MERGERS ACQUISITIONS Catalyst to Economic Growth 27 th

MERGERS & ACQUISITIONS - Catalyst to Economic Growth 27 th May, 2016 Mumbai Mr. Sanjeev Sancheti Chief Strategy Officer SREI Infrastructure Finance Limited

MERGERS & ACQUISITIONS CLASSIFICATION OF M&A On the basis of Value Chain Horizontal M&A – acquiring and target companies are competing firms in the same industry • Vertical M&A – combination of firms in the client-supplier or buyer-seller relationships • Conglomerate M&A – acquiring companies which operate in unrelated business Corporate Restructuring Acquisitions Business Share Capital Purchase Re-orgn Slump Sale/ Merger/Demerger Buyback Itemized Sale Capital Reduction Amalgamation LOCATE INVESTIGATE On the basis of relationship • Friendly M&A – acquisition in a friendly manner with approval from Board and shareholders of the target company • Hostile M&A – pitting the offer against the wishes of the target Demerger On the basis of economic area M&A PROCESS FORMULATE • NEGOTIATE INTEGRATE • Domestic M&A - the firms involved originate from one country and operate in that economy-country • Cross-border M&A - two firms located in different economies, or two firms operating within one economy but belonging to two different countries

BENEFITS OF M&A • ECONOMIES OF SCALE – a classic example would be AB In. Bev acquisition of SAB Miller which will form a company that makes almost a third of the world’s beer supply • GREATER EFFICIENCIES & OPERATIONAL SYNERGIES - Vedanta’s mega-merger with Cairn India and Aditya Birla Group merger of its branded apparels business Pantaloons Fashion and Madura Garments • ACCESS TO NEW GEOGRAPHIES & NEW PRODUCTS - ATC’s acquisition of 51% in Viom Networks to get access to the Indian Market. Merger of Charter Communication and Time Warner Cable which shall increase Charter’s footprint by 84, 000 sq miles • BRINGING IN NEW TECHNOLOGY & ENHANCING CAPAPBILITY OF FURTHER INVESTMENT IN TECHNOLOGY – Twitter’s acquisition of Periscope an app for streaming video from a cell phone, Infosys acquiring Panaya which is an ERP startup of Israel, Samsung electronics acquiring Loop. Pay where Loop. Pay's technology turns magnetic-stripe readers into a new type of tap-like payment system, requiring no contact with a card • TURNAROUND / REVIVAL STRATEGY – Majority of distressed deals in US Oil & Gas sector happened due to low oil prices in 2015 • DIVERSIFICATION – Foray of traditional retailer’s in India into the online space like Mahindra Retail’s acquisition of babyoye. com, Aditya Birla going into e-retail through abof. com • BRINGING TALENT & EXPERTISE - Acquisition of Letsgomo Labs and Martmobi Technologies by Snapdeal to strengthen its mobile presence, Acquisition of Nex. Table and Maple Graph by Zomato to acquire mobility capabilities to start online delivery • RISE IN NATIONAL COMPETITIVENESS • ACCESS TO FOREIGN CAPITAL AND CAPITAL MARKETS • INCREASE IN FDI & FOREIGN EXCHANGE

GLOBAL SCENARIO

GLOBAL M&A SUMMARY - 2015 • Record breaking year for global M&A – surpassed previous high of 2007 (from US$ 4. 6 tn in 2007 to US$ 4. 9 tn in 2015) • Cross border activity on the rise – globalisation continued to be a major driver, cross-border deals were almost third of total deals • Mega deals to the fore • Powerful US performance - The U. S. market continues to power ahead in an extraordinary way, providing the rocket fuel for growth in other key regions • Growing Board room confidence - Ready availability of debt finance, record levels of corporate cash, supportive shareholders, has given boardrooms the confidence to pursue significant strategic transactions • PE returns to the buy-out market - After several years of focusing on securing exits, PE funds are now returning to the buyout market and contemplating increasingly complex deals, backed by record levels of funding • Tax still a driver - Despite growing opposition from across the political spectrum, U. S. companies are still looking to do tax-driven deals – including inversions – with the aim of investing overseas earnings rather than repatriate them and face a high tax bill • China’s Private companies seek outbound opportunities Top 5 sectors by deal value (USD) 0 -500 m-1 bn 1 -3 bn 3 -5 bn 5 bn+ 2% 1% 4% 5% 88% Activity by Deal Value (USD) Deal volumes by region Source: MA& Insights, Q 4 2015, Allen & Overy

