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2013: The year private equity investors earned $600 mn

For the private equity industry in India,the year opened up a much-needed window of opportunity.

Written by Anil Sasi | New Delhi | Published: December 30, 2013 2:06:24 am

For the private equity (PE) industry in India,the year 2013 opened up a much-needed window of opportunity for investors straddled with investments bottled up for well over half a decade and a lack of exit options.

PE investors witnessed a spurt in the number of exits during the year that were cumulatively worth over $600 million,despite the subdued state of the primary markets.

The biggest action was concentrated in the healthcare sector,with London-based PE major Apax Partners’ sale of its 19 per cent holding in Apollo Hospitals for close to $370 million in multiple open market transactions marking one of the biggest exits of the year.


Apax had first picked up stake in the hospital chain six year ago,with a primary tranche in October 2007 that was followed up with stake purchases in subsequent years.

The other big exit in the works was that of PE major Blackstone selling its stake in Pune-based Emcure Pharmaceuticals to Bain Capital.

While the financial details are under wraps,industry estimates peg the deal size at about $100 million,or double the $50 million that Blackstone paid when it too the 13 per cent stake in the pharma firm in 2006. For Blackstone,this would mark the second exit from its Indian portfolio after it sold its stake Intelenet to UK’s Serco group in 2011.

US-based PE firm Avenue Capital too marked an exit from Gurgaon-based Medanta Medicity Hospital,where it had picked up stake way back in 2006.

PE major Carlyle Group picked up 27 per cent stake in Medanta in the transaction,including Avenue’s stake in the hospital venture.

Another benchmark during the year was the PE-backed initial public offering (IPO) of internet firm JustDial,which provided a exit for its investors SAIF,Tiger Global,Sequoia Capital India and SAP Ventures,whose sale of shares comprised over 80 per cent of the $167.11 million issue. The JustDial IPO was one of the largest in the Internet space.

Another US-based private equity investor TPG sold off its 9.9 per cent holding in Shriram Transport Finance in the open market via block deals,marking the largest public market sale entailing a complete exit.

The second such complete exit through the public markets was that by Warburg Pincus from Havells India,with returns of about 2.5x on its investment made in October 2007.

The steady stream of exits through the year comes at a time when PE investments in 630-odd companies are estimated to be four or more years old,according to estimates by Anand Rathi Investment Banking. PE investors generally follow a five-year investment cycle.

Much of the exits this year were concentrated in the second quarter,with as many as 29 exits reported during the three months,according to data from Venture Intelligence,which tracks PE activity.

The exits during the course of the year have been extremely positive in terms of net returns.

The JustDial IPO,for instance,fetched over 10x return for SAIF Partners,while the exit of PE investor TPG from Shriram Transport Finance gave the PE a return of over 6x.

“At the IPO price,SAIF was sitting on an over 10x return on its investment; Tiger Global,7.3x; Sequoia Capital India,over 2x and SAP Ventures,1.3x. The JustDial IPO marks the second successful Indian ‘Internet play’ brought to the public markets by SAIF,following the Nasdaq IPO of MakeMyTrip in August 2010,” Venture Intelligence noted.

Secondary sale transactions during the middle of the year included Warburg Pincus selling shares to Kohlberg Kravis Roberts (KKR) in the $460 million buyout of the Alliance Tire Group.

The spate of exits come at a time when pressure from the limited partners (LPs) — players who set aside the money that PE funds then invest in target firms — has been mounting on fund managers to show returns,especially in the wake of the sharp depreciation of the rupee against the dollar that further dents the investment in US dollar terms.

Over $50 billion has been invested by PE companies in India in the past 10 years,but only $16 billion has been returned to LPs,according to Anand Rathi Investment Bank and VCC Edge.

The coming year holds out the promise of more such exits if the markets continue to remain buoyant,the political risks notwithstanding.

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