Private equity funds may be finding exits challenging for the past year or so but IDFC Alternatives, the alternate asset management arm of IDFC, has bucked this trend. Of the around `4,000 crore of exits that the fund planned since mid-2016 across all the asset classes — infrastructure, private equity and real estate—, it has exited 65% of it resulting in exits worth `2,600 crore. In fact, more exits worth `2,700 crore are lined up from the infrastructure and private equity space, which will take the exits to more than what the fund envisaged.
MK Sinha, managing partner and chief executive officer, IDFC Alternatives, told FE that the reason why the fund has been able to manage an exit track record is because multiple exit options were conceptualised at the time of investing itself. “We maintain discipline and focus on exit timings when the assets mature and optimal value has been reached,” Sinha said.
In terms of returns also, the fund has been able to give returns in the range of 1.7X-2.3X from infrastructure investments. In private equity it has been between 2.2X and 2.7X, while for real estate the fund realised an internal rate of return of 22%. The exits from infrastructure have taken place through sale back to the companies and other PE players. In PE, its been a mix of strategic exits and public IPOs. In real estate, exits have been through project cash flows or secondary exits.
Indeed, the level of these exits assume significance as the overall traction for PE exits in India has remained tepid in 2016. As Prashant Mehra, partner, Grant Thornton India, puts it, the lack of exit options was the primary reason for lacklustre exits. According to data sourced from NewsCorp VCCedge, there has been a decline of 5.6% in the total deal value of exits to $6289.86 million in the financial year ended March 31, 2017 . The number of deals were also less at 229 against 260 in the financial year ended March 31, 2016.
Most of the investments made by IDFC were between 2009 and 2012 for infrastructure and private equity, while for real estate it was between 2014 and 2015. Sinha said that issues around land acquisitions, delayed approvals and coal block cancellations were challenges faced by IDFC’s first Infrastructure Fund (IIF1), raised in 2009. However, total distribution so far from IIF1 has been to the extent of Rs 1,600 crore and another Rs 1,200 crore of exits are lined up in the next three months. “This would result in almost 80% of the capital getting returned to the fund investors,” he said. The fund proposes to exit the fund completely over the next 2-3 years, based on the residual assets in the portfolio maturing and stabilising, he added.
So far, the value of exits made under infrastructure are to the tune of Rs 1,200 crore bulk of which has come through exit from Essar Power and ATC Telecom (erstwhile Viom Networks) in the last quarter. Exits of Rs 1,170 crore have come from assets like Parag Milk Foods, Manipal Integrated, Darcl Logistics Limited, while real estate exits are at Rs 230 crore via Vascon Engineers in Pune and Cybercity in Hyderabad.
IDFC Alternatives, which invests via three asset classes – private equity, infrastructure and real estate, boasts $3.6 billion worth of assets under management; it now runs four private equity funds, two infrastructure equity funds and three real estate funds.