PE firms exit big in 9 months of ’07

PE firms exit big in 9 months of ’07

Mumbai: Private equity investors have pushed through exit transactions in India worth $534.7 million (Rs2,133.5 crore) in the first nine months of 2007, just a few notches short of the $589 million worth of transactions concluded in all of last year.

It is estimated, based on potential deals in the pipeline, that before the year closes, the total value of exits would have scaled $1 billion. This would, however, still be well below the peak in 2005 when the total value of exits concluded by private equity investors stood at $3.3 billion.

These numbers do not include exits by early-stage venture capital investors.

The internal rate of return (IRR) on these exits—IRR is the profit earned after returning money to the limited partners and settling fund manager fees—cannot be ascertained yet (Click Table 1 and Table 2 for details).

However, the growing size of deals and multiple exit routes used indicate that India is fast gaining credibility for returning value to investors and augurs well for future fund-raising for this market.

Three of the eight disclosed exit deals this year are over $100 million against just one in 2006. ICICI Venture Funds Management Co. alone has pulled off three significant exits—from ACE Refractories Ltd, Subhiksha Trading Services Ltd and Deccan Aviation Ltd, and currently leads the pack in terms of total value of exits this year, at $161 million.

The 2005 record included Warburg Pincus Llc.’s $840 million sale of its residual 5.6% stake in Bharti Televentures Ltd to Vodafone Group Plc. and Citigroup Venture Capital International’s (CVCI) $593 million haul from the sale of its 41% stake in iflex Solutions Ltd to Oracle Corp.

All the disclosed exits this year, data for which was compiled by Mint from industry reports and private equity firms that did not want to be named, have been either through strategic stake sales, known as trade sales in private equity jargon, or secondary market transactions.

The top firms to watch out for in terms of exit activity in the remaining three months of 2007 and further into the first six months of 2008 include Actis Capital Llp., ICICI Venture, ChrysCapital Investment Advisors India, IL&FS Investment Managers Ltd, Warburg Pincus, CVCI and General Atlantic Llc.

All these firms are nearing the end of their first exit cycle in India and have simultaneously started allocating or raising fresh funds for investment here.

Delhi-based ChrysCapital has just raised its fifth fund—the $1.25 billion Chrys-Capital V—and is currently exiting investments from ChrysCapital III and selectively from ChrysCapital IV.

General Atlantic has recently announced a change in strategy both in terms of deal sizes, up from $20-50 million to $100-400 million per deal, and sector focus—it plans to do core infrastructure deals here, among other things (Click on the related article for Mint’s 1 June interview with Mark F. Dzialga, managing director and vice-chairman, General Atlantic LLC). The firm deploys between $1 billion and $2 billion globally on an annual basis and doesn’t disclose what it expects to deploy by region.

UK investor Actis Capital, which is raising a $1 billion India-focused fund, pulled off the second largest exit of the year with the $144 million sale of its 28% stake in Punjab Tractors Ltd to Mahindra & Mahindra Ltd early this year. Warburg, which kicked off a fresh phase of investing last year, has been exiting prior investments since 2005.

It concluded a partial exit from WNS Global Services when the Mumbai-based BPO firm listed on the New York Stock Exchange last year and is yet to announce one this year.