Mumbai: The private equity unit of Kotak Mahindra Bank is getting set for IPOs and the sale of some portfolio firms as exit opportunities are opened up by this year’s strong market rally, a top official said.
The firm, which manages $750 million in funds and boasts a portfolio of 20 firms, is looking to take two companies public in the fiscal year beginning April 2010, Nitin Deshmukh, chief executive of Kotak’s private equity arm, told Reuters.
“We are gearing up for strategic exits, as well as some IPOs,” he said in an interview, adding four or five of the unit’s firms were drawing interest from investors.
“The exit environment has come back. Companies will look to capitalise on the FY11 projections,” said Deshmukh, who has more than 20 years’ experience in venture capital and private equity.
Firms such as IDFC and ILFS Investment Managers are also planning to exit some of their portfolio companies, after being unable to do so last year as the stock market slumped by more than half.
IDFC, for instance, is currently working on about half a dozen IPOs or full exits through trade sales.
Exit deals between January and November this year by private-equity firms through public market sales and IPOs had a total value of $1.6 billion, compared with $934 million in the corresponding 2008 period, according to Venture Intelligence, a research service focused on private equity and M&A.
Indian corporate profits are reviving as the world economy recovers from a sharp slowdown, helping companies attract better valuations. The benchmark index has risen by three-quarters in 2009, to be among the best performing in Asia.
“Private equity activity is slowly getting back. We are seeing at least one deal a day. We will certainly see more action next year,” Deshmukh said.
Private-equity investment in India has been dropping over the past few years, with just $3.5 billion trickling in this year to 15 December, compared with $10.4 billion in full year 2008 and $13.7 billion in 2007, according to Venture Intelligence.
The year 2007 marked the final lap of a 5-year bull run that fired the country’s main stock index up six times in value.
Deshmukh said Kotak Private Equity was hoping to close at least a couple of investments in 2010, despite rising valuations.
“Private equity is challenged by buoyant capital markets, which set benchmarks on valuations, making it difficult to close deals,” Deshmukh said.
Indian companies have sold shares worth $19 billion so far this year after capital markets revived, eating into opportunities of PE firms.
Kotak will focus on companies that rely on domestic consumption, infrastructure-service providers and global manufacturing and services firms, he said.
“We will end up closing more number of deals in the next 12 to 15 months. The size will be about $20 to $30 million a deal,” he said.
Kotak Private Equity, which set up its first fund in 2005, currently manages three funds, one of which focuses on life science firms including clinical research services provider SIRO Clinpharm.
“I have led 32 transactions in the pharma and biotech space. Probably never lost a penny on any of them,” said Deshmukh, who has studied pharmaceutical technology and once worked with Indian drugmaker Cipla.
Other Kotak PE investments include India’s biggest stock bourse, the National Stock Exchange, and leading commodity exchange Multi Commodity Exchange.