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    PE investors busy booking profit in the rally

    Synopsis

    PE firms have been selling either a part or their complete stake in more than a dozen companies.

    ET Bureau
    MUMBAI: The sharp and sustained rally in India's equity markets has led private equity (PE) firms to line up exits on the country's stock exchanges for their liquid holdings, and ready the next round of value unlocking through a raft of local listings for closely held assets.

    In the past three months, PE firms have been selling either a part or their complete stake in more than a dozen companies, data analysed by ET shows.

    Similarly, they have also rushed to list some of their portfolio companies, taking advantage of the growing domestic demand for equities during the indices' climb in the last couple of years. With the lock-in for most of those IPOs coming to an end, PE funds have been monetising their holdings in these companies.

    For instance, PE investors in diagnostics chain Thyrocare will likely exit their investment after the lock-in period ended in May this year, sources said. “The stock has performed really well and now it is just a matter of time for the exit to come through,“ one of the investors said.

    Thyrocare's PE investors include Samara Capital, CX Partners, Norwest Venture Partners, and the Emerging India Fund.

    Last month, global private equity giant Blackstone sold a 7.55% stake in fragrance maker S H Kelkar and Co. for around Rs 334 crore through an open market transaction. Integrated (Mauritius) Healthcare Holdings (IHH), an arm of Khazanah Nasional Bhd, exited Apollo Hospitals by selling shares worth over Rs 830 crore. Cloverdell Investment, an affiliate of the Warburg Pincus group, sold about 2.5 crore equity shares of Capital First last month.

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    “The public markets have been very buoyant over the past two years, affording an opportunity to PE funds to consider exits on some of their older investments. The rich valuations have also made possible returns better than anticipated few years back,“ said Sanjeev Krishan, executive director, PricewaterhouseCoopers India.

    WELL-TIMED EXITS WELL-TIMED EXITS
    On Tuesday, Westbridge Crossover sold 1.56 per cent stake in diagnostics chain Dr Lal PathLabs for nearly Rs 123 crore through an open market transaction. Recently, Cresta Fund sold about 74 lakh shares in Adani Enterprises. The head of a global private equity fund, which has seen some liquidity events in the recent past, said: “We realised we could be at the peak of this bull run and hence wanted to monetise some of our public market investments when the time was right.“

    Since the beginning of this year, the Sensex has gained 18 per cent with Rs 52,000 crore of investments from FIIs. Domestic institutions have injected nearly Rs 32,000 crore into equities so far this year. Of the 70 fir ms listed on Indian bourses in the last five years, 42 were PE backed companies that have raised $4.49 billion (about Rs 28,900 crore) through initial share sales.

    “There is a lot of pressure on PEs to return capital to their limited partners, or investors,“ said Ravi Sardana of ICICI Securities.

    PRESSURE TO PERFORM
    Investing in Indian companies between 2000 and 2010, several PEs have been struggling to give profitable returns to their investors.According to data from Venture Intelligence, India has seen total investments of $124.5 billion in the past two decades versus exits worth just $61.8 billion.

    Although a bulk of PE exits continue to be off-market secondary sales between two parties, post 2014, the market for IPOs seem to have been back in vogue.

    One of the key concerns for the growth of the industry, until about a year ago, was the lack of exit options which translated into difficulties in re turning capital to investors, affecting the capital-raising cycle in turn. The only option was strategic sale or sale to another PE, and this was a limited market and had inherent challenges in valuation, said Harish HV, head PE services at Grant Thornton.

    “This will encourage more funds to be raised and bring in more venture, growth and buyout capital from both global and local investors. It would encourage economic growth, and is a welcome development,“ he said, referring to the monetisations.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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