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PEs made 31 exits from Indian firms during July-Sept 2014

Experts say market revival could spawn more exit deals in near future

T E Narasimhan  |  Chennai 

Private equity (PE) firms have made 31 exit transactions in India-based during the July-September 2014 quarter, up from 26 exits in the year-ago period, but less than the April-June quarter which recorded 47 exits. Experts say more exits are likely to happen in the near future. According to Venture Intelligence data, PEs sold shares worth $723 million (Rs 4,400 crore) in their listed portfolio during the quarter under review. Among the exits are Goldman Sachs’ stake sale worth Rs 1,369 crore ($227 million) in Mahindra & Mahindra to make a complete exit, realising 3x (in rupee terms) on its 2008 investment. Among part exits, Providence sold Rs 1,414 crore ($234 million) worth of shares (constituting 2.40 per cent stake) in Idea Cellular and registering a 4x return (including the value of the unsold shares) on its Rs 1,370-crore investment (via a pre-IPO placement) in 2006.

Public Mkt Sales
Quarter No. of Deals Value of Deals
Q4 13 7 167
Q1 14 11 168
Q2 14 25 706
Q3 14 19 723
62 1764

Besides, General Atlantic sold IndusInd Bank’s shares worth Rs 398 crore, realising a 2.7x return on its 2011 investment. IFC sold shares worth Rs 121 crore in Cholamandalam Investment and Finance Company, realising 3.9x on its 2010 investment. Notably, these deals came after a tough period for PE funds which were able to get only $31 billion in the past six years against their investment of about $90 billion in the last decade, according to a report from Bain & Company. However, things look bright now. Experts say the recent exits will send a positive signal to investors who have been shying away from the India-focused funds.

Strategic Sales
Quarter No. of Deals Value of Deals
Q4 13 6 167
Q1 14 6 153
Q2 14 9 170
Q3 14 7 144
28 634

According to Anand Narayan, senior managing director of Creador Advisors India, the present sentiment is upbeat and that it is important to maintain it. Last week, Creador Advisors had sold a portion of its stake in housing finance firm Repco Home Finance for Rs 146 crore and realised an internal rate of return of 75 per cent in dollar terms on the sale. Two PE-backed – Sharda Cropchem and Snowman Logistics – pulled off successful IPOs during July-September 2014. In Sharda’s Rs 352-crore IPO, the entire issue consisted of an offer for sale by PE investor Henderson (which made a complete exit) and promoters. Henderson, which had invested $24.2 million in Sharda in 2008, exited with a 2.23x return. Neither of Snowman Logistics’ PE investors – IFC or Norwest – sold their shares as part the Rs 197-crore IPO.

Based on the IPO price, the two investors are sitting on 2.95x and 1.23x returns, respectively. IFC had invested Rs 24.88 crore ($5.43 million) in 2010. Norwest had invested Rs 60 crore ($10.40 million) in 2013.

Secondary Sales
Quarter No. of Deals Value of Deals
Q4 13 11 837
Q1 14 3 18
Q2 14 10 373
Q3 14 2 75
26 1303

According to experts, in 2013 when IPOs dried up, three PE-invested companies did IPO - Just Dial, V Mart, and Repco Home Finance. All three have delivered good outcomes as well. In a market where retail and foreign institutional investors demand proven and validated track record, having a PE investor can make a lot of difference, says a senior executive with a PE firm. Another expert says it is tough to determine the right time or bad time for exits, which are driven by many factors such as the company’s condition, the sector’s performance, global and economic conditions.
Quarter No. of Deals Value of Deals
Q4 13 2 90
Q1 14 1 6
Q2 14 2 11
Q3 14 1 35
6 142

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First Published: Sun, November 02 2014. 20:36 IST