Stable markets prompt PE exits

StanChart PE to exit Powerica through an initial public offer.

This year’s stable market has given private equity (PE) investors an opportunity to profitably exit their investments in India.

Standard Chartered Private Equity Ltd (SCPEL), the PE arm of the global banking major, is set to exit its investment in Powerica, a Mumbai-based genset manufacturer, through the company’s proposed initial public offer (IPO).

According to sources in the know, the genset maker plans to float an IPO in the range of Rs 800 crore and is likely to submit the draft red herring prospectus (DRHP) next month. It has mandated Kotak Mahindra Capital and Citi Group for the fund-raising and is also in talks with JM Financial for this. In 2007, SCPEL had invested about $50 million in Powerica and acquired about 10 per cent stake. It could not be acertained how much stake SCPEL would sell in the IPO.

Powerica Ltd, owned by the Oberoi family, is one of the largest manufacturers of diesel generator sets in the country. The 28-year-old company is also in the business of assembly, sales and service of diesel, heavy fuel oil and gas power plants. In 2007, another genset manufacturer, Sudhir Gensets, received $60-70 million from Goldman Sachs and GE Power.

In his e-mail response, Naresh Oberoi, Managing Director, Powerica Ltd said, “In accordance with the terms of the share subscription agreement, an exit option to Standard Chartered Private Equity is to be provided. Our board has taken a decision to implement the terms of the agreement. We are in the process of implementation and in discussions with the agencies involved in the process.”

He refused to disclose more. Officials of Standard Chartered Private Equity Ltd, Kotak and Citi also refused to comment.

In October 2010, Endurance Technology, another portfolio company of Standard Chartered PE, filed its DRHP with the Securities and Exchange Board of India to raise about Rs 1,000 crore by diluting 20-25 per cent stake, allowing SCPEL to make a partial exit.

SCPEL is also looking to exit InterGlobe Technology Quotient, a travel outsourcing firm in which it invested about $140 million along with Credit Suisse and Singapore’s DBS Group, through a proposed IPO.

Early this month, it made a part-exit from auto finance firm Mahindra & Mahindra Financial Services. The PE firm sold more than two per cent stake for Rs 167 crore, earning more than two times returns.

Till date in 2010, as many as 14 PE exits worth $478 million have taken place through the initial public offer (IPO) route. In 2009, in comparison, there were two PE exits through IPOs and another two in 2008, according to VCCEdge data.

The major exits include Credit Suisse from Shree Ganesh Jewellery House ($84 million), Trikona Trinity from IL&FS Transportation Networks ($154 million), ChrysCapital from Hathway Cable ($142 million), JP Morgan Partners and India private Equity Fund from Jubilant Foodworks ($71 million) and Temasek from Infinite Computer Soulutions India ($41 million).

In the Indian PE sector, 34 exits worth $924 million through the M&A route, 71 exits worth $1.38 billion through open market, 15 exits worth $1.69 billion through buybacks and 17 exits worth $300 million through secondary sales took place till today in 2010, according to VCCEdge data.