Private equity (PE) exits via the secondary market have gathered steam, with calendar year 2015 recording 42 exits worth $778 million so far versus 36 exits, amounting to $561 million, during the same period last year, say Venture Intelligence data reviewed by FE.
The top five PE exits include stake sale via open market transactions by Chrys Capital, KKR, Tiger Global, Apollo Management and GIC, which had invested in sectors like banking, telecom, IT, media and FMCG, respectively.
Chrys Capital offloaded its stake in ING Vysya Bank for $137 million, giving its investors 3.6 times return. Tiger Global partly exited JustDial by selling 3.41% stake in the company for $50 million, giving 14-times return to its investors. Singapore’s sovereign wealth fund GIC exited its investment in FMCG compay Marico, with a return multiple of 1.95 times, at $34 million.
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 among the largest PE firms in the world, made their maiden investments in the country in 2006 and 2009, resepctively.
A lot of PE firms tend to remain invested in portfolio companies for 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 in the country in a single year ever. This was followed by investments of around $10 billion in 2008.
The year 2015 may prove to be a crucial one for PE funds on two counts. One, it marks the end of the eight-year period since 2007, plus the strong anticipation of a recovery in the domestic economy under a new pro-reforms government is expected to improve market conditions, helping PE firms exit investments profitably.
“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 HV, partner at Grant Thornton India, said. “However, a few good IPOs can revive investor appetite.”
Mukul Singhal, principal at SAIF Partners, a PE firm, says that although many PE firms seek to exit investments, the industry may need to wait another12-24 months for an improvement in primary markets.
“People are hopeful, but we still need to wait and watch. My sense is that we could see exits gaining momentum in 2016 or 2017,” Singhal said.
Arvind Mathur, president of Indian Private Equity and Venture Capital Association (IVCA), said the current focus is more on exits via the mergers and acquisitions (M&A) route and not through IPOs.
“We will see more exits via M&A now. IPO is a function of sentiment. We hope IPOs will also be a viable exit option over the next couple of years. We expect the government to come up with more reforms next year which will help to further improve investor sentiment,” Mathur said.
In calendar year 2014, there were 107 PE exits worth over $2.7 billion.