming the public markets. This is balanced by the potential benefits of annual returns which range up to 30% for successful funds. and lower in mezzanine capital funds. Once invested.000. which pools contributions from smaller investors to create a capital pool. • Investments in limited partnership interests (which is the dominant legal form of private equity investments) are referred to as "illiquid" investments which should earn a premium over traditional securities. private equity fund investment is for those who can afford to have their capital locked in for long periods of time and who are able to risk losing significant amounts of money. Distributions are made only as investments are converted to cash. limited partners typically have no right to demand that sales be made. government regulations etc. private equity can provide high returns. For the above mentioned reasons. Considerations for investing in private equity funds relative to other forms of investment include: • Substantial entry costs. it will not draw on an investor's commitment. an investor can lose all of its investment if the fund invests in failing companies. a sale or merger of the company they control. • If a private equity firm can't find good investment opportunities. it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as twelve years. or a recapitalization. . which invest in companies during the earliest phases of their development. Given the risks associated with private equity investments. with most private equity funds requiring significant initial investment (usually upwards of $1.

Replacement capital: Purchase of shares from another investor or to reduce gearing via the refinancing of debt. assess and develop an initial concept before a business has reached the start-up phase Start-up stage: Financing for product development and initial marketing.Private Equity investments can be classified into: • • • • Seed stage: Financing provided to research. The above stages can be explained by the diagram which is shown below -: . Expansion stage: Financing for growth and expansion of a company which is breaking even or trading profitably.

To do this. for the launch. Venture capital Venture capital is a broad subcategory of private equity that refers to equity investments made. early development. the financial sponsor will raise acquisition debt which ultimately looks to the cash flows of the acquisition target to make interest and principal payments. Venture investment is most often found in the application of new technology.Types of Private Equity Private Equity investments can be divided into the following categories: 1. or expansion of a business. Acquisition debt in an LBO is often non-recourse to the financial sponsor and has no claim on other investment managed by the financial sponsor. typically in less mature companies. Therefore. an LBO transaction's financial structure is particularly attractive to a fund's limited partners. new . 2. allowing them the benefits of leverage but greatly limiting the degree of recourse of that leverage. Leveraged Buyout Leveraged buyouts involve a financial sponsor agreeing to an acquisition without itself committing all the capital required for the acquisition.

venture capitalist's seeks higher return from these investments. acquisitions or other investments. The primary owner of the company may not be willing to take the financial risk alone.Distressed and Special Situations Distressed or Special Situations are a broad category referring to investments in equity or debt securities of financially stressed companies. and they prefer outside financing. able to generate revenue and operating profits but unable to generate sufficient cash to fund major expansions. in relatively mature companies that are looking for capital to expand or restructure operations. The "distressed" category encompasses two broad sub-strategies including: "Distressed-to-Control" or "Loan-to-Own" strategies where the investor acquires debt securities in the hopes of emerging from a corporate restructuring in control of the company's . 4 .Growth capital Growth capital refers to equity investments. Venture Capital is often most closely associated with fast-growing technology and biotechnology fields. Many entrepreneurs do not have sufficient funds to finance projects themselves. Companies that seek growth capital will often do so in order to finance a transformational event in their life cycle. Venture capital is often sub-divided by the stage of development of the company ranging from early stage capital used for the launch of start-up companies to late stage and growth capital that is often used to fund expansion of existing business that are generating revenue but may not yet be profitable or generating cash flow to fund future growth. enter new markets or finance a major acquisition without a change of control of the business. 3 .marketing concepts and new products that have yet to be proven. Entrepreneurs often develop products and ideas that require substantial capital during the formative stages of their companies' life cycles. the owner can take out some value and share the risk of growth with partners. These companies are likely to be more mature than venture capital funded companies. By selling part of the company to private equity. most often significant minority investments. To compensate the risk of failure.

