IIFL SPECIAL OPPORTUNITIES FUND – SERIES 2 Pre-IPO and IPO focused Cat II AIF
FUND OBJECTIVE & STRATEGY IIFL Special Opportunities Fund – Series 2
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FUND OBJECTIVE & STRATEGY One of a kind Fund offering in the market giving access to Pre-IPO/IPO Opportunities OBJECTIVE: The fund would be a unique offering in the market wherein it would be providing individual investors the opportunity to participate primarily in IPO and Pre-IPO events as institutional investors. The fund would be seeking to generate Long Term Capital appreciation through investment in Equity and Equity related instruments of to be listed companies. STRATEGY : The fund would be achieving its objective by investing in the following opportunities: •
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Pre-IPO – The fund would be investing into unlisted companies in the Pre-IPO stage. These would be those companies which are in the pipeline for IPO and would be listing in the coming months. IPO through Anchor or QIB route – The fund due to its nature would be able to invest in IPOs as an Anchor investor or through the QIB route thereby increasing the yield on the capital during times of over-subscription. IPOs post listing – The Fund shall invest in IPO shares with in one month from the date of listing. Further, the Fund may also invest in such IPO shares if they are below issue price for a period of 1 year from the date of listing Post listing, the holding period of the company could vary depending on the view on the stock from the listing price and future earnings visibility. The fund would not be investing in IPOs only for listing gains. Special Corporate Events – The fund has the option of investing into companies which are in the process of some special corporate events like QIP, Preferential allotment, FPO, Open Offer, Buy Back and Mergers & Acquisitions and where the value looks attractive for making additional alpha in the portfolio. (maximum 20% shall be allocated to such investments ).
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IPOS RECOMMENDED IN LAST 1 YEAR Selection of IPOs is the Key to outperformance
S.No.Company Name
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Issue Price (INR)
Listed On
Returns as on Closing Price Listing Nifty CNX500 CMP th 30 April’ 17 Returns as Returns as on Listing day Day (INR Rs) returns (30th April 2017) from Issue price on April 30 on April 30
1
Shankara Building Products
460
05-Apr-17
633
37.61%
703.5
52.93%
0.42%
1.47%
2
BSE Lim ite d
806
03-Feb-17
1069
32.63%
1004.45
24.62%
6.44%
8.51%
3
PNB Housing Finance Ltd
775
07-Nov-16
891
14.92%
1386.2
78.86%
9.50%
12.05%
4
Endurance Technologies Ltd
472
19-Oct-16
648
37.22%
806.1
70.78%
7.45%
9.41%
5
ICICI Pru Life Insurance Co. Ltd
334
29-Sep-16
298
-10.88%
406
21.56%
8.30%
11.96%
6
S P Apparels Ltd
268
12-Aug-16
295
10.07%
417.45
55.76%
7.29%
11.80%
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Dilip BuildconLtd
219
11-Aug-16
252
15.05%
422.5
92.92%
8.29%
12.69%
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Advanced Enzyme Tech. Ltd
896
01-Aug-16
1,178
31.51%
2064.8
130.45%
7.73%
11.99%
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Quess Corp Ltd
317
12-Jul-16
503
58.68%
794.45
150.62%
9.19%
14.21%
10 Mahanagar Gas Limited
421
01-Jul-16
520
23.49%
1031.2
144.94%
11.72%
16.88%
11 Thyrocare Technologies Ltd
446 09-May-16
618
38.59%
717.05
60.77%
18.28%
24.40%
12 Equitas Holdings Limited
110
21-Apr-16
135
22.95%
166.15
51.05%
17.59%
23.82%
13 Healthcare Global Enterprises Ltd
218
30-Mar-16
171
-21.58%
264.35
21.26%
20.28%
27.62%
14 TeamLease Services Ltd
850
12-Feb-16
1,022
20.23%
1058.45
24.52%
33.28%
40.81%
Source: www.nseindia.com and www.bseindia.com
PAST PRE-IPO OPPORTUNITIES
RBL Bank 280 260 240 220 200 180 160 140 120 100 80 Aug/16
CNX500 RBL BANK: 161.8%
CNX 500: 10.3% NIFTY: 6.5% Oct/16
Dec/16
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RBL Bank : IPO issue price Rs 225
