Exits by PE funds rise 30 pc

Increase in stock indices has given the opportunity to book profits

Till July this year, India Inc saw as many as 31 deals where the PE firms sold their stakes in domestic companies — an increase of 29 per cent over the corresponding period a year ago. In the comparable period there were 24 such deals, according to data compiled by the deal-tracking firm Venture Intelligence.

“PE firms which are currently exiting, invested in Indian companies way back in 2004-05. With the recovery in the stock market, they are now finding valuations attractive and are selling stake,” Venture Intelligence CEO Arun Natarajan said.

Market opinion
Marketmen said there were apprehensions that PE players might find it difficult to offload their holdings in companies due to high volatility in the stock market.

But with the equity market surging 62.43 per cent till July this year, an increasing number of PE firms were preferring public market sales route to cash in on their holdings, they said.

PE investments in 2004-2005 — including Warburg Pincus (Max India), Citi (Lupin Labs, HT Media) ChrysCapital (Shriram Transport), StanChart PE (Aurobindo Pharma) - have been exiting their stakes via the public markets at significant multiples of the investment.

“The firms which invested 4-5 years back were waiting on the sidelines for right valuations. As the stock market recovered substantially, they feel the worst is behind us and are exiting their positions,” Natarajan said.

Till July, public market sales by PE firms shot up 79 per cent in value terms, while in volume terms it soared nearly seven-fold. There were as many as 20 public market sales by PE firms valued $283 million till July, against three such deals worth $158 million in the corresponding period a year ago.

Besides public market sales, PEs preferred strategic sale and buyback as the preferred exit option. Till July, there were as many as eight strategic sales worth $287 million, followed by buybacks wherein PEs exited two companies with a deal value of $40 million.

However, lesser number of PE firms are ready to tap the primary market route as of now as they are still sceptical on the valuation front. So far this year there has been only one IPO exit worth $58 million. In the comparable period there were as many as 6 such deals worth $477 million.

“While the IPO exits are yet to gain footage this year, with the changing primary market scenario of the country it seems PE firms would line up for such exits next year as sentiment improves,” Natarajan said.

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