PE exits through public markets rise

PE exits through public markets rise

Mumbai: As Indian stocks continue to hit new highs, some private equity (PE) funds are locking in returns by selling their investments in publicly traded companies.

On Wednesday, US-based private equity firm General Atlantic LLC’s arm GA Global Investments, sold 6.5 million shares of IndusInd Bank Ltd for Rs.397 crore. It owned 4.83% stake in the bank, which has now come down to 3.59%.

 

 

General Atlantic is one among many funds that has used the market rally to sell part of their listed investments. According to JM Financial data research, PE funds have sold $1.18 billion worth of investments through public market transactions between January and August this year. This is 75% of the total exits by PE funds so far this year. Over the same period last year, only 20% of total exits happened through the public markets, adding up to roughly $580 million.

 

“Market exits have increased substantially and private equity funds have managed to exit through this route effectively. We expect more exits to happen through the year and the numbers will go up substantially, especially for companies that are listed and where investors are making returns,” said

 Bhavesh Shah, managing director-investment banking at JM Financial Institutional Securities Ltd.

 

On 17 July, First Carlyle Growth VI, the investment entity through which US-based PE firm Carlyle Group had invested in Repco Home Finance Ltd sold its entire stake in the company. It sold nearly 10 million shares for Rs.465 crore. It started exiting the investment last year and has sold its holding in the company for Rs.664 crore on its investment of Rs.108 crore. This worked out to an internal rate of return (IRR) of 38.4% on the investment, according to a person directly involved in the transaction. Carlyle has sold Rs.500 crore in investments through public market exits this year.

 

 

Large PE funds such as Bain Capital, Baring Private Equity Partners India, Saif Partners, Multiples Alternate Asset Management Pvt. Ltd, ChrysCapital Management Co. and others have also sold part of their investments.

 

The largest of these was Bain Capital’s sale of 4.29% stake in Hero MotoCorp Ltd for Rs.1,481 crore, according to a Mint report dated 13 June. Baring India also sold 0.77% in Bangalore-based software services exporter Mphasis Ltd in the June quarter for an undisclosed sum.

 

“The capital market buoyancy will enable funds to exit from their investments. Markets had been depressed for last two-three years and funds now have the opportunity to monetize their investments and return capital to investors” said Keshav Misra, partner and head of investments at Baring Private Equity Partners India. Baring has investments in Muthoot Finance Ltd, Manappuram Finance Ltd , Vardhman Holdings Ltd and TD Power Systems Ltd.

 

“We do have public market exposure and exits are a continuous process and we would be open to mark some exits if we see the price and value is correct,” said Misra.

According to Sanjeev Krishan, executive director and leader-private equity and transaction services at PricewaterhouseCoopers Pvt. Ltd, public market exits will continue as valuations improve.

“If their own assessment of valuations of the company indicates that the underlining company performance is lower than its current valuations they find it a better decision to exit these shares,” said Krishan.

Since the beginning of this year, BSE’s benchmark Sensex has gained 27.94%. On Thursday, it fell 0.20% to close at 27,085.93 points

 

 

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source.live mint