GLOBAL SCENARIO - 2015 Deal Value 6 12% 10% 5 8% 8% 8% 10% 4 3 2 1 0 5% 5% 1. 1 1996 5% 4% 3% 2. 3 4% 4. 6 3. 9 3. 3 3. 2 2. 1 1. 3 2. 7 2010 2012 8% 6% 4% 4. 9 3. 7 6% 4% As a % of GDP US$ trillion as a % of GDP 2% 0% 1998 2000 2002 2004 2006 2007 2008 2014 2015 Source: J. P. Morgan, Dealogic as of January 8, 2016 GLOBAL M&A ACTIVITY 2000 1800 1600 1400 1200 1000 800 600 400 200 0 39% 31% 28% 23% 24% 27% as a % of overall M&A deals 35% 33% 26% 28% 45% 32% 27% 30% 530 2001 364 329 2002 2003 486 1549 1107 1105 35% 25% 1785 794 31% 1084 934 861 854 739 2010 2011 2012 2013 579 15% 5% 2004 2005 2006 2007 2008 2009 2014 2015 Source: J. P. Morgan, Dealogic as of January 21, 2016 CROSS BORDER DEALS Total Cross border deals as a % of total deals US$ billion Cross border Deal Value

MACRO ECONOMIC TRENDS THAT WILL DRIVE GLOBAL ECONOMIC GROWTH OVER NEXT FEW YEARS • Extremely accommodative monetary policy • Normalizing of business conditions • Strong US Dollar • China’s economic slowdown • Low but rising oil prices • Structural reforms

KEY THEMES FOR 2016 • Supportive environment to continue – – • Balance mix will characterize activity – – – • $6 trillion in cash reserves held at the end of 2015 provides corporate leaders the firepower to make acquisitions to improve earnings CEOs may also use 2016 to spin off and divest assets to achieve greater earnings growth and corporate clarity PE funds may play a more significant role since dry powder, the capital available for investment purposes is near record high Cross-border transactions will continue to provide a significant source of value creation – – – • Commodity-related sectors and Financial Institutions may see a rebound in activity in 2016 Asian outbound M&A will remain a significant factor in global transactions going forward Desire for higher growth markets, greater value-add products and services, and attractive valuation opportunities are driving increases in outbound activity across regions Europe may attract more inbound activity as there is better visibility around the return of growth to the region Strong levels of Asian outbound activity are likely to continue Activist investors will continue to seek expansion – – Assets under management at activist hedge funds reached $122. 9 billion in the fourth quarter of 2015 Structural and regulatory distinctions may cast activism in different guises, but investor activism is extending its international reach SECTORS WITH HIGHEST APPETITE TO ACQUIRE TOP INVESTMENT DESTINATIONS

INDIA STORY

INDIAN ECONOMY - Summary • India’s macroeconomic situation has improved somewhat during the past year. Growth has picked up slightly and credit rating outlook has improved. Inflation is declining and the currency is stable. There is also increased interest from foreign investors • Private equity deals have increased in the last one year due to more realistic valuations. However, investors are keener on investing in sectors like renewable and logistics. Funds that are nearing the end of their life cycle are chasing exit routes through IPOs more aggressively • India witnessed robust GDP growth rate of 7. 2% in 2014 -15 and 7. 6% in 2015 -16. • However, headwinds in the form of slow global economic growth, weak domestic private investment demand, concerns relating to stalled projects, excess capacity in industry and sluggish external demand will continue to be prevalent in 201617. It is therefore expected that the growth rate in 2016 -17 will not improve drastically from the levels achieved in 2015 -16. • For 2015 -16, the fiscal deficit is about 3. 9% compared to about 4% in 2014 -15 • Industry-wise, the performance was mixed. – – Sectors like electricity, coal, cement, passenger cars and fertilizers have shown positive growth Others like steel and aluminium reported negative growth rates

