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Consumer Spotlight

M&A and Private Equity Perspective on


the Consumer Sector

Q3
FY2016

Merisis Consumer Sector Coverage

Modern retail currently constitutes only about 20% of the current retail market in
India - estimated to reach US$1.3 trillion by 2020
Indias retail and consumer goods sector is likely to see continuing deal-making activity
for the next six months, as it expects investments to flow in from the US and China

Consumer Goods
& Services

According to a report by BCG and CII, Indias robust economic growth and rising
household incomes would increase consumer spending to US$ 3.6 trillion by 2020 and
India's share of global consumption would expand more than twice to 5.8% by 2020
More than 60% of the brick and mortar retailers have developed their e-commerce
capabilities and the trend is definitely redefining the shopping experience
Indian e-commerce market is set to touch US$128 billion by 2017 from current level of
US$42 billion. Also estimated that by 2020, more that 150 million consumers would be
digitally influenced in FMCG, spending more than US$ 45 billion in that category

E-Commerce

The government allowed single-brand retailers to directly enter the online retail
segment, while also creating a platform for "Indian manufacturers to boost their ecommerce business in India
Foreign investment in Indias financial services sector rose sharply in 2015, led by
interest in retail service providers and a higher cap for foreign investment in the
insurance sector. Deals worth US$3.8 billion were closed in the financial services
sector in 2015, up from US$1.6 billion in 2014

Finance

Reserve Bank of India has recommended granting commercial banking license to


multi-state urban cooperative banks (UCB) having business of more than INR 20,000
crore (US$ 3 billion)

India needs to grow from 4%-of-GDP healthcare spend to 5.5%-of-GDP, as per a


McKinsey report. India needs to strengthen its weak primary health system, manage
shortage of skilled HR, regulate the private sector, increase public spending on health,
improve health information systems and deal with weak governance & accountability.

Healthcare

India is home to at least 140 start-ups in the doctor-booking and practice management
software segment, according to Tracxn. Indias home healthcare industry, which
consists of home-based medical devices and home services, is worth $2 billion and
growing 20% annually

The education sector has seen some fairly slow but motivating trends emerging over
the last year. Ed tech, the poorer cousin to the e-commerce and the food-tech
startups, struggled with much lower levels of funding throughout the year barely
gathering 1% of the $7.2-billion kitty invested in India

Education

The Ministry of Human Resources and Development initiated the New Education
Policy (NEP) at the beginning of 2015.

Investment Activity - India


Macro Overview
Hailed as "the bright spot" in a gloomier global
economy, India outpaced China as the world's
fastest growing economy in 2015 and is
expected to clock 7-7.5% growth in 2016
provided the reform momentum continues
The main focus around reforms in 2016 will be
on the governments ability to implement the
goods and services tax (GST), the state
elections in mid-2016 and redemptions of
FCNR (B) dollar deposits in Q4 2016
Consumer Industry Overview
2015 did not witness the anticipated revival of
demand in the consumer goods sector in India.
A weak monsoon led to a slowdown in rural
demand, especially in the Q2 2016, which in
turn impacted revenue growth of packaged
consumer goods companies in India since they
depend on the rural market for around 35% of
their sales.
Deal Overview

Total Fundraising Q3 FY2016


By Volume 341 Deals
5%
7%

Investments of $4.4 billion, spread across 341


deals, were made in Q3 FY2016; an increase of
35% in deal volume and 23% in deal value
when compared to deal-making in Q3 FY2015
Merger & Acquisition

M&A deals struck during Q3 FY2016 were


recorded at 192 deals worth $5.0 billion.
Compared to Q3 FY2015, deal volume
increased by 20%, whereas the deal value
which declined by a healthy 42%
Domestic M&A deals fell 58.5% to $8 billion
during the year. Inbound and outbound deal
value grew 70% to $7.8 billion, and 95% to
$5.1 billion, respectively, during the year.

733

923

10%

154

648

52%
675
23%
Information Technology
Industrials

1,268

Consumer Services
Health Care

Financials
Utilities/Materials

Consumer Focused Fundraising Q3 FY2016


By Volume 264 Deals
5%
5%

By Value - $1.9 Billion


16

4%
791

13%

739

74%
344
55
Consumer Goods & Services
Financials

E-Commerce
Health Care
Education

Private Equity

Private Equity inflow of $21 billion for the full


year of 2015 surpassed the previous high of
$18 billion seen in 2007. Compared to the
$12.5 billion invested in 2014, the inflow in
2015 is up nearly 67%.

