Consumer Spotlight

M&A and Private Equity Perspective on

the Consumer Sector

Q2
FY2016

Mumbai

Bangalore

Merisis Consumer Sector Coverage

Indias consumer packaged goods and retail sectors may not be able to sustain the
high growth path solely on consumption-led demand in the wake of structural
bottlenecks, as per FICCI report.

Consumer Goods
& Services

The online grocery market in India is growing at 25-30% annually in metropolitan areas
and large cities and only 5% to 8% of all grocery stores are organized corporations.
Hence, its a challenge for companies to get local mom and pop or kirana stores on
board due to existing gaps in technology and integration

Indian e-commerce market is likely to reach USD 8.5 Billion by 2015

It is estimated that online retail will be an $18 billion industry in India by 2018 and ecommerce logistics will be a $2 billion industry by 2019
Re-rating of Unicorn start-ups valuation globally likely to have an impact on funding
and valuation in India

E-Commerce

Large ecommerce players looking at aqui-hiring - not just for skilled people but for
innovative ideas
Indian financial services firms delivered the second-highest return on invested capital
for private equity firms during 2009-13, according to a study by McKinsey & Co

Finance

RBIs decision to grant 11 payment banks license and 10 small banks license in this
quarter is likely to see more deal activity. 9 out of the 10 entities that received the
RBIs in-principle license for small finance bank might have to raise an estimated INR
4,000 crore ($606.2 million) from domestic investors to bring down their foreign
shareholding to 49%

India's healthcare sector is expected to reach $280 billion by 2020, growing at a

compound annual growth rate of 16%, says a FICCI-KPMG report and set to create 7.4
million jobs
Home healthcare picks up pace in India thanks to digital technology and the positive
fillip in e-commerce industry

Healthcare

The healthcare segment is gaining traction as it has attracted foreign funds to the tune
of USD 3.37 billion in January-July 2015

The education market in India is worth USD 100 billion annually. Ed-tech startups are
contributing to a changing trend in education in India
Real-time book updates, online tutoring, edutainment and online test preparation are
some of the business models through which education startups are trying to cater to a
larger audience. Using technology they have been able to reach tier II and tier III cities

Education

Govt. of India approved a proposal to bolster ties between India & Germany in higher
education sector in the field of research, skill development & faculty development

Investment Activity - India

Macro Overview
Aiming to reap significant benefits from
continuing reforms, Finance Minister Arun
Jaitley said all macroeconomic parameters
including fiscal deficit and inflation appear
positive and hoped that GDP growth would
exceed 7.3% rate of last year
For 2015-16, the government aims to restrict
fiscal deficit to INR 5.55 lakh crore, or 3.9% of
GDP. Implementation of Goods and Services
Tax (GST) is very high on the governments
priority list where they have set a deadline of
April 1, 2016 for its implementation
Consumer Industry Overview
Indias resilient consumer spending is an
advantage, as demand decelerates almost
everywhere else. For years, growth in India has
been fueled more by domestic demand than
by exports
Indias retail market is expected to cross $1.3
trillion by 2020 from the current market size of
$600 billion, expected to grow at a CAGR of 15
- 20%
Modern retail with a penetration of only 5% is
expected to grow about 3x to $180 billion by
2020 from $60 billion in 2015
Deal Overview
Private Equity
Between Jan-Sept 2015, there were 928 PE
deals worth $14.24 billion, the highest so far in
volume and value for the Indian private equity
Investments of $4.7 billion, spread across 342
deals, were made in Q2 FY2016; an increase of
53% in deal volume and 56% in deal value
when compared to deal-making in Q2 FY2015
Merger & Acquisition
M&A deals struck during Q2 FY2016 were
recorded at 233 deals worth $6.8 billion.
Compared to Q2 FY2015, deal volume declined
9%, deal value increased by a healthy 31% the
growth being driven by outbound deals, which
grew over 4.8x between the same period

