MERGER & ACQUISTION

IDFC & GRAMA VIDIYAL MICROFINANCE NBFC

MERGER

ACQUIRER

TARGET COMPANY

DATE: 13/07/2016
SOURCE: Economic Times
M&A NEWS IN BRIEF:
IDFC Bank on 13th July announced the acquisition of Grama Vidiyal Microfinance,
a Trichy-based Microfinance company for an undisclosed amount
The deal is likely to be completed by the end of December.
It is the first time an Indian bank has acquired a microfinance institution and
made it a subsidiary.
Some of the branches of the non-banking finance company would be converted
into IDFC branches.
All

loan

assets

on

the

book

will

be

transferred

to

IDFC

Bank.

ACQUIRER COMPANY: IDFC BANK

TARGET COMPANY: Grama Vidiyal Microfinance
TYPE OF MERGER: Horizontal merger
METHOD
OBJECTIVE OF ACQUIRER:
Trichy based Grama Vidiyal's network is spread over 319 branches across seven
states and 65 districts of Tamil Nadu, Kerala, Karnataka , Puducherry,
Maharashtra, Gujarat and Madhya Pradesh, and has over 3,000 employees as
well as it had an AUM of Rs 1,502 crore of micro finance assets as of March.
This will give the IDFC Bank access to a sizeable number of rural and semi-urban
customers in very short period of time and creates a platform for growth of retail
banking business.

IDFC bank already has 50 branches serving about 40000 MFI customers.Grama
Vidiyal customers would add to it.
It will also give IDFC an existing base of customer for MFI, as MFI is a business
where the loan defaulting rate is the least. In case of grama vidiyal the loan
recovery rate has been 99.99% that means NPA is barely 0.01%. So certainly
along with wide customer reach, it is also the gateway for the IDFC bank for
Micro Finance business as MFI has become essentially & strategically important
because of the fact that 70% population of India resides in rural areas & MFI here
plays an important role as an institution & has substantially a large amount of
scope as well for the good business.
OBJECTIVE OF TARGET COMPANY:
Current customer households of Grama Vidiyal, in turn, will benefit from IDFC
Bank's full range of liability products, customised credit offerings, innovative
digital services and doorstep banking. As well as it will give access to better
banking facilities to the existing customer of Grama Vidiyal bank, even to
manage its perpetually growing operations it was important for the Grama
Vidiyal bank to have some kind of technical & operationality expertise so that
managing large business doesnt act as an impediment in the development of
the MFI NBFC Grama Vidiyal.
CONSIDERATION:
Consideration for the deal is estimated at Rs. 300 crore though officially the
actual amount f consideration is not yet been disclosed.
JUSTIFICATION OF PRICES:

Grama Vidiyal is the fifth-largest MFI in India and has a customer base of 1.2
million, operating from 319 locations across 65 districts of Tamil Nadu, Kerala
Karnataka, Puducherry, Maharashtra, Gujarat, and Madhya Pradesh. The
assets under management were Rs 1,502 crore as on March 31, with a
quarterly profit of Rs 15 crore.
Its annual profit is nearly Rs 60 crore and has a loan recovery rate of 99.99%.
IDFC bank has a loan book of Rs 75000 crore
As of the March 2016 ended quarter, IDFC Banks advances stood at Rs 45,699
crore as on 31st march
The assets of Grama Vidiyal will be transferred to IDFC bank books. It will retain
its existence as a subsidiary of IDFC Bank, which will act as business
correspondent.
The deal is estimated at nearly about Rs 300 crore.

IMPACT ANALYSIS
IMPACT ON COMPETITIORS IN THE INDUSTRY

IMPACT ON SHARE PRICE

Here as we can see that the news of merger was declared on 12 th July &
subsequently on the same day the stocks of IDFC was traded at 2 week high
prices that is Rs. 53.90 as the impact was substantial, because the opening for
the same day was Rs. 48.15 & the shares prices surged up to Rs. 53.90 i.e.
11.94% high. It closed at Rs. 52 on the same day & subsequently it started
trading above Rs. 50. So certainly the impact was substantial because of the fact
that Grama Vidiyal is an MFI NBFC with a quarterly profit of Rs. 15 crore, which
according to the investors & shareholder in market will give IDFC a wide reach in
the market for banking business.

Date: July 14, 2016

Source

: Mint

M&A News in brief:

Granules Pharmaceuticals, a wholly owned subsidiary of Hyderabad-based

Granules India, has agreed to acquire 12.5% stake in US-based developmentstage pharmaceuticals firm USpharma for an undisclosed amount.