By Value - $4.4 Billion

3%

Total M&A Q3 FY2016


By Volume 192 Deals
5%

2%

By Value - $5.0 Billion

1%

9%

2,360

24%
178

16%

62
24%

19%

226

347

1,379

404
Information Technology
Financials
Utilities/Materials
Telecommunication Services

Consumer Services
Industrials
Health Care
Energy

Consumer Focused M&A Q3 FY2016


By Volume 91 Deals
9%

4%

1%

By Value - $1.8 Billion


1

47%
39%

E-Commerce
Financials
Health Care

54 62

523
924

Consumer Goods & Services


Education

Top 5 PE Deals in Q3 FY2015

ICICI Prudential Life Insurance Company Ltd. - (November 17, 2015)

Premji
Invest
USD 297 million

PremjiInvest and Compassvale Investments agreed to acquire 6% stake in ICICI


Prudential Life Insurance Company Ltd. from ICICI Bank for US$ 297 million on
November 16, 2015, thus ICICI Bank will hold approximately 68% in the
company while Prudential Plc, the JV partner, will maintain its stake at 26%
It values ICICI Prudential Life at US$ 4.9 billion
Implied Embedded Value (EV) = 2.36x

ICICI Lombard General Insurance Company Ltd. (October 30, 2015)


Fairfax Financial Holdings Limited agreed to acquire an additional 9% stake in
ICICI Lombard General Insurance Co. Ltd from ICICI Bank for US$ 237 million
which will increase its stake to 35%
It values ICICI Lombard General Insurance at US$ 2.6 billion

USD 237 million

Implied Embedded Value (EV) = >2.0x

IIFL Wealth Management Ltd. (26th October, 2016)


General Atlantic Singapore Fund agreed to buy 21.61% in IIFL Wealth
Management (India Infoline) for US$ 173 million
The proposed transaction would provide IIFL Wealth with additional capital for
its business operations and general corporate purposes as well as for growth
and expansion of the business

USD 173 million

It values IIFL Wealth Management at US$ 800 million

IndiaIdeas.com (Bill Desk) (7th December, 2015)


General Atlantic and Temasek Holdings, have jointly acquired significant
minority stake in Bill Desk, an online payment gateway solution provider for
US$ 130 million

USD 130 million

A small part of the fund will be used to purchase some shares from an existing
investor, Clearstone Venture Partners, while the rest of it will be used for the
companys overall growth
It values IndiaIdeas.com (Bill Desk) at US$ 1 billion

Locodel Solutions Pvt. Ltd. (Grofers) (November 26, 2015)


Grofers received US$ 120 million in funding led by new investor SoftBank Corp
with participation from existing investors Tiger Global, Sequoia Capital,
Apoletto Managers and Yuri Milner

Yuri
Milner
USD 120 million

Grofers will use the proceeds to invest in building this ecosystem further, to
expand its network, to continue growing its supply-chain management
development, and to continue building out its last-mile infrastructure
It values Grofers at USD 400 million

Top 5 M&A Deals in Q3 FY2015

GI Retail Pvt. Ltd, Payments Business (October 27, 2015)

Payment Business

USD 375 million

Wirecard AG agreed to acquire payments business of GI Retail Private Limited


and 60% stake in GI Technology Private Limited from GI Retail Private Limited
for 340 million (230 million in cash & 110 million linked to the overall future
performance)
Wirecard will take over 900 staff in offices in Delhi, Chennai, Hyderabad,
Bangalore, Mumbai, Kolkata, Lucknow, Manila, Batam & Kuala Lumpur

Reliance Life Insurance Company Ltd. (November 24, 2015)


Nippon Life Insurance Company acquired an additional 23% stake in Reliance
Life Insurance Co. Ltd. from Reliance Capital Limited for US$ 341 million taking
its overall stake to 49%
The transaction pegs Reliance Life Insurances valuation at US$ 1.5 billion,
amongst the highest valuations for any life insurance company in India

USD 341 million

Implied Embedded Value (EV) = > 3x

Birla Sun Life Insurance Company Ltd. (December 2, 2015)


Sun Life Assurance Company of Canada acquired additional 23% stake in Birla
Sun Life Insurance Company Ltd. from Aditya Birla Nuvo Ltd. for US$ 250 million
thus increasing its stake to 49% valuing the company at US$ 1.08 billion
The transaction will help Aditya Birla Nuvo achieve its aim of being amongst top
three private life insurers in India

USD 250 million

Implied Embedded Value (EV) = 2.2x

HDFC ERGO General Insurance Company Ltd. (December 17, 2015)