INDIA M&A DEAL ACTIVITY - 2015 • The Indian M&A activity softened in 2015 with a total of 930 deals that were announced with a cumulative disclosed deal value of US$26. 3 billion. Deal volume remained at levels similar to the previous year • Decline in domestic deal activity through the year, which declined to a cumulative deal value of US$10. 9 billion from 513 deals compared to a total deal value of US$16. 2 billion from 493 deals in 2014. The slump in domestic deal activity was – – Largely due to the absence of megadeals (like Sun-Pharma deal of US$ 3. 2 bn, Kotak ING deal of US$ 2. 4 bn in PY) Owing to a weak outlook Downturn in the commodity cycle Lack of big-ticket divestments by debt-ridden companies, which were a significant contributor in PY • Domestic deals accounted for 55% of the total deal volume in 2015 (45% for cross-border) • Cross-border deals accounted for 59% of the deal value in 2015 (41% for domestic) • Technology, retail and consumer products and infrastructure were the most active sectors through the year with respect to the deal volume and accounted for nearly one-third of the total announced deals in 2015. From a value perspective, the oil and gas sector was at the forefront, followed by pharmaceuticals, on account of big-ticket (US$ 500 mn & above) outbound transactions

INDIA M&A DEAL ACTIVITY - 2015 40 1000 150 930 US$ bn 825 900 835 30 800 763 32. 1 27. 2 700 29. 4 28. 4 Number of Deals 870 35 25 121 120 95 90 30 - 2013 2014 2015 M&A activities of Indian Companies Technology Retail & CP US$ million 4, 500 3, 425 3, 118 3, 000 2, 696 2, 509 2, 406 Infrastructure Retail & CP 1, 500 - Infrastructure Diversified IP Financial Services Five Most Active Sectors by Deal Count in 2015 6, 000 Source: EY analysis of Thomson One Data 84 60 600 2012 86 26. 3 20 2011 91 Oil & Gas Pharmaceuticals Financial Services Five Most Active Sectors by Deal Value in 2015

CROSS-BORDER DEAL ACTIVITY IN INDIA -2015 Geographical Distribution of Deals Top 5 cross-border deals 50 100 40 Number of Deals 80 42 78 60 40 33 20 - United States Japan 18 16 16 United Kingdom Singapore France Five Most acquisitive nations for Indian Companies in 2015 Source: EY analysis of Thomson One Data 30 20 14 8 10 - United States United Kingdom Germany 6 6 UAE Singapore Five Most targeted nations by Indian Companies in 2015

DOMESTIC DEAL ACTIVITY IN INDIA - 2015 20 16 12 8 4 0 424 452 448 Nos of Deals 493 513 600 400 16. 2 13. 9 6. 2 5. 5 2011 2012 2013 10. 9 200 0 2014 2015 Source: EY analysis of Thomson One Data 3 big mergers in 2015 in the domestic arena, done with an aim to build healthy balance sheets, simplify group structures and gain operational synergies: Stakes and assets transfers within group companies were also reported during the year: • • Vedanta’s announced mega-merger with Cairn India at a deal value of US$ 2. 2 bn Aditya Birla Group announced merger of its branded apparels business Pantaloons Fashion and Madura Garments for US$ 818 mn UPL announced merger of its agriculture seed company Advanta with itself for US$ 698 mn A few examples of spin-offs being concluded during the year include: • Suzlon Energy Ltd. selling its German subsidiary Senvion to Centerbridge Partners LP for Euro 1. 05 bn to reduce its debt burden • DLF signed definitives to sell DT cinemas to PVR for US$ 78 mn, in line with its strategy to sell non-core assets to reduce its debt burden • • Jag Prakashan brought together its two radio businesses, Radio City and Radio Mantra, under the name Music Broadcast to simplify its ownership structure and consolidate its ad sales revenue Apollo Group transferred its 55. 7% stake in Apollo Agro to Gujarat Apollo Industries and Apollo Earthmovers Max India spun-off its business activities into 3 listed companies, which will be individually responsible for the group’s main business activities, namely life-insurance, health and allied businesses and manufacturing Share repurchases well also a prominent aspect across many deals: • Proposed share repurchase plan by Just Dial totalling to INR 165 crs, while shelving its earlier announced fund raising plans. The Company was expected to utilize the funds as raised for acquisitions, which it suspended citing high valuations of internet companies • Clariant Chemicals bought back shares for US$ 54 mn, with a view to reward its shareholders by purchasing the shares at a premium to the prevailing market price, after selling its Kolshet Land Number of Deals With an eye on optimization and efficiency, restructuring deals (mergers and stake/assets transfers within group companies, spin-offs and share repurchases) emerged as a major driver of domestic M&A activity during the year US$ bn Deal Value

