PEs tap block deals to exit
Investors taking advantage of the resurgence in stock markets to reduce stakes in Indian firms
PremiumMUMBAI : A sharp pick up in block trades by private equity and venture capital investors that started in July with the markets witnessing a rebound amid foreign institutional investors (FII) buying is unlikely to slow substantially even as foreign investors turn bearish on Indian stocks.
The past couple of months have seen some of the biggest block trades as investors took advantage of the resurgence in the stock markets to cut their stakes in listed Indian companies.
Private equity major KKR sold a ₹9,185 crore stake in Max Healthcare in the largest PE block deal seen in the Indian stock markets to date, while Blackstone sold large stakes in two of its positions—a ₹4,000 crore stake in auto parts maker Sona BLW Precision Forgings and ₹2,650 crore in Embassy Office Parks. Other investors such as Temasek and TPG, too, have sold down their holdings in listed companies in recent months.
Several promoters have also jumped on the bandwagon to pare their holdings. Triveni Engineering and Industries Ltd, a promoter of Triveni Turbine Ltd, sold a ₹1,609 crore stake in the company to several investors last month, while Biocon Ltd sold a ₹1,220 crore stake in Syngene to mobilize funds.
These large trades came amid FIIs buying around $7.6 billion of Indian equities in July and August, but since the second half of September, these investors have once again become net sellers of equities. FIIs sold Indian equities worth $1.6 billion in September.
However, industry experts believe that the momentum in block trades by investors is likely to continue as the cautious FII buyers are replaced by domestic institutional investors and even high-net-worth individuals.
“We are witnessing more blocks by domestic funds / HNIs as compared to FIIs. FIIs are buying very selectively," a Mumbai-based investment banker said on the condition of anonymity.
The supply for large blocks remains strong as the 12-month post IPO lock-in ends for many companies which went public last year. These investors will be looking for the right opportunities to sell down their holdings through block trades.
“We don’t think that there is a lot of impact of FII selling on block deals. Even in the first six months of the year when FIIs were selling, we did see many blocks. The majority of the supply is coming from financial sponsors, especially companies where IPO lock-in are expiring," said another investment banker, who also spoke on the condition of anonymity. There is activity in sectors such as financials and consumer goods, which are doing well, while tech is a difficult prospect in the current environment, he added.
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