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Pre-IPO investment by IIFL Seed Fund at Rs 211
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IPO investment 1 week prior to the IPO issue opening
•
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NIFTY
Pre IPO investment assured us 100% allocation of desired amount
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Feb/17
Apr/17
Pre IPO price at a discount to IPO issue price QIB / HNI segment oversubscription during IPO: 85.7 / 197.3 times
Return on investment as on 28 th April 2017: 161%
PAST PRE-IPO OPPORTUNITIES UJJIVAN
NIFTY
CNX500
270 250 230
UJJIVAN: 81.7%
210 190 170 150
CNX 500: 24.4%
130 110 90 May/16
Jun/16
Jul/16
Aug/16
Sep/16
Oct/16
Nov/16
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Ujjivan : IPO issue price Rs 210
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Pre-IPO investment by IIFL Seed Fund at Rs 205
•
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IPO investment 2 months prior to th e IPO issue opening
•
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NIFTY: 18.3%
Pre IPO investment assured us 100% allocation of desired amount
•
Dec/16
Jan/17
Feb/17
Mar/17
Apr/17
Pre IPO price at a discount to IPO issue price QIB / HNI segment oversubscription during IPO: 34.3 / 134.9 times
Return on investment as on 28th April 2017: 81%
PAST IPO SUBSCRIPTION FIGURES Applying through Anchor and QIB segment clearly has the edge In any IPO, larger allocation happens to Anchor and QIB segment. This helps in getting more yield on capital in the IPO. No of times Anchor Investor segment subscribed
No. Of times QIB segment subscribed
No. Of times NonInstitutional segment subscribed
% Reserved for Anchor Investor
% Reserved for QIB
% Reserved for NonInstitutional
PNB Housing Finance
1.0
38.6
80.3
29.1%
20.1%
15.1%
Endurance Technologies
1.0
53.0
127.3
30.0%
20.0%
15.0%
RBL Bank
1.0
85.7
197.3
29.9%
20.1%
15.0%
Ujjivan Financial Services
1.1
34.3
134.9
32.2%
19.5%
14.5%
Mahanagar Gas
1.0
76.3
186.5
29.8%
19.8%
14.9%
IPO Name
Performance of some Recent IPOs
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Issue price
Listing Price
% Gain on listing day
April’17
% Gains from IPO price as on 30th April’17
PNB Housing Finance
775
891
15.0%
1386.2
78.86%
Endurance Technologies
472
648
37.3%
806.1
70.78%
RBL Bank
225
299
32.9%
564.9
151.07%
Ujjivan Financial Services
210
232
10.5%
380.8
81.33%
Mahanagar Gas
421
520
23.5%
1031.2
144.94%
Source: www.nseindia.com and www.bseindia.com
Price as on 30
PRE-IPO INVESTMENT Entering companies before they hit the roads for IPO There are many companies which are in the IPO pipeline but their actual IPO subscription dates are still some months away. There comes various opportunities from existing investors of the company who would want to exit from the company before the IPO starts. •
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•
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Why would an existing investor Exit before IPO – Several times an existing investor of a company wishes to exit from the company before the IPO happens as he doesn’t want to remain locked-in for 1 years from the IPO date (as per SEBI norms) and wishes to part or full exit before listing. Why would a company do Pre-IPO allocation – Many a times companies do pre-ipo allotment to institutional investors in an effort to do price discovery and gauge market demand for their IPO issue What is in it for us – We as an investor would be able to get a reasonable discount to the IPO price by buying the shares from such an existing investor who wishes to exit. This discount is on account of us giving him liquidity before IPO but binds us for 1 year lock-in. Also when companies give Pre-IPO shares, it enables us to get assured allocation Benefits of Pre-IPO: If we are able to arrange Pre-IPO shares through the merchant bankers then it removes the uncertainty that is linked with the IPO allocation and also gives better yield on capital blocked.