Total Fundraising Q2 FY2016

By Volume 342 Deals
5%

9%

By Value - $4.7 Billion

2%

386

382

1,068

10%
1,383

52%
22%

1,425

248

Information Technology
Financials

Consumer Services
Health Care

Industrials
Others

Consumer Fundraising - Q2 FY2016

By Volume 200 Deals

By Value - $2.3 Billion

5%

5%
9%
16%

338
1,150

615

66%
220

E-Commerce
Financials
Health Care

Consumer Goods & Services

Education

Total M&A - Q2 FY2016

By Volume 233 Deals
8% 3%
9%

By Value - $6.8 Billion

2%

39

247

31%

629
787

1,817

10%
15%

Information Technology
Financials
Energy

1,852

1,554

22%
Consumer Services
Health Care
Utilities

129

Industrials
Materials

Consumer M&A - Q2 FY2016

By Volume 36 Deals

By Value - $369 Million

0

5%
17%
32%
E-Commerce
Financials

43
41%

71
255

Consumer Goods & Services

Education

Top 5 PE Deals in Q2 FY2016

Snapdeal
Snapdeal raised $500 million valuing them at $4.8 billion post money, funding
led by SoftBank and new investors Wonderful Stars Pte and Alibaba on Aug 18,
2015

USD 500 million

Funds will be used to increase the number of merchants on its site to 1 million,
from about 150,000 today

Oyo Rooms
The $100 million deal values Oyo at around $400 million post money, funding
led by new investor SoftBank and existing investors Sequoia, Lightspeed, &
Greenoaks on July 14, 2015

USD 100 million

Funds will be used to expand the size of its network to 50,000 rooms across 100
cities by the end of this year, develop innovative technology products and up
customer acquisition and for expanding into Asian countries

L&T Finance Holdings

PE firm Bain Capital has bought close to a 10% stake in L&T Finance, arm of
Larsen and Toubro Ltd, for INR 1,300 crore in two transactions

USD 100 million

The deal will help L&T Finance raise capital to allow L&T to divest some of its
holding, meet its capital adequacy requirements, & for growth capital purposes
at CAGR 25% over 3 years

Pepperfry
The $100 million was a Series D funding round led by new investors Goldman
Sachs & Zodius Advisors and existing investors Norwest and Bertelsmann India
on July 27, 2015

USD 100 million

Funds will be used to expand its logistics footprint in Tier-3 & Tier-4 cities by
adding to its growing fleet of delivery vehicles, open new distribution centers,
expand assembly services, strengthen its technology platform and experience
centers

Practo Technologies
The $90 million deal values Practo at $525 million post money, funding led by
new investor Tencent Holdings, Sequoia Capital Global Equities, Google Capital,
Sofina Socit, Yuri Milner, Altimeter Capital and existing investors Sequoia
India and Matrix Partners on Aug 6, 2015

USD 90 million

Funds will be used to expand product lines, acquire more startups, enhance
headcount, increase its lead in the doctor discovery business, accelerate its
international expansion.

Top 5 M&A Deals in Q2 FY2016

Share khan Ltd.

BNP Paribas SA acquired Share khan Limited from The Rothay Group, Baring
Private Equity Asia Fund, IDFC Private Equity, Samara Capital and Citi Venture
Capital International for INR 22.4 billon on July 30, 2015

USD 350 million

Through this acquisition BNP, whose financial offerings in India include

corporate and retail banking, investment banking and wealth management, will
further expand into brokerages as well as asset management in India.
P/E = 12.5x

IIFL Holdings Limited

FIH Mauritius Investments Ltd made an offer to acquire 26.8% stake in IIFL
Holdings Limited for INR 16.2 billion in cash on July 14, 2015

USD 255 million

Fairfax already holds 9% stake in IIFL through one of its investment through the
HWIC Asia Fund and after the transaction will end up holding 35% , thus greater
than the promoters shareholding of 29.8%
Equity Value/Book Value = 2.4x

P/E = 13.1x

Kuoni Travels (India) Pvt. Ltd.

Indian & Hong Kong Business

USD 84 million

Thomas Cook acquired Swiss tour operator Kuoni Group's business in India &
Hong Kong for INR 535 crore as a part of its strategy to scale up the inbound
business & explore Asia opportunity
Thomas Cook will take in about 1,800 employees of Zurich-headquartered
Kuonis business unit in India and Hong Kong.
EV/Revenue = 2.76x (Historical 2014)

EV/EBITDA = 17.7x (Historical 2014)

The Royal Bank of Scotland Plc., Indian Private Banking Unit

Indian Private Banking Unit

Sanctum Wealth Management

USD 30 million

The Royal Bank of Scotland Plc. entered into a definitive agreement to sell its
Indian private banking unit to Sanctum Wealth Management, a company led by
the head of the business, Shiv Gupta in a management buyout transaction on
July 27, 2015 for an undisclosed financial disclosures
The deal was primarily to pull back from some foreign markets and to focus on
UK retail and commercial banking. It will retain its private banking business,
onshore clients and staff and will retain all branch networks currently operated
by RBS India (Private Banking)