ERGO International AG acquired an additional 22.9% stake in HDFC ERGO
General Insurance Company Limited from HDFC Limited for US$ 168 billion in
cash post which it will hold 48.74%
The proposed transaction values HDFC ERGO at US$ 735 million

USD 168 million

Implied Embedded Value (EV) = 2.0x

Cholamandalam MS General Insurance Co. Ltd. (December 25, 2015)


Mitsui Sumitomo Insurance Co. Ltd. is acquiring 14% stake in Cholamandalam
MS General Insurance Company Ltd. for a total consideration of USD 134
million from Tube Investments of India Ltd., Post which Mitsui Sumitomo
Insurance will hold 40% stake

USD 134 million

The proposed transaction values Cholamandalam MS General Insurance


Company Ltd. at USD 952 million

Notable PE Transaction
Company Overview

Locodel owns and operates the e-commerce mobile platform Grofers. Its app
enables users to order on-demand grocery and veggies from their mobile
phones which are available at local market and delivered at the doorstep.
It was founded by Saurabh Kumar and Albinder Dhindsa in 2013
The Gurgaon, Haryana based start-up has expanded to 17 cities and works
with 10,000 merchants doing about 30,000 orders in a day with an order value
of ~INR 400-500

Angel Round
(Sept 2014)

Series A
(Feb 2015)

Series B
(April 2015)

Series C
(Nov 2015)

$0.5 million

$10 million

$36 million

$120 million

Sequoia Capital
India Advisors and
Deepinder Goyal

Sequoia Capital
India Advisors,
Tiger Global
Management LLC

Sequoia Capital
India Advisors,
Tiger Global
Management LLC

Softbank Corp,
Yuri Milner,
Sequoia India,
Tiger Global
Management LLC

Business Model
Grofers is an m-commerce marketplace for daily shopping. It allows shoppers to shop from their favourite store in their
neighbourhood and get the delivery within 90 minutes
Shoppers can shop for Grocery, Fruits & Vegetables, Bakery items, Flowers, Meats, Pet Care, Baby Care and Cosmetics
products with just a tap of a button and get everything delivered instantly or schedule it for a convenient time later
Grofers is replacing the trip to local shops for consumers by bringing merchants (and their inventory) online
Grofers makes its revenue via commission from retailers. It receives 6-7% margin on groceries while bakery products
gives them higher margins of around 20%

Competition
Company

Merisis Opinion
Amt Raised
USD 46 Mn

USD 46 Mn

USD 12 Mn
USD 7.2 Mn

Investors
Sequoia, SAIF,
Snapdeal, ru-Net,
Jafco, Beenext
Zodius, Bessemer,
Ascent, Helion,
Avezo
Accel, Qualcomm,
Times Internet,
Dragoneer
Spencers (M&A),
Brand Capital

Hyper-local on-demand delivery model offers


merchants logistics support and technology power to
fight modern retail and ecommerce that are
increasingly taking away their business
While the space does hold a good opportunity, it still
hasnt been easy to crack

Ability to get local mom and pop, or kirana, stores


on board will be critical factor for success
As Hyper-local businesses, especially in the grocery
space, work on thin margins, they will have to explore
newer avenues such as advertising to sustain margins

Notable M&A Transaction


Deal Overview

German payments company Wirecard has agreed to buy the payments


business of Great Indian Retail Group, a major southeast Asian electronic
payment and e-commerce business for 340 million (230 million in cash &
110 million linked to the overall future performance)

Payment Business

The deal includes:

100% of the shares from GI Retail and financial investors of companies


operating payment services in India, the Philippines, Indonesia and
Malaysia under the brands iCASHCARD, Smartshop, StarGlobal,
Commerce Payment as well as several segment brands

60% of the shares of GI Technology, part of Great Indian Retail Group


and an issuer of prepaid cash-card, mobile-wallet and remittance
technology
Wirecard will take over more than 900 staff in India, the Philippines, Indonesia
and Malaysia as part of the deal, which includes the iCASHCARD, Smartshop,
StarGlobal, Commerce Payment brands

Deal Value*

EV/Revenue

EV/EBITDA

340 Million

7.5 x

48.6 x

Deal Rationale
GI provides hundreds of thousands of Indians without bank accounts the ability to use cash for online payments or
money remittance. Its cash cards can be topped up at banks, local stores or by mobile phone
The acquisition secures Wirecard a stake in one of India's fastest growing licensed Prepaid Payment Instrument (PPI)
issuers as well as a Full Fledged Money Changers (FFMC) license in India, enabling the operation of multi-currency
transaction and remittance services

Merisis Opinion
Domestic remittance options are improving against the backdrop of Indias thriving e-commerce industry, with the
advent of cost-effective alternatives to traditional informal channels. Changing industry dynamics has made India a
attractive market to foreign investors

* The Deal Value of 340 million includes 230 million in cash & 110 million linked to the future performances

Sector Focus Health Care at Home


Introduction

How big is the Market Opportunity?

