The current calendar year has seen private equity investments to the tune of $11.8 billion, which is higher that $11.1 billion for the whole of calendar 2014. As per data sourced from Venture Intelligence, PE exits during the current calendar have also touched a record high at $6.8 billion, which is nearly double of $3.9 billion recorded in 2014, and, in fact, the best so far for PE exits.
Data analysis indicates a five-fold jump in exits via strategic sales, which stood at $483.49 million in 2014 versus $2.5 billion in CY2015 (year-to-date), while exits via the secondary route climbed to $1.6 billion in CY2015 YTD from $349.12 million in CY2014. PE exits via the buyback option gained momentum and stood at $434.49 million in CY2015 YTD versus $137.95 million in CY2014. Exits via IPO totalled $2.2 billion in comparison to $2.8 billion in CY 2014.
While the record exits can be explained by the investment cycle — with the end of five-seven years, PE firms make an exit — higher investment is attributed to better investor confidence. “This year may be the best ever. I think I can close north of $15 billion. The good part is the PE exit-to-entry ratio of 35 to 40, which is a fairly good ratio at this point of time,” noted Akhil Awasthi, managing partner, Tata Capital Growth Fund.
Among the top five PE exits, iGate’s strategic stake sale to Capgemini, pegged at over $1 billion, allowed Apax Partners to exit its holding in the company. Likewise, Baring Asia exited its investment in Lafarge India via the buyback route in a deal valued at around $300 million.
PE exits in CY 2015 also include stake sale via open market transactions by investment firms including Chrys Capital, KKR, Tiger Global, Apollo Management and GIC that had invested in sectors like banking, telecom, IT, media and FMCG.
For example, Chrys Capital offloaded its stake in ING Vysya Bank for $137 million, returning 3.6 times to investors. PE giant Tiger Global had partly exited Just Dial by selling 3.41% stake in it for $50 million, giving a return of 14 times to investors. Singapore’s sovereign wealth fund GIC exited investment in FMCG company Marico, with a return multiple of 1.95 times, at $34 million.
Similarly, KKR marked its first exit in the country by selling its entire holding of 2.5% in telecom tower company Bharti Infratel for $136 million. KKR had invested in Bharti Infratel in 2008 and this was its second investment in India. Apollo Global Management partly exited its investment in media and entertainment company Dish TV by selling 3% stake for $41 million, securing a return multiple of 2.06 times.
American PE firms KKR and Apollo Global Management, counted amongst the largest PE firms in the world, made their maiden investments in the country during 2006 and 2009, respectively.
A lot of PE firms tend to remain invested in portfolio companies for a period of five to eight years and exit these investments at a premium at the end of this tenure. PE funds invested around $19 billion in India in 2007, the highest quantum of PE investment made into the country in a single year ever. This was followed by investments of around $10 billion in 2008.
“Promoter buyback and secondary sales will be the preferred options for most PE players, since there is a bit of inertia in the IPO market with the experience of investors not being very positive,” said Harish HV, partner at Grant Thornton India, adding, “However, a few good IPOs can revive investor appetite.”