The Global Financial Crisis : What went wrong!!!

The Global Financial Crisis : What went wrong"August 29, 2009 Presented by : Jagannadham Thunuguntla Equity Head, SMC Capitals LimitedDemystifying the Financial Crisis in US US Crumbling pillars – Reasons for the collapse • Overspending citizens : -0.5% personal saving rate • Big mistake by US banks • Unstable US Regulatory regimeFirst Big Mistake by US Banks – Unacceptable leverage levels 33 : 1 28 : 1Wealth destruction in US!! Balance sheet sizes of some of the biggies US$ 1.00 Tn US$ 1.08 Tn US$ 675 Bn US$ 1.80 Tn US$ 1.02 Tn US$ 2.00 Tn Balance sheet total of top 10–15 financial institutions in US: US$ 20 Tn Vs. US GDP: US$ 14 Tn!Credit Default Swaps US$ 65 Tn Collateral Debt Obligations US$ 40 Tn New Complex Products Derivatives & High Yielding Complex securities Warren Buffet said “Derivatives are weapons of mass destruction”Dow Jones Industrial Average – Index levels Dow Jones Industrial Average December 31, 1964 874.12 December 31, 1981 875.00Nikkei 225 – Index levels Nikkei 225 December 31, 1989 38,957.00 August 29, 2009 10,534.14IPOs : 2006 to 2009 YTD -Total issue size Amount Invested (US$ Mn) 4421.13 8181.56 4045.62 1833.8 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 2006 2007 2008 2009* Notes: Total Issue size includes aggregate volume of IPOs of 2006-2008 and 2009 Year To Date (YTD) No. of IPOs -79 No. of IPOs -103 No. of IPOs -37 No. of IPOs -635.31 140.85 310.69 6.70 0 40 80 120 160 200 240 280 320 2006 2007 2008 2009* Amount raised through Rights Issue (Rs. in Billion) Year :2006 No. of Issues :39 Total Vol. :Rs. 35.31 Bn Avg. RISize :Rs. 91 Cr. Rights Issue : 2006 to 2009 YTD -Total issue size Year :2007 No. of Issues :29 Total Vol. :Rs. 140.85 Bn Avg. RISize :Rs. 486 Cr. Year :2008 No. of Issues :26 Total Vol. :Rs. 310.69 Bn Avg. RISize :Rs. 1195 Cr. Year :2009* No. of Issues :7 Total Vol. :Rs. 6.69 Bn Avg. RISize :Rs. 95 Cr. Notes: Total Rights Issue includes aggregate volume of 2006 -2008 and 2009 Year To Date (YTD) FDI Flows in India: 2006 to 2009 YTD Amount Invested (US$ Bn) 8.96 22.83 34.36 33.61 0 10 20 30 40 2005-06 2006-07 2007-08* 2008-09* Notes: Figures for 2007-08 and 2008-09 are provisionalFII Flows into Equity Markets: 2006 to 2009 YTD Amount Invested (US$ Bn) 8.11 17.65 -11.97 7.57 -15 -10 -505 10 15 20 2006 2007 2008 2009* Notes: FII Flows into Equity Markets includes aggregate volume of Inflows of 2006-2008 and 2009 Year To Date (YTD) Amount Raised (US$ Billion) ECBs: 2006 to 2009 YTD -Total Amount Raised Fund raised through ECBs 17.18 25.79 17.83 5.54 0.00 5.00 10.00 15.00 20.00 25.00 30.00 2006 2007 2008 2009* No. of ECBs: 733 Average ECB Size: $23.43 Mn No. of ECBs: 680 Average ECB Size: $37.93 Mn No. of ECBs: 410 Average ECB Size: $43.49 Mn No. of ECBs: 246 Average ECB Size: $22.53 Mn Notes: 2009 Year To Date (YTD) Amount Raised (US$ Billion) Fund raised through FCCBs 5.98 7.52 1.48 0.07 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 2006 2007 2008 2009* No. of FCCB Issues: 82 Average FCCB Issue: $72.93 Mn No. of FCCB Issues: 20 Average FCCB Issue: $74.22 Mn No. of FCCB Issues: 75 Average FCCB Issue: $100.33 Mn FCCBs: 2006 to 2009 YTD -Total Amount Raised No. of FCCB Issues : 3 Average FCCB Issue : $24.5 Mn Notes: 2009 Year To Date (YTD) PE: 2006 to 1H 2009 -Total Amount Raised Amount Invested (US$ Bn) No. of Deals 1H 2009 has witnessed PE investments to the tune of US$ 1.92 Bn from 96 deals. Notes: 1. PE investments include all the Private Equity, Venture Capital, PIPEs across the sectors in India * Annualized figures for the year 2009 Amount Invested No. of deals 7.9 19.5 10.6 3.8 302 405 312 192 050 100 150 200 250 300 350 400 450 0.00 5.00 10.00 15.00 20.00 2006 2007 2008 2009*64 36 82 48 20 15 9 0 15 30 45 60 75 90 0-5 5-10 10-25 25-50 50-100 100-200 200+ No of Deals Deal Distribution : Amount Invested by PE in CY’08 Deal Size (US$ Mn.) $640 Mn $395 Mn $450 Mn LNM India Venture Sophia Power Company Ltd 20.51% 18.27% 26.28% 16.67% 10.58% 4.81% 2.88% During 2008, about 61% of the deals happened in the range of US$ 5-50 Mn. About 9 transactions during the period are over and above US$ 200 Mn. Real Estate and IT & ITeS sectors have seen about 32% of the PE investments (on volume basis) during the period. 