Home healthcare as a concept and business has existed in


India for many years. Organized players have started
pursuing this opportunity under new business models by
which has given the sector tremendous visibility. The
organized players are bringing perspective to the market
through customer centric approach & specialization of
services.

Indias population is projected to grow from 1.2 billion


today, to 1.6 billion by 2050. Indias 60+ population in the
same time frame will have grown from 100 million today,
to over 300 million.

A lot of excitement stems from the fact that the Indian


healthcare industry is at an inflection point. The first phase
of healthcare development was in the hospital space
which has already bloomed & is largely completed. Hence,
post discharge care, geriatric care, and chronic disease
management and other key areas for home healthcare,
have come into the spotlight.
The Indian healthcare market is growing fast and so is the
cost of medical services at hospitals. Amid the rapidly
increasing burden of chronic diseases, and the demand for
quality medical care, especially for the elderly, the market
is now opening up for home-based healthcare services.
Demand for Home Health Care in India?
The concept of old-age homes or assisted living is socially
unacceptable in India and therefore better home-based
health care facilities are becoming an imperative. It is
estimated that for an average individual, 70% of health
care needs can be met in a home environment. This can
result in better health outcomes and lower medical costs.
Indias home healthcare industry consists of home-based
medical devices and home services. The home-based
devices market is well developed, but the home services
segment is largely unorganized and dominated by small
local agencies.
There has always been an unmet demand for quality
healthcare in India. In the last couple of years many private
players have invested in this sector and new investors are
still flocking in. But, a large vacuum still existed for HHC
services. Neighbourhood clinics and home visiting doctors
were not able to fill this gap. While HHC is already a multi
billion dollar market in the developed countries, the Indian
market is relatively small and is being serviced by small
agencies or independent service providers reaching out to
a very small consumer base.

India's Home Health care market is estimated at $2-billion


and growing at 20% annually.
It is expected to mirror the exponential growth in other
countries, specifically the US and UK. The home healthcare
market in North America is estimated to be $130 billion,
while the European home healthcare market is expected
around $57 billion by 2017.
Funding in Indian Home Health Care Space:
Company

Amt Raised

Investors

USD 46 Mn

Qualcomm,Venture
East, IFC, Accel

USD 10 Mn

Eight Roads Ventures,


Fidelity Biosciences

USD 1 Mn
USD 0.35
Mn

Anil Khandelwal,
Krishan Gupta, Sandeep
Parwal, Arun Purohit
India Quotient Fund,
SAIF Partners

Foreign
Investment

Bayada Home Health


Care

Joint
Venture

Dabur India & Health


Care at Home(UK)

Undisclosed

RR Energy & Dr. Rajesh


Vasudeva

Home Health Care viz-a-viz Hospitals A Complimentary


and a lucrative business model
Home healthcare starts where hospitals stop as far as
treatment of medical events are concerned. However
home healthcare plays a very vital role in management of
chronic diseases and also preventive care.
The private hospital business model is focused on return
on capital employed and average revenue per operating
bed, while HHC is all about last-mile logistics, using
technology and health-care workers to ensure timely care
at doorstep in a convenient and affordable manner. HHC is
a different business model where it is a volume game.

Sector Focus Health Care at Home


Hospitals, typically generate the maximum revenue per
bed in the first 24 hour - 48 hours of admission post which
revenue per bed goes on decreasing. Home Health Care as
an offering compliments the hospitals revenue
inefficiencies per bed as well as can be cost effective for
customers. HHC can help earlier discharge and help
hospitals improve on revenue per bed.
Home health care services are cost-effective as it reduces
the burden of indirect expenditure on travel to hospital
and spend on hospital bed, among others. Home care
services are 50-70% cheaper than hospitals.
Business Model Analysis

Challenges the Industry has:


1. One of the main constraints is the availability of high
quality manpower suited to work in the home
environment. The Indian educational system currently
does not have a structured training program for home
health care. Unless there is vocational training for
para-medical services, a strong home health care
system will remain a far fetched distant reality.
2. Absence of structure and standard processes in the
organization is another challenge which is the case
with a lot of unorganized players in this industry and
thus carelessness and negligence comes with it.