diminishing the effect of investing in new private equity funds. . Sellers of private equity fund investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds.equity. These transactions can involve the sale of private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors. Secondary investments provide institutional investors with the ability to improve vintage diversification. intended to be a long-term investment for buy-and-hold investors. By its nature. which is often used by smaller companies that are unable to access the high yield market. "Special Situations" or "Turnaround" strategies where an investor will provide debt and equity investments. Mezzanine capital. 6. In compensation for the increased risk. This form of financing is often used by private equity investors to reduce the amount of equity capital required to finance a leveraged buyout or major expansion. mezzanine debt holders require a higher return for their investment than secured or other more senior lenders. Often investments in secondaries are made through third party fund vehicle. Secondaries also typically experience a different cash flow profile. particularly for investors that are new to the asset class. often "rescue financing" to companies undergoing operational or financial challenges. 5 . the private equity asset class is illiquid.Mezzanine capital Mezzanine capital refers to subordinated debt or preferred equity securities that often represent the most junior portion of a company's capital structure that is senior to the company's common equity. allows such companies to borrow additional capital beyond the levels that traditional lenders are willing to provide through bank loans. structured similar to a fund of funds although many large institutional investors have purchased private equity fund interests through secondary transactions. Secondaries Secondary investments refer to investments made in existing private equity assets.

a potential deal can either come through a company owner approaching them or from an intermediary who will try to bring both parties (Company and Deal Maker) to make the deal.but only a few are selected. Due Diligence is what you could call ‘doing your homework’. Deal Makers come across hundreds of potential deals . In a year.Process of Private Equity Investment The Private Equity Process in 6 Steps: · · · · · · Deal Origination (Deal Sourcing) Due Diligence Deal Negotiation Deal Closing (Acquisition) Post Acquisition Monitoring Exit (IPO. Before starting detailed . Trade Sale or Buy back) Deal Origination or as some call it ‘Deal Sourcing’ is how Deal Makers get their deals. they may just approach companies who are expanding fast and wish to grow further. In some cases.

negotiations. both from an operational and financial point of view against the expansion plan and budgets that were setup earlier by the company. Share Purchase Agreement. Improvements to business. in a deal . At the Deal Negotiation phase. investor try to make sure everything is fair and secure. Post Acquisition Monitoring requires the Deal Team (those who have worked on putting the deal together) to closely monitor the company. investor prepare it for an Exit . Although Auditors and Consultants are appointed to conduct the Financial.4 years) with the presence of the Deal Team. Advisory Agreement etc are drafted to include all items that put the deal together. is then used during negotiation. Financial Reporting. As the company matures (usually after 2 . conducting other administrative functions (usually done by a separate entity) like updating any articles of association etc. multi-national or conglomerate) or in rare cases a Buy Back by the owners. It’s the conclusion of the deal. they return their money with the profit they gained . By this time. Contracts such as Investment Agreement. Management Agreement. the company will have grown quite a bit with still plenty of room to grow further. Legal and Technical Due Diligence they also work side by side to understand the target company and its industry better. investor set out the terms and conditions (covenants.it makes everyone happy.either an IPO or a Trade Sale (sale to a larger party. and Information Flow to Strategy are made at each level through either the company’s management or its board. Deal Closing is probably the easiest part but also contains an element of risk. All the information collected at this time. Tax.always leave something extra for the person buying . (There’s a saying. representations and warranties) and other deal terms that defines (or makes the deal).) And once investor have exited the company. the signing of all Agreements and transferring funds from the buyer to seller. from Corporate Governance.

here are some advantages of private equity for not only investors but also the companies that private equity firms acquire: Advantages for Investors: • By definition. ROC or similar distractions. This allows private equity firms to reform the companies without the constraint of having to report quarterly to the SEBI. . Although this may seem like a linear process . Advantages of Private Equity Investing in a private equity fund has a lot of advantages compared to other investment areas. • Private equity firms generally perform very rigorous due diligence on potential investments.for company after taking their fees for all the effort put in the above process. private equity firms work outside the public eye and do not have to follow the same transparency standards that public firms and funds must adhere to.it isn’t exactly so. By utilizing a team of researchers the private equity firm is able to identify most risks that would not otherwise be found. primarily because investors deal with a number of companies and each one is at a different stage in the private equity process.

