PE exits via public market sales at multi-quarter highs

Jun 29 2014, 02:01 IST
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The current quarter (Q2CY14) has seen the highest number of exits in at least 10 quarters. The current quarter (Q2CY14) has seen the highest number of exits in at least 10 quarters.
SummaryThere have been at least 16 PE exits through public market sales aggregating $489 million.

Repco Home Finance partial exit and Great Pacific Capital fully exited Edelweiss with over 2x returns. However, some exits were made with huge haircuts, including Blackstone which sold a part stake in its seven-year-old holding in Gokaldas Exports with negative 69.5% returns.

Varun Didwania, vice-president with Helix Investments Advisors, believes that the decision to exit the loss-making investments depends on individual fund strategy with some of them having the capability to wait while some may just take a hit. "There are investments of the 2007-08 vintage where the entry valuations were disproportionately high and those deals might still struggle to recover capital," said Singhal.

Lahiri believes that for infrastructure-related companies, the sector-specific challenges remain in place and it may take a while for them to revive growth. “In case of such investments, PE investors have no option but to wait for turnaround in a company's performance to exit otherwise they will have to take a haircut,” added Lahiri.

Looking ahead, experts believe that though the exit environment is likely to get better, the exit route through public market sales would remain restricted to better-performing companies. "Exits still remain a challenge for most of the investments made since 2008. For exits to happen in a sustainble manner and regularly, companies have to do well fundamentally,” said Lahiri.

Didwania believes the exit route through public market sale is available to only a certain kind of company with certain size and that for many of the smaller and mediumfirms, the strategic or secondary sale still remains a viable option.

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