IPO INVESTMENT – ANCHOR AND QIB SEGMENT Anchor and QIB category has edge over the non-institutional segment The fund would be applying in the IPO of various companies which are priced attractively and also have sound fundamentals supporting the valuations. The fund is eligible to apply in the IPO through the Anchor segment or the QIB category which gives it an edge over applying through the Non-Institutional category. Why QIB category is better than Non-Institutional category in IPO through the QIB category as follows: •
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•
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There are various benefits of applying
By applying through the QIB category, the fund has the option of becoming an Anchor Investor in the IPO and thereby guaranteeing the number of shares that would be allotted. However the same would be required to be held with a lock-in of 1 month. The QIB category has been historically much less subscribed as compared to the Non-Institutional category thereby improving the allocation that would happen in the IPO. The QIB category also has higher % allocation as compared to the Non-Institutional category
INVESTMENT POST IPO LISTING Entry into high quality companies at discount valuations ICICI Prulife Went Below Issue Price After Listing ICICI Prulife had a poor listing and many leveraged clients sold at distress post listing. It gave ample opportunity to long term investors to buy at discount to IPO price and make substantial returns.
PNB Housing Was At Attractive Valuation Post Listing PNB Housing gave ample opportunity to accumulate at Rs. 800 – 850 levels post listing. Issue price was Rs 775. It was attractive value at 800-850 levels and gave 63% return from there.
ICICI Pru
PNB Housing
430
1500
400
1400
370
1300
340 310 280 250
1200 1100 1000 900 800 700 Nov/16
*Returns as on 30th April 2017 Data Source: Bloomberg & IIFL Research
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Dec/16
Jan/17
Feb/17 Mar/17
Apr/17
SPECIAL CORPORATE EVENTS Market Neutral Strategy focused on Absolute Returns Kotak Bank - ING Vyasa Merger Arbitrage
Sun Pharma - Ranbaxy Merger Arbitrage
Kotak Mahindra Bank and ING Vysya got merged on 20-Nov- Sun and Ranbaxy got merged on 1-April-2014 in the ratio of 2014 in the ratio of 725:1000.From the date of 8:10.From the date of announcement till the consummation announcement till the consummation of merger the spread of merger the spread was between 12.9% to 2.2%. was between 7.6% to 1.26%.
8.00%
Entry
14.0%
Entry
7.00%
12.0%
6.00%
10.0%
5.00%
8.0%
4.00%
6.0%
3.00% 4.0%
2.00%
2.0%
1.00% 0.00%
Exit 4 1 / v o N / 7 2
4 1 / c e D / 7
4 1 / c e D / 7 1
4 1 / c e D / 7 2
5 1 / n a J / 6
5 1 / n a J / 6 1
Data Source: Bloomberg & IIFL Research
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Exit
0.0%
5 1 / n a J / 6 2
5 1 / b e F / 5
5 1 / b e F / 5 1
5 1 / b e F / 5 2
5 1 / r a M / 7
5 1 / r a M / 7 1
5 1 / r a M / 7 2
5 1 / r p A / 6
4 1 / r p A / 6 1
4 1 / y a M / 1 1
4 1 / n u J / 5 0
4 1 / n u J / 0 3
4 1 / l u J / 5 2
4 1 / g u A / 9 1
4 1 / p e S / 3 1
4 1 / t c O / 8 0
4 1 / v o N / 2 0
4 1 / v o N / 7 2
4 1 / c e D / 2 2
5 1 / n a J / 6 1
5 1 / b e F / 0 1
5 1 / r a M / 7 0
5 1 / r p A / 1 0
PROPOSED IPO PIPELINE After raising over INR 17,500 cr in 2016, IPO pipeline for 2017-18 looks promising Company Name HUDCO GTPL Hathway Limited National Stock Exchange of India Limited
10,000 3,000 NA
PSP Projects Limited
3,000
Central Depository Services (India) Limited
5,000
Reliance Infrastructure InvIT Fund
30,000
India Grid Trust
26,500
Genesis Colors Limited Continental Warehousing Corporation (Nhava Seva) Limited
6,500 10,000
Prataap Snacks Limited
5,500
G. R. Infraprojects Limited
