Private equity exits through IPOs decline 70 per cent in 2018

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Published: January 22, 2019 12:22:27 AM

In the last few years, initial public offerings (IPOs) have been a favoured route for PE/VC investors to exit. However, as IPOs took a hit in 2018, attraction of public issues as an an exit route has significantly reduced.

Private equity exits through IPOs decline 70% in 2018

In the last few years, initial public offerings (IPOs) have been a favoured route for PE/VC investors to exit. However, as IPOs took a hit in 2018, attraction of public issues as an an exit route has significantly reduced.

In 2018, through the offer for sale (OFS) route, PE VC exits were the lowest in three years. PE exits reduced by 70.76 %, from `10,218 crore in 2017 to `2,987 crore in 2018, showed Prime Database data. In 2016, PE investors had pulled out `4,252 crore through IPOs.

Omega HC Holdings pulled out `1,635.66 crore through IPO of Varroc Engineering, which was the highest exit in 2018 through an IPO. The share sale of Bandhan Bank saw PE investors sell shares worth almost `810.61 crore, while those of Newgen Software Technologies and Sandhar Technologies saw PE investors selling shares worth `308.98 crore and `212.48 crore.

Several PE/VC investors such International Finance Corporation, GTI Capital Beta, Kedaara Capital, IDG Ventures India, SAP V (Mauritius) and Unit Trust of India Alternative Investment Advisory Services reaped benefits through IPOs.

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Additionally, of the `30,959 crore raised in 2018, 75% of the funds has gone to PE VC, promoters and other shareholders. This is however 7% less than previous year, which was at 82%. In 2016, PE VC, promoters and other shareholders pulled out 65% of the total funds raised via equity markets. Through 24 issues in 2018, Indian capital markets garnered `30,959 crore against `67,147.4 crore in 2017. FE had earlier reported that fund-raising via equity market routes had plunged 60% in 2018.

After the Americas region, Europe, Middle East, India and Africa (EMEIA) area exchanges remained strong as the world’s second-largest IPO market. EMEIA accounted for 32% of the global volume and 23% by proceeds in 2018.

“Looking ahead to 2019, we expect a cautious start globally, followed by rays of hope that should brighten IPO activity in the second half of the year. In the meantime, it is more important than ever for IPO candidates to remain flexible and be well-prepared to move when the fog begins to lift,” said Martin Steinbach, EY Global and EY EMEIA IPO Leader, in a report.

With regard to Asia Pacific IPO markets, Ringo Choi, EY Asia-Pacific IPO Leader, said: “If fundamental factors improve, such as greater geopolitical certainty, better trade relations or an increase in liquidity, we may see improvements in IPO activity as early as Q1 2019. However, if fundamentals remain as they are, we may see a short burst of activity in the first half of 2019, but sustained improvement in IPO activity may not be realised until the second half of the year.”

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