The business model that is followed by most players today


is to have collaborations with leading hospitals to generate
referrals. While most players also have a direct customer
interface, major portion of todays in home healthcare
consumers come from referrals of doctors and hospital
chains. In the next 4-5 years, as the major players gain
critical mass, their bargaining power with hospitals is set to
increase significantly. The referral fee as a % of revenue
shared with Hospitals currently is around 15-20% but is
expected to come down to 8-10%.

3. As convenience and quality are the mainstay of the


industry, it is a very logistically intensive and servicefocused business, so getting the quality right is
absolutely essential but also very challenging.

Technology a key differentiator in the business

Healthcare needs to be patient-centric, which benefits


them in more way than one. Providing treatment, along
with mental peace, is the need of the hour. Home care
services offer these twin benefits simultaneously.

A strong technology backbone is absolutely necessary as


there is no central place like a hospital where healthcare is
delivered. Home health care is not a high margin business
and in order to be profitable it needs to scale which can be
achieved once the technology is in place.
This is possible only with the effective use of technology
across every aspect be it scheduling of appointments,
logistics to manage remote workers, maintain
standardized care protocols, capturing and analyzing
patient data, and monitoring patients remotely so as to
free up doctors time and to get personalized treatment.
Growth Drivers - Key developments are expected in areas
of insurance, regulations and service protocols
While there is no doubt that insurance will play a bigger
role in the success of this segment, the industry awaits
innovative insurance packages for HHC. India is the perfect
platform to launch innovative healthcare services and
solutions provided the regulations are supportive.

Merisis Take on Health Care at Home


Rise in income levels and awareness of diseases and its
care is swinging the pendulum in favour of patient care at
home than in hospital.

While India is gaining ground as a medical tourism hub,


serious measures are required to provide quality and
affordable healthcare facilities to the citizens also.
Homecare facilities will turn out to be a big game changer
as it helps hospitals free up its bed spaces which can be
used efficiently to treat critical cases.
The home healthcare market might not currently hold a
big share of revenue, but this share is set to expand
through the inclusion of multiple medical services from
pharmacy needs, medical devices, hospital appointments,
patient records, chronic disease management and other
medical services.
Home Health Care is an integral part of the overall
Healthcare eco-system. A business model that can coexist
with the existing health care systems and networks will be
successful in penetrating the industry and will become the
market leader.

Merisis Transactions

10

Deals this Quarter


Grab raises funding from Sixth Sense Ventures

Merisis Advisors is pleased to announce that its client, Grab, hyperlocal


logistics service provider, has raised funding from Consumer centric
venture fund Sixth Sense Ventures
Mumbai based Grab provides a seamless tech platform to enable lastmile delivery. Its services encompasses restaurants, food tech
companies, e-commerce platforms, laundry services, grocery
platforms, pharmacy stores, & logistics aggregators
Having partnered with 450+ merchants across 7 cities, and delivering
over 4000+ orders per day, Grab is becoming a critical part of the ondemand services play in India
Recently, Grab also received strategic investments from Zomato to
spruce up its delivery process, online restaurant directory and food
ordering

On-Going Transactions
Education Platform
India's largest online marketplace for supplementary education connecting students with industry partners
for field visits, workshops and hands on practical experiences.

Food Logistics
Indias leading a Food logistics company providing last mile delivery using technology to ensure operational
execution is seamless

Home Shopping
One of Indias biggest Television shopping e-commerce company, is seeking to raise funds

11

Merisis Consumer Practice


Selected Transactions
Equity Syndication

M&A

Equity Syndication

USD 15 Mn

Undisclosed

USD 4 Mn

PE Investment
By

Acquires

Series A
Investment by

October 2015

January 2015

April 2012

About Merisis
Merisis Advisors, a leading independent advisory company, helps growing companies raise capital
from institutional investors as well as advises owners and funds exists from their investments and
maximizes the value of their portfolio. Merisis Advisors focus areas are Technology, Consumers and
Industrials and its experienced team provides deep domain expertise in these verticals as well as a
strong commitment to client. With offices in Mumbai and Bangalore, Merisis Advisors helps its
clients through the complex process of fund raise and M&A, and deliver on its promise of Growth
Simplified. Merisis is the Indian representative of AICA, a global alliance of independent advisors
with presence in 25 countries.
For more information visit
www.merisisadvisors.com

Sumir Verma

Fazal Ahad

Managing Director

Director

Email: sumir@merisis.in

Email: fazal@merisis.in

Mobile: +91 99672 55500

Mobile: +91 98201 49574

Mumbai

Bangalore

www.merisisadvisors.com

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