SECTOR WISE FOCUS AND OUTLOOK TECHNOLOGY • SMAC (social, mobile, analytics and cloud) applications – the emerging game changer FINANCIAL SERVICES • • Insurance leads FS sector Entering payment solutions • • Clean energy increasingly on the radar of overseas players Focus on expansion drives deals in logistics A promising road ahead (100% FDI in most of the infrastructure segments) MEDIA & ENTERTAINMENT • • Increasing demand for digital platforms Consolidation in movie exhibition segment & regional consolidation in broadcasting Sustained momentum expected in coming year PHARMACEUTICALS • • Indian pharma majors continued to acquire globally Domestic consolidation remained prominent in branded generics International Markets – an avenue for continued growth REAL ESTATE & HOSPITALITY • • Corporate demand & realistic valuation aid deals in hospitality sector Real estate witness green shoots Supported deal fundamentals aided by the government to lead to increased deals in the sector RETAIL & CONSUMER PRODUCTS • • • Domestic action in F&B – packaged foods & alcoholic beverages Online retail segment – increasing prominence Personal care – new avenue for growth Outbound deals to increase in personal care; consolidation in eretail segment TRAVEL SERVICES • • Online taxi aggregators taking inorganic route to scale up Exciting time for online tour and hotel aggregators Consolidation & acquisitions of new age companies will help sustaining the momentum in the coming year Consolidation in AMC space Online transaction through payment banks A positive credit growth outlook to support banking and NBFC market O U INFRASTRUCTURE • • Strong year ahead as India Inc moves on the path of digitization T L O O K

TOP 10 DEALS FOR 2015

OVERALL INDIAN M&A OUTLOOK FOR 2016 • Deal activity to pick up in 2016, domestic deals which were subdued in 2015 like to see more consolidation deals especially in sectors like – infrastructure and manufacturing, retail and pharmaceuticals • Inbound front may see increased activity from Japan - softness in relationship of both countries , further fuelled by low interest rate in Japan compelling Japanese Corporations with huge cash piles look new avenues for growth. Manufacturing such as automotive and Specialty Chemicals sectors most likely to benefit of this • Outbound investments continued to be led by oil & gas and pharma sector quite similar to last year • Recent FDI norms and the much awaited GST will perhaps be a game changer and will further accelerate the deal activity from an inbound investment, domestic M&A and PE perspective • Strong interest from both foreign investors and domestic players in buying out stressed assets. Stressed assets worth ~INR 3 tn in the system. Investors are looking this as an opportunity to hunt for good assets which could yield high returns • Support from 'Make in India' initiative and thrust on defense. Many FDI announcements in defense and insurance sectors as the government lifted / diluted FDI caps. These factors will continue to support corporate actions in 2016. • Key factor to have a considerable impact on M&A in 2016 shall be the pickup in CAPEX cycle of Indian players. This may pick in second half of 2016 due to two triggers: – – • Government’s focus on core infrastructure and plans it has announced for road and highways, smart cities and Digital India Further cut in the rate by RBI, should support the demand cycle, aid industrial recovery and boost economic growth in the country Only challenge could be ongoing global slowdown and constraints in capital raising. Global M&A deals in 1 Q 2016 were already down 25% to USD 701 b. However, India in a sweet spot in the emerging markets. Most foreign investors and companies are bullish on fundamentals of Indian economy.

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