PE exits taper off in Q3CY15

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Mumbai | Updated: October 19, 2015 9:34:51 AM

Private equity (PE) exits have seen a slight slowdown in Q3CY15 but should gain momentum in Q4CY15, reports Neha Bothra in Mumbai.

Private equity (PE) exits have seen a slight slowdown in Q3CY15 but should gain momentum in Q4CY15, reports Neha Bothra in Mumbai. One reason for this is that a host of firms is likely to list on the on the bourses providing PE firms an exit route. Total PE exits slowed from $3.9 billion in Q2CY15 to $1.6 billion in Q3CY15. But that doesn’t mean funds aren’t able to cash out — exits have totalled $6.8 billion so far in 2015, nearly twice the $3.9 billion seen in 2014, according to Venture Intelligence data. And that’s a bumper harvest after the long drought between 2000 and 2013 when investments were a whopping $94 billion but exits just $18.3 billion, according to Mckinsey data.

Nevertheless, Akhil Awasthi, managing partner, Tata Capital Growth Fund, believes the year could close with investments north of $15 billion and may be the best year ever. “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”, Awasthi notes.

Mukul Singhal, principal at SAIF Partners, however, feels investors might need to wait a while for the primary market to pick up. “My sense is that we could see exits gaining momentum in 2016 or 2017,” Singhal says.


Even as Cafe Coffee Day (CCD) is looking to raise Rs 1,150 crore via IPO, none of the key PE investors — comprising New Silk Route, KKR and Standard Chartered PE — is looking to cash out now. However, around 20 companies have Sebi’s approval to tap the primary market later in the year and it’s possible there may be some sellouts then.

Harish HV, partner at Grant Thornton India, points out that a few good IPOs can revive investor appetite.”Promoter buyback and secondary sales will be the preferred options for most PE players, since there is a bit of an inertia in the IPO market with the experience of investors not being very positive in India,”  Harish observes.

Arvind Mathur, president of Indian Private Equity and Venture Capital Association (IVCA), says exits via the mergers and acquisitions (M&A) route is now more popular than via IPOs. “We hope IPOs will also be a viable exit option over the next couple of years following more reforms and improved investor sentiment,” Mathur says.

After increasing from $575.38 million in Q1 to $1.4 billion in Q2, PE exits via the stock market decreased to $374.21 million in Q3CY15. While Chrys Capital sold its stake in ING Vysya Bank for $137.4 million in January, the third quarter saw Temasek offload its equity holding in Bharti Infratel for $100 million. The second quarter witnessed the biggest PE exit deal via the stock market, with Apax Partners buying TPG Capital’s stake in Shriram Union Finance for $383 million.

The same trend is evident in PE exits via the secondary route that registered an increase in PE exits from $410 million in Q1 to $558.19 million in Q2 before declining to $539.77 million in Q3. In February, Carlyle acquired New Silk Route’s stake in Destimoney for $200 million, while Blackstone sold its shares in CMS Info Systems to Baring Asia in May for $250 million. These deals were overshadowed by India Value Fund Advisors stake sale to TA Associates in ACT Broadband for $400 million in July.

PE exits via the buyback route remained lukewarm in Q3, with PE exits decreasing from $416.52 million in Q2 to $106 million in Q3. The biggest PE exit via the buyback option was recorded in June with Lafarge India buying back its equity stake from Baring Asia for $305.52 million. In July, Gateway Rail Freight acquired its shares from Blackstone for $90 million.

These companies include SSIPL Retail that will give an exit window to Tano India, SH Kelkar that counts Blackstone as an investor that is likley to off load its shares to the public. Also, there are 18 companies waiting for Sebi’s nod to collectively raise over Rs 11,000 crore, according to PRIME Database.

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