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Business News/ Companies / News/  Private equity buyouts surge past $1 billion mark this year
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Private equity buyouts surge past $1 billion mark this year

Amount exceeds value of such transactions last year, mirroring investor confidence in acquiring large stakes in Indian companies

Photo: MintPremium
Photo: Mint

Mumbai: Private equity (PE) buyouts in the first five months of 2015 have already exceeded the value of such transactions for all of last year, mirroring investor confidence in acquiring large stakes in Indian companies as economic growth accelerates.

In 2014, PE funds completed 15 buyout transactions worth $648 million. Year to date, six buyout deals worth $1.08 billion have already taken place, according to data from PriceWaterhouseCoopers Pvt. Ltd. In 2013, PE funds were involved in 21 buyouts worth $2 billion.

The increased buyouts, which entail the acquisition of controlling stakes by PE funds, are partly a reflection of the attraction Indian assets hold for PE funds as the economy expands at a faster pace. India is projected to become the world’s fastest-growing major economy by 2016-17 with a growth rate of 6.5%, topping China’s 6.3%, the International Monetary Fund said last month.

Global investors that have raised large Asia-specific funds over the past two years are also deploying the money, and possibly channelling a larger portion to India. Baring Private Equity Asia expects to invest at least $1 billion in India from its Baring Asia 6 fund, which closed in February with commitments of $3.98 billion, founding partner and chief executive Jean Salata said in a March interview.

“The buyout activity is definitely on the uptick and more is likely to occur in the next couple of years," said Sanjay Nayar, member and CEO of Kohlberg Kravis Roberts and Co. India. “This is primarily driven by willing promoters and influenced by factors such as the need to de-leverage, sharper capital allocation, succession issues and an increasing interest from private capital and strategics."

In May, Baring Private Equity Asia completed its acquisition of CMS Info Systems Ltd from Blackstone Group Lp in a deal worth $440 million.

Last month, Advent International and Singapore’s Temasek Holdings Pte. Ltd jointly acquired a 34.37% stake in the consumer products business of Crompton Greaves Ltd for $315 million.

Advent and Temasek are to make an open offer for additional shares in compliance with takeover rules.

Interestingly, out of $5.7 billion worth of PE and venture capital deals in 2015, the contribution of buyout deals stands at 18% compared with 5% last year ($648 million from $12.4 billion worth of deals).

“It goes to show increasing level of comfort financial sponsors are having towards India. We expect with the new government policies aimed at improving overall business environment, ease of doing business, improvement in overall level and the level of buyout activity should increase," said Pramod Kumar, managing director of Barclays Capital India.

Other large buyouts include the possible sale of the India business process outsourcing (BPO) business of Serco. On 30 April, Business Standard reported that Blackstone and Filipino BPO firm SPi Global are in race to acquire the unit in a deal worth $400 million.

On 29 April, Reuters reported that Advent International was in talks with Carlyle Group and three separate healthcare providers to sell its 72% stake in CARE Hospitals for $250-300 million.

“Large PE funds are ready to pump in money if they get a controlling stake," the India head of a US-based PE fund said on condition of anonymity. “In buyouts through secondary transactions, where a PE firm sells a company to another PE, the buyer will be more comfortable with numbers as well as the management."

Two large secondary transactions have taken place in 2015. New Silk Route Partners Llc sold its stake in Destimoney Enterprises Pvt. Ltd for over 1,200 crore to Carlyle Group in February and Blackstone sold CMS Info Systems to Baring Private Equity Asia.

“Buyouts are mainly caused by divestment of businesses, succession issues or stress while another major reason is that first-generation promoters today are more amenable to ceding control than the older generations," said Sanjeev Krishan, executive director and leader of the private equity and transaction services practice at PricewaterhouseCoopers.

According to a report by Bain and Co., the Asia-Pacific PE market set a new all-time high in buyout value at $81 billion in 2014, 63% higher than in 2013, while global buyout value dropped 2%.

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Published: 22 May 2015, 12:44 AM IST
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