India has firmly established itself as the world’s IT superpower with almost all major software development companies having an Indian development centre. • Mature Financial markets . with enormous growth potential in many industries. This has led to greater confidence in the future growth potential of Indian companies. Rajeev Gupta. Avnish Bajaj. not only to manage their own funds but also as their representative on the board of companies in which they have invested. • Abundance of skilled labor . as a strategy for their assets allocation.India offers a huge advantage in the form of its highly talented and skilled labor pool. • Economic Scenario.India is one of the fastest growing economies in the world. • Success of several sectors . which can lead to the success of the firms in which investment is made through the private equity route. it is a very big incentive for managers. This means that capital requirements are high. so managers and their staff are motivated to produce good results to investors. The emergence of entrepreneurs in India who consider PE their full time occupation is also a positive sign. through PE funds without involving themselves directly in the operations of target companies. and a leading provider of BPO and KPO services. Although carried interest is often criticized for taking money from the investors. translating into an ideal hunting ground for PE funds . there are well established corporate houses diversifying their surplus investment.A recent spate of mergers and acquisitions has given rise to yet . PE funds are invariably on the lookout for high profile managers. Akhil Gupta. It is also becoming the the hub of back office operations.Capital markets have stabilized in the recent past with regulators like SEBI keeping a firm watch on the market development. Besides.• The management receives carried interest. • Successful M&As. and Nikhil Khattau. The funds are not just bullish about the businesses in India but have also grabbed a fair share of highly rated managers like Vivek Paul. a portion of the profits. This means both increased opportunities as well as an easier and painless exit route for PE funds.

For instance. which help in the growth of the company. experienced managers that tend to perform very well. they tend to be the top young business school graduates. The same goes for lower level employees at private equity firms. • Successful track record. • PE helps those companies which cannot raise money from the market. It opens up enormous opportunities for companies to raise funds.The first generation of private equityplayers have realized significant success in the last several years. By private equity company get money from the investors. • PE helps a company to prepare for stock market listing (IPO) as the exit route of investment. The continuous scrutiny by stock market participants. SEBI & ROC facilitates efficiency improvement and proper strategic decisions. Warburg Pincus earned huge returns out from its investments in Indian companies like Bharti Telecom. . This helps the company to utilize best talent in the industry without shelling out even a single penny from its pocket.another way of exiting from Indian companies for private equity investors. Advantages for Company: • Private equity managers are paid very well and so it is easy to attract high caliber.

India. the impact cost remains very high due to sheer magnitude of scale. Even in the listed space. causes an investment decision to be affected by politics. being divided into a number of states. in addition the minimum investment accepted is usually more than £1mn. It depends on the gap between entry and exit of the investor. since it require concentrated efforts to find a suitable investor for unlisted company. • Political condition . Changes in regulation and infrastructure development . • A long term investment perspective is necessary to achieve gains for a private equity investment programme because the investment programme depends on the company growth. • Relative illiquidity –Private Equity funds normally invest in a unlisted space and they find it difficult to exit the investment at their wish.Disadvantages of Private Equity Disadvantages for Investors: • Difficult to access for small & medium investors-private equity LimitedPartnership funds may only be marketed to institutions and very wealthy individuals.

private equity managers charge relatively high fees for managing capital committed by external investors (generally around 2%) and. Because investor have some control over the company. • Entrepreneurs have to give up some of their company’s shares to a private equity investor. infrastructure & real estate and telecommunications. to the exclusion of the remaining industries. financial.PE funds are being channelized into only a few sectors like IT. desperately in need of funds for growth.China is a direct competitor of India and most of the private equity investors. take a sizeable proportion (generally 20%) of realised returns in excess of investment hurdle rates. The new state-of-the-art airports in China bear a stark contrast to the abysmal conditions of the terminals in India’s main cities. environmental and management due diligence. He has to take advice of the investor to take decision and it causes delay in the process. • Competition from China . so it is not easy for the entrepreneur to take decision independently. which could take several months before they make final decisions on investing. eyeing the Asian region. • High costs . if the fund performs well. legal. • The private equity managers have control over the timing of a sale of (a part of) the business. . control.are often sidelined due to friction and conflict between the state and the federal government. Disadvantages for Company: • It is a lengthy process since private equity managers conduct detailed market.e. i. • Lack of promotion in investment across sectors . draw a comparison across both the countries to decide where their money should be parked.

