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Private equities rush for the exit in $4.7-bn push

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New Delhi | Updated: July 3, 2015 1:32:50 AM

Private equity (PE) exits in the first half of 2015 at $4.7 billion have outpaced total exits in 2014 worth $3.7 billion, according to Venture Intelligence data.

sensex and niftyWith the stock markets remaining resilient, IPOs have been a good exit option for PEs and they have sold stock worth .4 billion across 56 deals in the six months to June compared with .7 billion across 109 deals in 2014. (Reuters)

Private equity (PE) exits in the first half of 2015 at $4.7 billion have outpaced total exits in 2014 worth $3.7 billion, according to Venture Intelligence data. The value of strategic stake sales, at close to $2 billion, has jumped fourfold.

PE firms have also opted for exits via secondary stake sales and this value is close to $1 billion. 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. PE exits via the buyback route too have been popular — at $345 million, the value of such transactions was more than double the value in 2014 (see table 1). Baring Asia, for instance, sold its stake in Lafarge India via the buyback route in a deal valued at around $300 million.

With the stock markets remaining resilient, IPOs have been a good exit option for PEs and they have sold stock worth $1.4 billion across 56 deals in the six months to June compared with $2.7 billion across 109 deals in 2014.

“Promoter buyback and secondary sales will be the preferred options for most PE players, since there is some inertia in the IPO market,” said Harish HV, partner at Grant Thornton India.

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Arvind Mathur, president of Indian Private Equity and Venture Capital Association (IVCA), believes exits via mergers and acquisitions (M&A) are more common currently. “We will see more exits via M&A now since IPOs are a function of sentiment. Once the sentiment improves, there could be more IPO exits, ” Mathur said.

PEs typically stay invested in companies for five to eight years, hoping to exit at a premium. In 2007, they invested around $19 billion in India, the highest ever in a single year. This was followed by investments of around $10 billion in 2008. Given that in 2015 most investments would be seven to eight years old, investors would be looking for exits.

Many PE-backed companies have filed preliminary papers with the Securities and Exchange Board of India for proposed IPOs. While PineBridge is likely to offload shares via the listing of Uniparts, Motilal Oswal Private Equity may exit its holding in Power Mech Projects. Between January and June in the current year, over 30 PE-backed companies have filed draft red herring prospectuses.

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