The exits made by major private equity (PE) players such as ChrysCapital and IL&FS Investment Managers Ltd (IIML) from their investments in companies this week, is an indication that such investments are becoming solvent again. The PE industry in India had been in a standstill for the last six months as the downturn in markets forced companies to postpone their initial public offering (IPO) plans indefinitely, which made the exits tough for investors.
On Tuesday, ChrysCapital sold nearly 5% stake in Shriram Transport Finance Company (STFC), for Rs 300 crore on the National Stock Exchange, gaining more than 8 times return on investment in STFC. On the same day, IL&FS Investment Managers Ltd, the PE arm of IL&FS, sold about four million shares or more than 2% of IBN18, a Network18 Group company, for Rs 41 crore. It had offloaded the stake at Rs 100.25 per share. Shares of IBN18 reached a 52-week high of Rs 137.5 on the BSE on Thursday.
Bhavesh A Shah, executive director-investment banking, JM Financial said, ?The recent exits send a strong signal to investors across the globe that the Indian PE investments have provided spectacular returns even in the current global scenario. This would give a boost to the confidence of the global investors towards India and enable PE funds to raise more investible resources for India in the coming future. The post-election scenario has helped improve the overall investor sentiments and is likely to result in more PE deals in the near future.? Officials from ChrysCapital and IL&FS could not be reached for comments.
Apart from the deals of ChrysCapital and IL&FS, another major player, Standard Chartered PE, has also made an exit from Karur Vysya Bank recently, making $6.68 million, while Russell AIF Capital had sold about 2.2 million shares of Yes Bank early this month at a price of Rs 83.45 on the NSE, according to a data compiled by SMC Capital. On Thursday, shares of Yes Bank closed at Rs 124.35 on the NSE.
Jagannadham Thunuguntla, director (merchant banking), SMC Global Securities Limited, said, ?This transaction shows that if PE funds invest in healthy companies in good industries backed by honest management, they can make excellent returns even in recessionary conditions. Further, this transaction also signifies that PE funds have to be extremely selective about their investments to make healthy returns. These deal can bring back some of the lost momentum into the PE industry.?
In 2008, there were about 6 PE-backed IPOs floated for companies such as GSS America (IL&FS), Titagarh Wagons Ltd (ChrysCapital, Blackstone, JP Morgan), Shriram epc (UTI Ventures, Galleon), On Mobile (Goldman Sachs), KSK Energy and Gokul Refoils (Granite Hill), according SMC Capital data. In 2007, about 32 exits were made by PE investors with 6 PE-backed IPOs.