Direct investors The investment company has a private equity team who invest directly in companies. subject to the stated objective of the company. the investment company invests in a portfolio of private equity funds which invest in companies. Funds of funds aim to diversify across a range of investment strategies and different sectors providing access to a range of managers. . Some private equity investment companies invest in both direct investments and funds offering a hybrid of the two approaches set out below. and sometimes restructure. in order to increase the long-term value of the companies so these companies can be sold at a profit. Fund of funds investors In a fund of funds.those which invest directly in companies and those that invest in funds which invest in companies (fund of funds).Ways of Investment There are two types of listed private equity investment companies . The managers’ aim is to help these companies develop and progress.

The accounting and financial aspects of this exit need to be studied very carefully. B. It is often advisable to keep the transaction a closely guarded secret because clients. It is a very attractive exit for both the investment manager and the company’s management team if the company can guarantee regular cash flows and can mobilize sufficient loans. These negative signals become even stronger if the negotiations fail. suppliers and employees may interpret a trade sale negatively. Entrepreneur or Management Buy-Out The Buy-Out of the funds stake by its management team is becoming more and more successful as an exit strategy. also referred to as M&A (Mergers & Acquisitions). The trade sale is agreed in private and makes both the buyer and the seller less vulnerable to the external pressures of a stock market flotation. of privately held company equity is the most popular type of exit strategy and refers to the sale of company shares to industrial investors. Trade sale A trade sale.Investing in PE Funds Investor Fund of Funds PE Funds PE Funds PE Funds Ways of Exit Compa ny Compa ny Compa ny Direct Investment Compa ny There are different ways in which a private equity investor can exit from an investment: A. .

If company decides to opt for this route. E. A stock market flotation should correspond with a genuine wish to make the company more dynamic over the long term and to profit from the growth possibilities offered by a stock market. . but it is far from being the most widely used. Sale of the investment to another financial purchaser (called a secondary market investor) One financial investor may sell his equity stake to another one when the company has reached the stage of development or when the current development of the company no longer corresponds to the investment criteria of the original fund. A stock market flotation always leaves company open to the risk of an unwanted bid whereas equity held by an investor that company has chosen can be better managed. Therefore. This can also occur if the financial support required maintaining the company’s development has exceeded the capacity of the fund. D. even in stock market booms. the equity share placed on the market (the float) must be sufficiently large to ensure liquidity – the reward for appealing to the market. Liquidation This is obviously the least favorable option and occurs when the efforts of the head of the company and the investors to save the company have not succeeded. it must be minutely prepared over a long period. A flotation is not an end in itself but the beginning of a long process of development. IPO (Initial Public Offering): flotation on a public stock market A stock market flotation may be the most spectacular exit. This strategy has the advantage of enabling an exit when the team does not want a trade sale or a stock market flotation.C.

• Funds utilized the sharp rise in the stock markets to cash out and return some money to LP’s. There were 66 open market exits and only one IPO exit – the part sale of Warburg Pincus’ stake in DB Corp.93 billion in 2008.Private Equity Exits Breakdown • 2009 saw 96 exits compared to 44 in 2008 not including the PE stake sale in Centurion Bank of Punjab to HDFC Bank. .2 billion in 2009 compared to $0. Total exit value rose to $2.

or high net worth individuals. Back then. mutual funds.Introduction to Private Equity in The Indian stock markets witnessed tumultuous times during the years 1999-2000.000 crores were raised by private placement of equities. FIIs. There was continuous surge in the stock markets and in 2001. there were over 20 companies that had either planned or made allotment of shares during this period through modes such as preferential and private placements of equity. the king pin of these surges. Ketan Parekh was arrested and put out of action by SEBI. While preferential allotment was seen in companies where the promoters' stake is low. Some of the big deals during these periods were: . the private placement was made to companies (in the form of strategic investment). Between 1999 and 2000. when the market was in its infancy. around Rs 6.

