Warburg Pincus Bharti

Warburg Pincus &

Bharti TeleVentures

The Dawn of PE In India

The Deal……………………

One of the most reputed PE firms of US Investments worth more than $ 26

billion In more than 100 Companies Presence in US, Europe & Asia One of the first PE investors in India

Real Interest Rates too high to sustain Large Market – Double edged sword Increasing GDP growth Democratic Government Growing Middle class consumers Majority of population in between 18 – 25 yrs of

age Strong Education System IT Boom

Macro Factors – India

Positive Macro Factors – Sector

National Telecom Policy encouraging Domestic Private Investment Foreign Direct Investment

Competition to Fixed Line Service Providers High Installation Fees Order Backlog

Mobile Telephony considered as a status symbol Markets were Price Elastic No Player having Pan-India presence Telecommunication is a pre-requisite for Growth

Negative Macro Factors – Sector

Lack of Regulatory Clarity

Economic viability of Telecommunication Project

Restriction on Licenses

Monthly Fixed License fee to government

No investor interest – No clarity on Exit route

Bharti having presence only in North India

Difference INDIA

Leverage buyouts Control Layoff’s Management changes Part of Strategic plan Reduce competition

Banking on Growth Story Long Term Investment Financial & Operational

efficiency Working with Management Strategic Investor Accelerated growth &

competitiveness Enhancing Shareholder Value

Landmark Transaction

The Deal equaled one – third of total PE investments in India till date

PE investments in India were only 0.2% of total GDP FDI was only about 1% of GDP First Investment done banking upon the “India Growth

Story” Foreign Exchange fluctuation was a matter of concern Investment in Unorganized Sector Investment in a privately owned company

WP – Information Gaps

Bet on forecasts Loss making business Entering as a minority stakeholder Ambiguity in Government Policies Fragmented Sector – Cost efficiency Mobile telephony was still a Luxury among Indians Business model based on Cost-Volume-Pricing

Contrarian Call

Business Growth Opportunities High Interest Costs Confidence on Management India’s Demographic Pattern Open Economy Global Presence

Mittal’s Approach - Valuations

Valuation not to be done on the conventional method of ARPU

New Methods focus on efficiency Gross Revenue Operating Efficiency Capital Efficiency

Our take on Valuations Method

Optimum Utilization of Resources

Gross revenue is the major CSF

Business model is based on increasing Subscriber base to cost efficiency

Price Elastic market

Shareholder Value & Corp Governance

Think Big !!! BT- Initial Suboptimal Strategy – Bell NorthWP -Change in Plans – Pan India Presence Growth Plans !!!BT - Management Approach to build business from scratchWP - Time sensitive: Growth by Acquisition Restructuring the corporate structureBT- Adhoc structureWP – Buy back stakes to reduce to conflicts of interest Inclusion of Strategic Partners - SINGTEL

Exit………………………..

The Road ahead……………..