Most deals through secondary sale to strategic investors
Private equity exits seem to be gathering steam with $8.3 billion (Rs 55,600 crore) worth of stake sales recorded in the current financial year, making it the highest ever in terms of exit deals by PE investors.
The funds have managed to monetise their investments largely through secondary sale to other private equity funds or strategic investors and public market sales. Secondary market sales dominated the exits with $5.71 billion monitised through this route, while 110 deals amounting to $2.59 billion were encashed through public markets, including initial public offerings.
It is estimated that $500 million were mobilised by private equity investors through sale of shares in the investee companies in the IPO market during this year.
In value terms, this year’s exits where the highest since 2011 when PEs managed to monetise $6 billion. There were quite a few strategic sales during this year, including Capgemini’s $1.12 billon acquisition of Apax Partner’s stake in IT firm iGate and buyout of TRG Global’s stake in Mumbai-based brokerage firm Sharekhan by the French financial major BNP Paribas.
Other major deals include Snapdeal’s acquisition of stake in Freecharge.in from Sequoia Capital for $400 million and TA Associate picking up stake in ACT Broadband for $400 million.
“Private equity funds are taking advantage of the bullishness in the market to exit from the investment either through secondary sale or through public market. Even the strong IPO market is helping private players to cash in on their investments,” says Raja Lahiri, partner, Grant Thornton India.
Most of these exits are from companies that are doing well, especially in sectors like consumer, IT and financial services. However, there are challenges in sectors like real estate, power, infrastructure and steel for PEs to get exit at good valuations, Lahiri said.
Bullishness in the market also helped the players. There were several large exits through block deals in public market.
The Singapore government’s investment firm Temasek and the US private equity major KKR offloaded $445 million worth shares in Bharti Infratel, while Bain Capital sold $116 million worth shares in Hero Motocorp.
“There is rise in investments as well as exits by PE investors this year. If the market were going to be good, investors would like to take some chips off the tab. There will be good amount of activity in private equity space going forward,” says V Jayasankar is senior executive director and head of equity capital market at Kotak Investment Banking.
Private equity firms were finding it harder to exit businesses over the past few years as the initial public offerings market has ground to a halt and strategic buyers became more cautious about buying businesses because of volatility in the public markets.
According to Jayasnkar, most private equity funds are making reasonable returns on their investment, especially those made during post 2009, when valuations became quite attractive compared with the pre-financial crisis period.
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