61.22%23 21 24 17 8 3 0369 12 15 18 21 24 0-5 5-10 10-25 25-50 50-100 100-200 No of Deals Deal Distribution : Amount Invested by PE in 1H’09 Deal Size (US$ Mn.) $108 Mn $67 Mn $161 Mn 23.96% 3.13% During 1H 2009, about 25% deals happened in the range of US$ 10-25 Mn followed by 24% of the deals happening in the range of US$ 0-5 Mn 21.88% 25.01% 17.71% 8.33% HBS Realtors 60.90%17 New Variants Blank check deals Private Treaty Statutory/Sovereign Wealth Funds Buyout Funds Phoenix India Acquisition Corp. Millennium India Acquisition Co. Inc New Variants New Variants of Private EquityQIPs : 2006 to 2009 YTD -Total issue size Amount Invested (US$ Mn) 1051 5005 529 4325 0 1000 2000 3000 4000 5000 6000 2006 2007 2008 2009* Notes: Total QIP size includes aggregate volume of QIPs of 2006 -2008 and 2009 Year To Date (YTD) No. of QIPs -16 No. of QIPs -29 No. of QIPs -4 No. of QIPs -21 $900 Mn $877 Mn HDFC Unitech $563 Mn Indiabulls Real estateFund raised through ADRs and GDRs Notes: 2009 Year To Date (YTD) Amount Raised (US$ Billion) ADRs and GDRs: 2006 to 2009 YTD -Total issue size 1.66 2.64 0.10 1.88 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2006 2007 2008 2009* No. of ADRs & GDRs: 15 Average DR Size: $175.79 Mn No. of ADRs & GDRs: 4 Average DR Size: $26.12 Mn No. of ADRs & GDRs: 33 Average DR Size: $50.39 Mn No. of ADRs & GDRs: 4 Average DR Size: $46.88 MnSl. No. Issuer company Status Issue Size (Rs. Cr.) 1 Done 2656.50 2 Done 4410.43 3 Done 4300.00 4 Done 1688.40 5 Done 480.11 6 Done 499.99 7 Proposed 2500.00 8 Proposed 750.00 9 Proposed 500.00 10 Proposed 1800.00 11 Proposed 2383.50 12 Proposed 2000.00 13 Proposed 500.00 14 Proposed 4767.00 29,235.93 Some of the QIPs – Done & Proposed PTC India Orbit Corp Ackruti City Anantraj IndustriesSl. No. Issuer company Approximate Size of IPO (Rs. Crs) SEBI Clearance issued on SEBI Clearance valid till 1 67.46 20-Mar-09 19-Mar-10 2 110.00 15-Jan-09 14-Jan-10 3 1400.00 11-Sep-08 10-Sep-09 4 244.04 5-Nov-08 4-Nov-09 5 2000.00 4-Sep-08 3-Sep-09 6 700.00 18-Sep-08 17-Sep-09 7 49.22 4-Nov-08 3-Nov-09 8 77.00 11-Feb-09 10-Feb-10 Expected IPOs Future VenturesSl. No. Issuer company Approximate Size of IPO (Rs. Crs) SEBI Clearance issued on SEBI Clearance valid till 9 46.02 23-Sep-08 22-Sep-09 10 43.00 5-May-09 4-May-10 11 36.00 24-Apr-09 23-Apr-10 12 120.00 2-Jan-09 1-Jan-10 13 53.00 25-Feb-09 24-Feb-10 14 604.18 2-Jun-09 1-Jun-10 15 105.79 19-Jun-09 18-Jun-10 16 93.93 11-Jun-09 10-Jun-10 5749.64 Expected IPOs Mid Valley Entertainment ARSS InfrastructureThank You SMC Capitals : Thanks You! Services: IPOs, FPOs, Rights Issues, Buy Backs, Delisting, Open Offers, Private Equity, QIPs, FCCBs Debt Syndication, ESOP FBT Valuation /Implementation, M&A and Other advisory services For Merchant Banking Queries, Contact: Jagannadham Thunuguntla, Equity Head Mobile: 9312788860, 9312063677, Tel: +91 11 25826706, E-mail: jt@smccapitals.com Mumbai: +91-22-66651450-55, Chennai: +91-44-42088256 Disclaimer : This report is for information purposes only. Due care has been taken in compilation of the report to ensure that the information is accurate to the best of our knowledge and belief. 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