Mebelkart Technologies Private Limited

Mebelkart announced it will receive $20 million in funding on August 18, 2015.
The transaction will involve sole participation from new investor, Getit
Infoservices to acquire more than 75% stake to complete a strategic investment
in the growing furniture market

USD 20 million

Funds will used to enter the interior design and modular kitchen business and
investing in creating augmented and virtual reality options on its site.
Valuation - $26.7 million

Notable PE Transaction
Company Overview

Oyo Rooms is an Indian virtual hospitality brand. It aggregates budget hotels

and guesthouses, making inventory discoverable and bookable online. Its
branding provides a franchise-like consistency of product. Its a managed
marketplace of properties.
OYO Rooms currently offers 14,000 rooms in 80 cities.
Ritesh Agarwal, the founder of Oyo Rooms was the first Asian to graduate as a
Thiel Fellow, a global contest in which he was the only winner from India. At
19, he chucked the idea of Oravel, the Airbnb clone, and changed his business
to OYO Rooms.

Angel Round
(Mar 2014)

Series A
(Sept 2014)

Series B
(Mar 2015)

Series C
(July 2015)

$0.65 million

$5 million

$24 million

$100 million

Lightspeed
Venture Partners
and other
institutional
investor

New: Sequoia
Existing Investors:
DSG Consumer
Partners,
Lightspeed

New : Green Oaks

Capital

New : Softbank
Group

All existing
Investors
participated

All existing
Investors
participated

Business Model
It has developed an asset-light business model. It partners with hotels with the aim of standardization on various
measures in each room including free Wi-Fi and breakfast, flat TVs, spotless white bed linen, branded toiletries, 6-inch
shower heads, a beverage tray and similar amenities
OYO doesn't own any of these properties, and instead, invests in marketing and management quality improvement for
the hotels under its fold. It's a win-win for OYO and the hotels, many of whom just don't have the network, knowledge
or the budget for smart marketing, and they run empty. OYO helps them improve their yields.

Competition
Company

Merisis Opinion
Amt Raised

Investors

USD 36 Mn

Orios Venture,
Tiger Global

USD 6 Mn

Saif Partners,
Matrix Partners

USD 5 Mn

Accel Partners,
Kalaari Capital

USD 3 Mn

Mangrove Capital

OYO rooms is a first mover & a leader in the rebranded budget hotels space. OYO has displayed how
un-organized, offline business can move to the
organized online space and take advantage of
business potential that the connected digital world
has to offer. The success of OYO has resulted in the
creation of a new category in India and led to a flurry
of new entrants into the space.
Yet, there are still a lot of un-organized spaces in the
Indian market waiting to be structured through
collective branding/re-branding and technology.

Notable M&A Transaction

Deal Overview

Indian & Hong Kong Business

Thomas Cook (India) Ltd., Indias premier integrated travel and travel related
financial services company has signed a definitive agreement with Kuoni
Group to acquire Kuonis Travel businesses across India and Hong Kong in
entirety for a consideration of Rs. 535 crore. The acquisition will be financed
through equity infusion, internal accruals and debt
The Kuoni brand is licensed to the acquirer for one year in India and for five
years in Hong Kong. Thomas Cook will pay Rs. 320 crore to add consumertravel brands such as SITA, SOTC and Distant Frontiers to its portfolio in India,
overtaking Cox & Kings to become the top player in customized holiday
bookings and the balance Rs. 215 crore for Kuoni's Hong Kong travel business
As part of the acquisition, Thomas Cook (India) Ltd will take on approximately
1,800 employees of Kuonis business unit in India and Hong Kong tour
operating, and will continue to run the business activities independently
The acquisition of Kuonis Indias travel operations gives TCIL access to their 21
owned offices and 85 franchisees

Deal Value

EV/Revenue

EV/EBITDA

USD 84 Million

2.76x

17.7x

(Historical 2014)

(Historical 2014)

Deal Rationale
Kuoni Group had announced its intention to sell tour businesses in India and other parts of world to focus on online
travel, destination management and visa processing services
This acquisition is expected to help TCIL, essentially a fragmented player in the travel industry, to strengthen its
inbound and outbound tour offerings and consolidate its base in the market
The deal gives Thomas Cook the scale and will help in better contracting and improve margins
The acquisition of Kuonis HK business will give Thomas Cook (India) a foothold in China as HK is considered Chinas
gateway

