Foreign private equity funds are expected to continue booking profits in the Indian financial services space in the near-term, according to experts.
In the recent past, foreign PEs like Carlyle Group, Warburg Pincus, Temasek Holdings along with sovereign wealth fund of Malaysia, Khazanah Nasional, have sold their investments either partially or full in financial services companies.
"Recent exits of some of the foreign PE players are pure profit booking. This trend is likely to continue in the near-term. However, foreign fund houses will remain invested in the financial services sector in the long-run to cash in the growth opportunities in this sector," investment banking firm Ladderup managing director Sunil Goyal told PTI here.
He also said profit-booking is necessary for fund houses to raise capital for further investments.
While Khazanah on Monday sold its entire holding in private sector lender Yes Bank for about $110 million through block deals, US private-equity giant Carlyle Group sold a quarter of its stake in the country's top mortgage lender Housing Development Finance Corp (HDFC) for $270 million last month.
Similarly, Warburg Pincus had sold a little over 1% of its holdings in the private sector lender Kotak Mahindra Bank for $73 million. Singapore government owned Tamasek sold 1.4% of stake in ICICI Bank for $300 million last month, raking in huge profits. Khazanah, for instance, has sold its 4.2 percent stake in the Mumbai-based lender at a premium of over 150 percent profit in five years.
"PE firms don't take decisions like offloading their investment on the basis of volatility in the stock market. In my opinion, all these foreign PEs, who had exited or part exited their stakes in banks, had invested in these firms for long-period and exited to book profit from their investments," Vice President - Research of Angel Broking Vaibhav Agrawal said.
Some feel the recent activity of PE funds could be a sign of uncertainity. "Though this is a clear trend of profit-booking, it also shows the uncertainty in the stock market which prompted these players to offload or part offload their stakes in the financial services companies," said a fund manager in a domestic PE firm said.
Talking about the recent exits, PWC Associate Director Robin Roy said that these exits didn't anyway indicate that foreign PE firms were not bullish on growth prospects in financial services space.
"PE firms are not long-term multilateral financial institutions and have their own time horizon for exits. I feel foreign PE firms remain bullish on the growth prospects of financial services industry in the country and we will see much more investment in this segment in the future," Roy said.