Year Q1 Value (in $mn) Volume Year Q1 Value (in $mn) Volume 5229 190 442 66 2005 Q2 Q3 379 44 716 45 2006 Q2 Q3 2007 Q2 Q3 Q4 691 65 Q1 Q4 Q1 Q4 1.184 114 93 81 100 166 88 105 149 2009 Q2 Q3 1138 62 1178 73 2010 Q4 1413 99 1943 88 2008 Q2 Q3 2065 113 3345 133 Q4 1604 84 Q1 675 65 .526 1. 2010. private equity investments in India displayed steady signs of recovery in the first quarter of 2010. Zee Telefilms (Rs 800 crores at Rs 1. a jump of more than 185% from $675 mn in Q1 2009.605 1.039 crores at Rs 1.943 mn. Interestingly. despite the enormous growth in deal value on a quarter-on-quarter basis. India has a very vibrant Venture Capital (VC) / Private Equity (PE) industry with USD 32.· · · · HFCL (Rs 735 crores at Rs 1. total announced deal value was $1.734 5. Economists estimate that India needs about USD 1 trillion of investment over the next five years to sustain a GDP growth of above 9 percent. After a turbulent 2009.246 2.000 per share).38 crores at Rs 825 per share). against which industry estimates that PE investments would be in the range of USD 9-10 billion in the year ending December 31.5 billion invested across more than 1500 VC/PE deals from January 2006 till date.508 5. up from 65 in Q1 2009. This translates to USD 60-100 billion of VC/PE investments requirement over three years. Pentasoft Technologies (Rs 798 crores at Rs 798 per share) Trigyn Technologies (Rs 606. Total deal count in Q1 2010 also increased by 35% to 88 deals. For the quarter ended March 2010.050 per share and Rs 1. the deal count decreased by 11% to 88. The latest quarter registered the highest value of deals since 2009.450 per share). down from 99 in Q4 2009.555 2.697 2.

Sector wise Distribution .

It would also include various regulatory norms for the private equity investment in India and the benefits and hazards of PE over public equity. magazines and different online resources would be used to construct the investment pattern.Methodology Study would be mainly focused on the analysis and use of secondary data. . various journals. The study will be done by taking an example of Warburg Pincus & Bharti Airtel Ltd. Extensive use of Cygnus.

Bharti Airtel provides telecommunication services primarily to retail. as well as wireless application protocol-enabled Internet access and roaming services. and broadband services comprise integrated services digital network. The company's mobile communication services include information services. as well as . special phone plus services. and small and medium scale enterprises in India. national and international long distance services. Its telephone services include telephone services. broadband and telephone services. About Bharti Airtel Ltd. virtual private networks. and enterprise services. and wireless fidelity networks. unified messaging. dial-up services. and audio conference services.Warburg Pincus & Bharti Airtel Ltd. corporate. It offers global system for mobile communication (GSM) services. short message. leased line. and prepaid and post paid services. The company also offers long-distance voice and data communication services.

First. Bharti Airtel is a part of Bharti Enterprises. it has become the largest private sector telecom company in India and has undergone a number of changes. consisting of GSM mobile. partnerships with Ericsson and Nokia. 2009. with experienced professionals heading these functions. Between September 1999 and July 2001. The firm’s experience is unparalleled in building successful businesses. all the key support functions and processes (like human resources. Warburg Pincus invested $292 mn to finance Bharti's growth through acquisition and expansion of existing properties. The company was founded in 1995. limited partners over the • . and fund the growth of attractive opportunities.enterprise services. and managed e-business services. Provide superior rates to return for its long term. Second. India. managed data and Internet services. the company made a successful initial public offering on the Indian stock exchanges in February 2002 and raised $172 mn. Create a network of talented and experienced business people around the world. mobile services. Working in partnership with management teams.000 customers. provide strategic advice and guidance. marketing and technology) have been strengthened. broadband and telephone customers. 2006. Since the initial investment in Bharti in September 1999. satellite services. since its inception. Lastly.649. Warburg Pincus’ strategy has been to: • • Develop broad investment capabilities internally. Warburg Pincus has become one of the leading private equity and venture capital firms in the world. As of Mar. 31. finances. and an information technology alliance with IBM. it provided telecommunications services to approximately 96. the company has formulated a focused acquisition strategy. in spite of tough market conditions. such as voice services. acquired three companies and successfully won bids for 15 new licenses. It was formerly known as Bharti Tele-Ventures and changed its name to Bharti Airtel in April. Warburg Pincus takes an active role in building businesses. The firm operates globally to source new investment opportunities. About Warburg Pincus Over the last 30 years. Bharti Airtel had strategic alliances with SingTel and Vodafone. The company is based in New Delhi.