Merisis Opinion
The acquisition is part of Thomas Cook strategy to scale up the inbound tour business and expand in foreign markets
With this acquisition Thomas Cook would become the largest tour operator in both inbound and outbound segments
Also like other companies, Thomas Cook faces challenges from online travel companies that are growing at a fast rate.
This acquisition also allows the company to face the challenge

Sector Focus Hyperlocal Logistics

Introduction
First there was E-commerce, then M-commerce and now
its the time for N-commerce (Neighbourhood). With
majority of the retail shopping still happening in the
neighbourhood of the consumers, the hyperlocal logistic
space can aspire to tap the entire retail market.
Increasing number of consumer-facing hyperlocal
platforms are seeking to serve their consumers directly to
their homes to expand their business. Lack of credible 3rdparty logistics options force merchants to employ in-house
personnel for logistics, which is not efficient or scalable.
The market need has led to the growth of specialist
express delivery services that are able to aggregate and
meet the delivery demand requirements. A number of
companies operating in the hyperlocal logistics space have
also drawn investor interest. Some of them are:
Company

Amt Raised

Investors

USD 11 Mn

Sequoia, Nexus,
Blume

USD 8.8 Mn

Kunal Bahl, Rohit

Bansal, Fidelity
Growth

USD 1.6Mn
USD 1.3 Mn
USD 0.7 Mn
NA

The total hyperlocal logistics opportunity is estimated to

be between USD 3-6 billion.
How the Business works
In Hyperlocal logistics, typically a merchant makes a
request for delivery once he receives the order from his
customer. These orders have to be delivered in a time
bound manner.
Economic Model Analysis
The most critical variables in hyperlocal logistics business:
Revenue per Order: The hyperlocal logistics providers
typically earn Rs.40-50 per order depending on either the
time sensitivity or the size of the order. Time sensitive and
big orders command premium pricing.
Cost per Order: While the revenue per order is more of a
fixed component, cost per order is a variable factor which
can determine the viability of the model. Typically a rider
can expect to earn Rs.20,000 22,000 per month. On 26
days a month schedule, his cost works out to approx.
Rs.750 850 per day or Rs.75 - 85 per hour for 10 hour
shift. A rider typically delivers an order in 45 minutes or
delivers 12-14 orders in a day.
Profitability Analysis per rider

Accel Partners

Particulars

Details

Orios Venture,
Zomato
Haresh Chawla,
Oliphans, Zomato

No of deliveries per day (10 hr shift)

Revenue per day

Rs.480 - 700

Lightspeed

Rider Cost per day

Rs.750 - 850

Loss per day

-Rs. 50 370

How big is the Market Opportunity?

Indias retail market is estimated at USD 600 billion in 2015
with 10% of the market share with organized retail.
Catering to the organized retail which also includes ECommerce segment presents a USD 3 billion opportunity.
While the entire unorganized retail segment may not use
the services of the hyperlocal delivery provider, even if a
mere 10% of them use these services (F&B brands, outlets
on hyperlocal platform such as Grofers, PepperTap & 1mg
etc.), it presents an additional market of USD 3 billion.
Given the fact that retail players are just warming up to
the hyperlocal concept, the market opportunity is huge.

Revenue per order

12-14
Rs.40-50

Lower revenues earned per rider against cost incurred

makes the model economically less attractive. Reason for
lower revenues is underutilization of riders working hours.
Most of the hyperlocal logistics providers currently focus
on catering to the demands of the F&B segment. Hence in
a day you get 6 peak hours of delivery and 4 non-peak
hours of delivery where there are fewer deliveries
Hyperlocal logistics businesses will have to look for ways to
utilize the non-peak hour optimally to become
economically viable. Tapping into other hyperlocal industry
verticals besides the scheduled delivery segment will go a
long way in making the business model viable.