4,000
Security and Intelligence Services (India) Limited Aster DM Healthcare Hinduja Leyland Finance Limited Seaways Shipping and Logistics Limited
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Issue Size (Rs. Mn)
NA 16,000 5,000 800
Nihilent Technologies Limited
3,500
KPR Agrochem Limited
1,800
New Delhi Centre for Sight Limited
1,150
GVR Infra Projects Limited
4,000
VLCC Health Care Limited
5,000
Matrimony.com Limited
5,000
Paranjape Schemes (Construction) Limited
6,000
Note: Above list is tentative and not exhaustive
KEY TERMS IIFL Special Opportunities Fund – Series 2
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FUND STRUCTURE & KEY TERMS Fund Set Up & Regulatory Aspects
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PARTICULARS
DESCRIPTION
FUND NAME
IIFL Special Opportunities Fund-Series 2, a close ended scheme IIFL Private Equity Fund
CATEGORY OF FUND
Category II Alternative Investment Fund
TARGET SIZE
INR 1500 cr
SPONSOR COMMITMENT
2.5% or INR 5 cr whicheveris lower
TERM
Up to 42 months from final close; option to extend by 1 year subject to approval of two-thirds of the unit holders by value of their investment in the Alternative InvestmentFund
DRAWDOWN PERIOD
18 months from the initial closing date, with the discretion of the Investment Manager to extend the draw down period
UPFRONT DRAWDOWN
25%of the CommitmentAmount or such otheramount as may be decided by the Investment Manager
INVESTMENT MANAGER
IIFL Asset Management Limited
FUND MANAGER
Dr. Rahul Salvi
TYPE OF INVESTORS
Resident Indians including individuals, companies, trusts, or any other eligible resident Indian investor and Non Resident Investors (Foreign Investors, NRIs from NRE and NRO Account, FPIs or Foreign Investors under Schedule11 of FEMA, as permitted under RBIand SEBI regulationsfromtimeto time).
FUND STRUCTURE & KEY TERMS Fees & Expenses and Exit Loads
PARTICULARS
DESCRIPTION Share Class
Class A1
Class A2
INR 1 cr & multiple of Rs. 1 lakh thereafter
INR 5 cr & multiple of Rs. 1 lakh thereafter
INR 15 cr & multiple of Rs. 1 lakh thereafter
INR 20 cr & multiple of Rs. 1 lakh thereafter
Management Fee
Not to exceed 2.00% p.a. on daily Net assets
Not to exceed 1.75% p.a. on daily Net assets
Not to exceed 1.50% p.a. on daily Net assets
Not to exceed 1.00% p.a. on daily Net assets
Hurdle Rate #
Post tax post expenses 10% p.a. on CAGR basis
Post tax post expenses 10% p.a. on CAGR basis
Post tax 10% p.a. on CAGR basis
Post tax 10% p.a. on CAGR basis
Performance Fee
10% of returns over and above the Hurdle Rate without catch-up
10% of returns over and above the Hurdle Rate without catch-up
10% of returns over and above the Hurdle Rate without catch-up
10% of returns over and above the Hurdle Rate without catch-up
Administration Expenses
At actuals,not exceeding0.15% perannum on dailynet assets
Set-up Fee
Upto 2 % of a ggregate Capital Commitment Not Available 25-30% every 3-4 months (subjectto investment avenues availability with the FundManager)
# Taxation rate applicable to an individual shall be considered for calculating the hurdle rate
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Class A4
Minimum Commitment
Fixed Fee Terms
Redemption Frequency Drawdown Schedule
Class A3
FUND MANAGEMENT TEAM IIFL Special Opportunities Fund – Series 2
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INVESTMENT MANAGER- IIFL ASSET MANAGEMENT LIMITED
Experienced key personal managing around Rs 7000 crores in AIFs
In-house 4 member research team and also backed by strong IIFL Institutional research team which has over 25 analyst covering over 190 companies
Proven track record of investment philosophy. Investment focus on margin of safety and growth at reasonable price.