This investment will enable Granules to participate in product selection

and have right of first refusal to market the select products which are under
development by USpharma.

USpharma Windlas will receive milestone payments and share of the

profits from commercial sales. Granules Pharmaceuticals, Inc. will be responsible
for the marketing and distribution of the products in the United States, subject to
final approval by the U.S. Food and Drug Administration (US FDA).
Acquirer: Granules Pharmaceutical Inc.
Target: USpharma Windlas LLC
Type of M&A: On the basis of movement in industries
Method: Vertical forward integration
Consideration: Undisclosed
Impact Analysis:

33% of Granules total revenues come from North America

This move can help them in entering high-margin formulations

This move will help them increase their revenue in the US market

Helps Granules in expanding their product portfolio


Granules will have the right of first refusal to market the select products
which are under development by USpharma.

Objective of acquirer:

Portfolio expansion

Product in-licensing will help accelerate business expansion in USA

Objective of seller:

Outsourcing of marketing and distributing the products

Milestone payments from commercial sales

Impact on share price:

Granules India Ltd is currently trading at Rs. 150.55, up by Rs. 5.2 or

3.58% from its previous closing of Rs. 145.35 on the BSE.

The scrip opened at Rs. 147 and has touched a high and low of Rs. 151.15
and Rs. 145.1 respectively. So far 203637(NSE+BSE) shares were traded on the
counter.

YATRA and TERRAPIN 3 ACQUISITION CORPORATION

1) Date : 15th July 2016

2)Source : Mint
3)Merger and acquisition news in brief :

Travel agency Yatra Online Inc. has agreed to reverse-merge with Terrapin
3 Acquisition Corp. in a transaction that assigns an enterprise value of
$218 million to the Indian online travel agency and which will see it trade
on Nasdaq (as YTRA).

Under the terms of the agreement, the current shareholders of Yatra will
own at least 35% of the combined company and the first $100 million from
Terrapin will be used to fund the combined company and pay transaction
expenses.

Terrapin is a special purpose vehicle (or a company formed for a specific

purpose). It was created expressly to facilitate a transaction such as this
reverse merger. It will effectively cease to exist after the reverse-merger,
which is a term used to describe the acquisition of a listed company by an
unlisted one to facilitate listing minus the hassles of an initial public
offering (IPO). Terrapin is currently listed on Nasdaq.

The cash infusion is critical for Yatra, which is competing with well-funded
local rivals including Indias biggest online travel operator MakeMyTrip Ltd
in which Chinas Ctrip.com agreed to invest $180 million in January. The
latest transaction will allow Yatra, which was reported to be in talks with
Paytm (owned by One97 Communications Ltd) for a stake sale, to provide
a partial exit to some of its shareholders. They will make a maximum of
$80 million from the deal, according to the agreement.

Yatra not only gets access to capital but also gets listed on Nasdaq without
the uncertainty and cost of doing an IPO, said Chetan Kapoor, research
analyst for Asia Pacific at travel industry researcher Phocuswright.

The combined company will continue to be led by Yatras management

team under the leadership of chief executive officer and co-founder Dhruv
Shringi.

Shareholders of Yatra may receive an additional consideration of as much

as $35 million if they meet certain financial objectives during the 18
months after closing of the transaction, according to the agreement.

Norwest Venture Partners, Reliance Venture Asset Management Ltd and

Intel Capital are some of the investors in Yatra.

The acquisition-cum-listing gives Yatra much-needed capital to compete

with its rivals, said Aloke Bajpai, co-founder of Le Travenues Technology
Pvt. Ltd, which runs ixigo.com.

MakeMyTrip and Goibibo (the hotel booking site of Ibibo Group) raised a
lot of cash in the beginning of the year and resorted to heavy discounting
in the last six months, as a result the other online travel agents... had
been feeling a squeeze on profitability and growth, said Bajpai.

Launched in August 2006, Yatra, through its yatra.com website, provides

travel and hotel reservations for leisure and business travellers in India.

Yatra customers booked more than 2.8 million air travel reservations and
hotel stays with total transaction value worth more than $900 million
during the year ended 31 March, an increase of 25% from the previous
year.

This deal gives necessary capital to the company (Yatra) and liquidity for
shareholders and employees who are holding the shares, said Shringi in
an interview.

Everything remains same including the brand name of the company, that
will have expanded shareholding base. This is a very unique way of going

public, said Shringi, adding that the company is close to reaching

profitability. He declined to disclose details.

Nathan Leight, chairman of Terrapin, said the company was created with
the express purpose of partnering with a company that would benefit
from a public listing, could utilize our cash resources for growth and
generate long-term returns for our shareholders.

