Private equity investors struggle to find exit route

Private equity investors are finding it increasingly difficult to exit from listed firms amid sluggish stock market conditions, with only 54 exits worth $1.3 billion so far this year.

The PE exit deal value so far this year is around half of last year's figure. There were PE exits worth around $2.5 billion in the January to June period last year.

'Exits' for PE firms are the means by which a fund is able to generate returns and realise investments in a company by options like an initial public offering, a trade sale, selling to another private equity firm or a company buy-back.

"The sluggish markets have had negative impact on PE exits -- 2010 saw a record number of value of exits and 2011 to date has been slow, especially as regards the exits through capital market listings," Ernst & Young Private Equity Partner Mayank Rastogi said.

The sentiment is echoed by Avinash Gupta, Leader Financial Advisory, Deloitte in India, who said there were a lot of exits last year as the markets were good, but this is not the case this year, as markets are on a downslide.

On the back of rising inflation rates, corruption scandals and regulatory concerns, the benchmark sensitive index Sensex has declined by over 10% so far this year.

After a significant uptrend in PE exits in 2010, the momentum faded this year owing to sluggish and volatile conditions in the stock market, which to a large extent determine exit timings and valuations, as the principal mode of PE exits in India still remains the public market, experts said.

According to VCCEdge, the financial research platform of VCCircle, India has witnessed PE investments worth $5,227 million through 229 deals so far this year, while there were just 54 exits worth $1.3 billion.

Mergers and acquisitions have emerged as one of the most important form of exits so far this year, as four of the top five PE exits in 2011 are through the M&A route.

As per VCCEdge data, some major PE exits via M&A include Blackstone's $500 million exit from Intelenet, followed by General Atlantic's $254.18 million exit from Patni, Lightspeed Venture and Sequoia Capital from TutorVista ($127 million) and Indiareit Offshore and Indiareit Domestic from Commercial Project in Kurla ($100 million).