Dipping rupee hits PE funds biz exit plans

 It is not just the importers who are feeling the pinch of the depreciating rupee. Private equity funds, who invest in businesses, are finding it extremely difficult to exit businesses, due to which, they are looking at an exit route via initial public offerings (IPOs), rather than strategic sales, according to experts.

“There is some stress for private equity in generating returns, due to a rapidly depreciating rupee along with the competition leading to higher valuations,” Bijou Kurien, Member, Strategic Advisory Board and Mentor, L Capital Asia (LVMH Group), said on the second day of the India Retail Forum 2015.

Returns for private equity have dropped from 40-50 per cent in 2005-08, to 10 per cent in the last two years, and the holding period has risen to six years from three years earlier, Kurien added.

Between 2000-14, India has attracted private equity investments to the tune of $103 billion of which 50 per cent was pumped into corporates with an annual turnover in the excess of $125 million.

Experts also pointed out that digitisation of the retail business has helped in bringing the price sensitive middle-class Indians closer to consumption and in turn aided the entrepreneur scale up his business much faster than the brick and mortar economy that has helped valuations soar.

“Without compromising on quality, the eCommerce evolution has helped in sustaining a scaleable business not necessarily on financial matrix of being profitable, but in terms of creating value,” Bharat Banka, Founder and Ex-CEO, Aditya Birla Private Equity said.