Terrapin raised $212.75 million in its initial share sale in 2014, which is
now held in a trust account.

Deutsche Bank Securities Inc. is Terrapins capital markets adviser.

Greenberg Traurig Llp and Ellenoff Grossman & Schole Llp are representing
Terrapin, while Goodwin Procter Llp is representing Yatra.

The Indian online travel market will increase to $10.3 billion in gross
bookings in 2016 and online travel agency firms will account for about half
of it, according to Phocuswright.

Experts say that as the Indian online travel market matures, the landscape
has evolved into a battle of incumbents versus upstarts.

Consumer acquisition tactics such as intense price wars and cashbacks

from well-funded start-ups have driven the incumbents to refill their
coffers over the last few months in order to remain competitive, invest in
technology and product diversification, and maintain their market
leadership positions, said Kapoor.

Upon listing, Yatra will be the second major Indian online travel agent to
go public. MakeMyTrip listed on Nasdaq in 2010. Shares of MakeMyTrip
were trading down 1.29% at $16.77 at 8pm on Thursday on the Nasdaq.

4)Acquirer company : Yatra Online Inc.

5)Target company : Terrapin 3 Acquisition Corp
6)Type of merger and acquisition : Reverse merger
7)Method : The private entity buys majority shares of its smaller publically
listed company, after which both merge.
8)Consideration : $218 million
9)Objective of the Acquirer (YATRA):

Infusion of capital.
To be a public company (getting listed).
Liquidity for shareholders and employees who are holding the shares.
Growth in the Industry.

10)Objective of the Seller (TERRAPIN):

The company was created with the express purpose of partnering with a
company that would benefit from a public listing, could utilize their cash
resources for growth and generate long-term returns for their
shareholders.

11)Justification of Price:
12)Impact Analysis
a. Transaction Highlights

On July 13, 2016, Terrapin 3 Acquisition Corporation (TRTL) signed a

definitive agreement to merge with Yatra for an enterprise value of
$218m.
On a pro-forma basis, Yatra is expected to have an enterprise value of 3.0x
FY2017E Net Revenue, 2.1x FY2018E Net Revenue1.
Combined entity expected to be listed on NASDAQ post-business
combination under the ticker YTRA Expected transaction closing in
October 2016.

b. Alignment of Interest

Current Yatra owners will retain a 34%2 to 62%3 stake in the public
company depending on the amount of cash available from TRTL .
The first $100m of cash received in the transaction will be allocated to
repay outstanding debt and to pay transaction expenses with the
remainder (~$84m) being allocated as cash to Yatras balance sheet .
Any amount received above $100m will be allocated as follows:
A) 80% to current shareholders of Yatra, capped at $80m, and
B) Remaining amount will be allocated as cash to Yatras balance sheet.
Earn-out of up to $35m based on exceeding managements financial
forecasts over the next 18 months
Minimum cash condition of $100m.
The TRTL founders have agreed to reduce their founder shares by 50% and
Macquarie Capital has agreed to reduce its forward purchase by 50% to
$20m.

c. Attractive Valuation Strong Capitalization to Finance Growth

Pro-forma 3.0x FY2017E Net Revenue1 multiple and 2.1x FY2018E Net
Revenue1 multiple are meaningful discounts to peers even while Yatras
revenue growth prospects are strong and its balance sheet virtually debt
free .
Post-transaction cash on balance sheet of $96m to $148m will finance
growth initiatives as the company works towards profitability.

d. Strong Management

Yatras management team will continue to operate the business posttransaction.

TRTL will appoint 3 members and Yatra 4 members to the new Board; A
majority of the members will consist of members deemed independent
under SEC and applicable stock exchange rules.

13)Impact on Share Price:

-OF ACQUIRER: Yatra will now get listed after the whole process of
acquisition.
-OF TARGET COMPANY: Agreement for merger was signed on 13 th of
july16. Following was the stock movement.
Date
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close
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14)Impact on Competition in Industry:

Yatra will go public without raising any money.

A standard-issue IPO can take months to materialize. But, in this type of
merger i.e. Reverse Merger can take only a few weeks to complete and
hence are preferred.
As Terrapin is already a public company, Yatra, the Indian travel portal will
get to list on NASDAQ.
Yatra has scored a backdoor entry into the stock exchange without
suffering any of the hassles of initial public offer.
Upon listing, Yatra will be the second major Indian online travel agent to
go public. MakeMyTrip listed on Nasdaq in 2010. Shares of MakeMyTrip
were trading down 1.29% at $16.77 at 8pm on Thursday on the Nasdaq.