Sector Focus Hyperlocal Logistics

Generating maximum revenue per day from a rider
through optimal utilization of the peak and non-peak hours
will decide the viability of the business model.
Technology a key enabler in the business
A robust technology backend is critical to the success and
scalability of this business. Technology helps in improving
efficiency through route optimization, proper allocation of
resources based on demand trends, tracking of riders and
easy reconciliation etc.
Will Hyperlocal Logistics become irrelevant in future?
There is an argument that going forward the consumer
facing platforms will like to have control over delivery as
delivery is their touch point with the customer. While such
a rationale makes sense, in reality managing front end and
back end together is operationally difficult. If we look at
the E-Commerce segment as reference, most of the ECommerce players also rely on outsourced services for
fulfilling a major part of the delivery.
Even in Hyperlocal, the front end platforms are focussing
on managing the customers and looking at outsourced
delivery partners for fulfilling the orders. For example
Zomato, which has tied up with Pickingo and Grab to
manage their deliveries. Other customer centric players in
the hyperlocal segment are also either contemplating or
doing pilots for outsourcing the delivery part of the
business to these specialists.
Even full service logistics provides including E-Commerce
logistics providers may have to work with the Hyperlocal
logistics players to outsource a part of their delivery
requirement and maintain their own delivery channels
only for the base load.
Hyperlocal logistics as a business segment is here to stay
Is the segment overcrowded?
Another argument being made is that the segment has
become competitive and overcrowded and consolidation is
bound to happen. If E-Commerce, which constitutes ~1%
of the retail market, can have 3-4 specialized logistics
player, hyperlocal logistics which cater to the other 99% of
the market should easily allow for 8-10 large players.
How will the market evolve?
While the market will have 8-10 large players, a few of
them will have pan India presence while the rest will be
strong players in a particular region.

Logistics providers who have clients with pan India

presence are likely to evolve into pan India players as the
clients would like to work with 1-2 vendors nationally to
ensure standard service offering. The rest of the payers
will have a strong presence in the areas where they are
currently present.
Factors likely to impact the growth of the market
Talent pool: Riders are the backbone of the business
segment and will be the crucial factor for a company to
attract business going forward. Hence retention of the
riders in the network will be crucial given the fact that the
attrition rates in the segment is north of 20%. Incentivising
the riders with monetary as well as non-monetary benefit
besides having a defined career growth path is important.
Going forward the riders will have to be treated the way
Blue collared employees are treated.
Pricing war: Most of the logistics provider on the back of
the funding are chasing market share by aggressively
pricing their offering. Such pricing is economically unviable
in the long run and the pricing will have to be rationalized
in future.
However there exist a concern that the business may fall
significantly when the prices are increased going forward.
Also will the merchants who have adopted the hyperlocal
delivery due to the cheaper pricing stick when the prices
are revised is a question to be answered.
Merisis Take on Hyperlocal Logistics
Hyperlocal logistics provides the retail merchants an
opportunity to service their customers at home without
the need to set up their own logistic channel. Changing
lifestyle, customer preferences and rising real estate costs
are driving the growth of hyperlocal delivery.
Hyperlocal delivery services have a huge market potential
in India. With a large number of players mushrooming in
this space, the ones that deliver efficiently are more likely
to succeed.
Companies should diversify their clients and start
delivering for multiple industry segments in the long run.
This would require a company to own-up a location so
that it becomes the partner-of-choice for that location.
Success in this space would depend on managing the rider
pool and ensuring that these resources are optimally
utilised.

Merisis Transactions

10

Deals this Quarter

Voylla Raises $15 million from Peepul Capital
Merisis Advisors is pleased to announce that its client, Voylla, a leading
fashion jewellery brand has raised $15 million from Peepul Capital, a
leading private equity fund managing a corpus of $700 million
Jaipur-based Voylla Retail Pvt. Ltd, which owns and operates e-tailer
Voylla.com, is an online portal that offers a wide range of designer
jewellery and accessories for women, men, and kids
The funds will be used for brand building, expansion of the distribution
network, investments in technology and enhancement of manufacturing
capacity
The deal represents Merisis Advisors 8th transaction in 2015
Merisis Advisors acted as the sole advisor to Voylla Retail Pvt. Ltd for
this transaction

On-Going Transactions
Holiday Planner
Indias only holiday planner which technologically enables users to Discover, Plan and Book their trips online
on a single platform at once, is seeking to raise funds
Food Logistics
Indias leading a Food logistics company providing last mile delivery using technology to ensure operational
execution is seamless
Restaurant POS
One of Indias leading technology back-bone software to restaurants, connecting them to the digital world
creating a Food-tech Ecosystem, is seeking to raise funds
Home Shopping
One of Indias biggest Television shopping e-commerce company, is seeking to raise funds
Fresh Juices
A chain of retail outlets serving fresh, healthy, on the go juices, is seeking to raise funds

11

Merisis Consumer Practice

Selected Transactions
Equity Syndication

Equity Syndication

M&A

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

504 Shashmira Centre, 176 Vidyanagari, CST Road, Santa Cruz (East)
Mumbai 400098
www.merisisadvisors.com