recruit talented executives and draw on best practices from the firm’s portfolio companies. This is a critical advantage in the face of constantly changing economic conditions and financial markets.Warburg Pincus is a global leader in the industry it helped create: Private equity. entrepreneurs-in-residence and advisory boards. IT strategy and assessment and marketing. Private equity at Warburg Pincus means investing at all stages of a company’s life-cycle: From founding start-ups and fostering growth in developing companies to leading complex recapitalizations or large-scale buy-outs of more mature businesses. Striving to create sustainable value in partnership with superior management teams. beginning with a thorough evaluation of macroeconomic and industry fundamentals. the firm’s global portfolio has generated more than $20 billion annually in equity and debt financings on a global basis. In addition to the support provided by its investment professionals. This growth-oriented philosophy is incorporated across each of its investment sectors. whose expertise can be tapped at any time. media and telecommunications. this approach enables the firm to provide substantial resources to its portfolio companies. it work with companies to formulate strategy. Warburg Pincus has been the lead investor in more than 100 companies that have completed initial public offerings. industrial. technology. With more than 40 years of experience. With more than 160 investment professionals worldwide. its track record of continuous and successful investing is unmatched by any other private equity firm. conceptualize and implement creative financing structures. The firm’s IT Strategy and Assessment group is available to evaluate and advise businesses on their technology . consumer and retail and real estate. Matched with its size and scope of funds under management. Warburg Pincus provides deep expertise in a range of investment sectors including financial services. Over the last few years. It takes a different approach to investing. With an investment horizon of five to seven years. energy. healthcare. Warburg Pincus enhances its involvement with management by providing portfolio companies with value-added services in capital markets. The firm also works with its consultants. it takes an unusually long-term perspective. The firm has been industry-focused for more than two decades.

strategy. • • Analysis & Findings The Investment (1999-2001) Between September 1999 and July 2001. from start-up through growth financings and including acquisitions and restructurings.58 per cent stake. With the proposed investment. March 2005: Warburg sells another 6 per cent stake for $560 mn. the first tranche being invested in September 1999. US $ 300 mn is the second highest investment ever made by Warburg Pincus in any company. providing equity capital across the life cycle of the enterprise. Europe. anywhere in the world. The investment in Bharti Enterprises of approx.35 per cent stake for about $208 mn. the firm’s premier investment destination in Asia. marking the largest ever equity deals in single scrip on an Indian stock exchange. . Key-Points: • It has invested over US $ 11 billion in over 400 companies in 29 countries. Warburg Pincus also provides companies with marketing expertise to develop brandbuilding programs and strategic communications platforms for internal and external audiences. Warburg Pincus operates from 8 offices in 7 countries covering the United States. Warburg Pincus invests $292 mn in Bharti TeleVentures in return for an 18. Asia and Latin America. Warburg Pincus will have invested approximately US $ 530 mn in India making the country. The Bharti IPO (January 2002) Bharti goes public (Warburg stake diluted) The other exits (2004-2005) • • August 2004: Warburg sells a 3.

This is the timeline of Warburg Pincus' exit from Bharti Tele-Ventures.616bn. When Warburg Pincus exit from Bharti Tele-Ventures the realization from Bharti telecom was earned $1.65% stake to UK-based Vodafone for $847. The profit earned by Warburg Pincus was $1.5 mn.324bn which is equal to 450 percent return on investment done by them .• October 2005: Warburg sells its final 5.

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