KEY PERSONS Prashasta Seth, CEO, IIFL Asset Management Company, has over 16 years of experience in the financial services industry. Prashasta has been in IIFL Wealth since inception and has been instrumental in setting up the equity desk at IIFL Wealth. He is currently the CEO -IIFL AMC and has been instrumental in launching and consistently generating outperformance in various equity funds. Prashasta is a MBA from IIM Ahmedabad and B Tech from IIT Kanpur. His previous assignment includes a stint in JP Morgan , London and heading Irevna (a Standard & Poor’s company)
Dr. Rahul Salvi, Fund Manager, IIFL Special Opportunities Fund, has over 6 years experience in the Financial services industry. He is an alumnus of JBIMS with specialization in finance and working with IIFL since 2011. Prior to that he has had a brief stint with BOB Capital markets in their investment banking division. He is currently tracking Pharma and Technology sector for IIFL AMC.
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KEY RISKS IIFL Special Opportunities Fund – Series 2
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KEY RISK FACTORS 1. GENERAL RISKS: Risk of Investing in equity markets: •
Delay in IPO of the proposed IPO of the company
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Price fluctuation on daily basis and volatility in the value of securities.
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Strategy risk (i.e. IPO pipeline drying up due to poor market conditions)
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Macro-economic risks other market factors affecting the equity markets.
•
Management Risk & Financial Risk of the companies invested in the IPO
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Liquidity risk: There may be investments in companies where market liquidity is thin. As a pre IPO investor, the fund may be subject to lock-in as per SEBI (ICDR) Regulations, which may have liquidity issues Regulatory risk: Investments may be restricted from investing in certain sectors or companies, or be subject to investment limits. Country risk: Investments are subject to the geographical, political, economic and social issues specific to India
2. ACTIVE RISKS Concentration Risk: •
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Concentrated Strategies are likely to witness significant volatility in returns
DISCLAIMER •
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The purpose of this document is to provide general information to prospective investors in a manner to assist them in making investment decision. It does not purport to contain all the information that the prospective investor may require. This document is made for informational purposes only and should not be regarded as an official opinion of any kind or a recommendation. It does not constitute an offer, solicitation or an invitation to the public in general to invest in the AIF. This document is intended for the use of prospective investors only to whom it is addressed and who is willing and eligible to invest in AIF. The information contained in this document is obtained from sources believed to be reliable. We do not represent that any information, including any third party information, is accurate or complete and it should not be relied upon without proper investigation on the part of the investor/s. This document is qualified in its entirety by the Information Memorandum/PPM and other related documents, copies of which will be provided to prospective investors. All investors must read the detailed Private Placement Memorandum (PPM) including the Risk Factors and consult their tax advisors, before making any investment decision/contribution to AIF. Capitalized terms used herein shall have the meaning assigned to such terms in the PPM and othe r documents. IIFL Wealth Management Limited (IIFLW) is Co-sponsor of the Scheme. IIFL Wealth Management Limited (IIFW) is holding company of Investment Manager/Trustee Company of the Scheme and Co-Sponsor to the Scheme which may receive distribution or any other fees in this connection. Further, IIFLW and its group, associate and subsidiary companies are engaged in providing various financial services and for the said services (including the service for acquiring and sourcing the units of the fund) may earn fees or remuneration in form of arranger fees, referral fees, advisory fees, management fees, trustee fees, Commission, brokerage, transaction charges, underwriting charges, issue management fees and other fees. Please note that the said presentation is only for understanding the proposed terms of the Scheme, to be launched in the month o f May’2017. The Private Placement Memorandum of the Scheme has been filed with SEBI on April 13, 2017 and shall be available for subscription only on or after May 15, 2017. Depending upon the comments/feedback from SEBI, if any, the content/information/proposed terms of offer, as detailed in the presentation, may change. The contributors should note that the Scheme is neither approved or recommended by SEBI nor does SEBI certify the accuracy or adequacy of the PPM of the Scheme.
THANK YOU. Contact us at Customer Service: (91-22) 39585669 / 5600
8th Floor, IIFL Centre, Kamala Mills Compound, Lower Parel, Mumbai 400 013
