Private equity (PE) investors who invested a bulk of their capital at the market peak but have had few opportunities to exit their investments since 2008 are finally getting a chance to sell their holdings with many of their portfolio companies going for initial public offerings (IPOs).
A Mint analysis of nine PE funds, which have sold their investments partially through IPOs, shows that average annual returns generated by these funds is over 24%.
The average holding period is about four years.
Since many of them have only partly exited their investments, the final returns could change.
The analysis is based on the price at which the PE funds invested in a company and the price at which the shares were sold.
“Overall, it looks like a healthy time to exit investments through public share sale, and next year will be even better than this year as more companies are being groomed for their listings,” said Vishal Tulsyan, managing director and chief executive, Motilal Oswal Private Equity Advisors Pvt. Ltd.
The rosy outlook comes as a relief after a prolonged period of sub-par economic growth and poor market sentiments that had left many private equity funds in India struggling to sell their investments. Some of them had invested millions of dollars at the top of the market just before the 2008 global financial crisis.
The events not only crimped returns for private equity firms but also forced them to hold on to their investments for far longer than is the global norm.
Average gross returns to PE investors in India were 21% until 2007, according to a June McKinsey & Co. report.
After 2008, average returns from exits plunged to just 7%, the report said, adding that the average holding period for such investments also increased to 5.7 years in 2013 from 3.3 years in 2005.
Funds which have made partial exits this year through IPOs include New Silk Route, Providence Equity Partners, Jacob Ballas India, Motilal Oswal Private Equity, Zephyr Peacock India, Xander Group Inc., Norwest Venture Partners and Rabo Equity Advisors-managed India Agri Business Fund.
At 55%, Zephyr Peacock India clocked the highest return out of the lot as it partially exited its investment in Pennar Engineered Building Systems Ltd.
Zephyr had invested in the company in 2013 at Rs.58.20 per share. During its public issue, Pennar sold shares at Rs.178 apiece. This is the highest ever return clocked by the fund from any of its exits, according to the fund’s managing director Mukul Gulati.
The activity is being driven by the way capital markets are performing. (In the) last three years, the IPO market was virtually closed. Now, we are seeing healthy activity on the IPO front,” said Gulati.
Zephyr Peacock India is the private equity arm of New York-based Zephyr Management Lp.
New Silk Route, which has partly exited two investments through recent IPOs, made a return of 40% on its investment in Hubli-based VRL Logistics Ltd.
However, its seven-year-old investment in Ortel Communications Ltd gave it compounded annual return of just 8.79%.
New Silk Route didn’t respond to queries on returns made in recent exits but said that it has had “four liquidity events this calendar year across sectors like finance, consumer, logistics and telecom”.
“Over the last few months, NSR-backed companies Café Coffee Day, VRL Logistics and Ortel Communications completed successful IPOs. In addition to these three IPO events, NSR also did a strategic sale of Destimoney Enterprises,” said the fund in an email. “NSR remains optimistic about the opportunities in the Indian market.”
Source : ET
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A Mint analysis of nine PE funds, which have sold their investments partially through IPOs, shows that average annual returns generated by these funds is over 24%.
The average holding period is about four years.
Since many of them have only partly exited their investments, the final returns could change.
The analysis is based on the price at which the PE funds invested in a company and the price at which the shares were sold.
“Overall, it looks like a healthy time to exit investments through public share sale, and next year will be even better than this year as more companies are being groomed for their listings,” said Vishal Tulsyan, managing director and chief executive, Motilal Oswal Private Equity Advisors Pvt. Ltd.
The rosy outlook comes as a relief after a prolonged period of sub-par economic growth and poor market sentiments that had left many private equity funds in India struggling to sell their investments. Some of them had invested millions of dollars at the top of the market just before the 2008 global financial crisis.
The events not only crimped returns for private equity firms but also forced them to hold on to their investments for far longer than is the global norm.
Average gross returns to PE investors in India were 21% until 2007, according to a June McKinsey & Co. report.
After 2008, average returns from exits plunged to just 7%, the report said, adding that the average holding period for such investments also increased to 5.7 years in 2013 from 3.3 years in 2005.
Funds which have made partial exits this year through IPOs include New Silk Route, Providence Equity Partners, Jacob Ballas India, Motilal Oswal Private Equity, Zephyr Peacock India, Xander Group Inc., Norwest Venture Partners and Rabo Equity Advisors-managed India Agri Business Fund.
At 55%, Zephyr Peacock India clocked the highest return out of the lot as it partially exited its investment in Pennar Engineered Building Systems Ltd.
Zephyr had invested in the company in 2013 at Rs.58.20 per share. During its public issue, Pennar sold shares at Rs.178 apiece. This is the highest ever return clocked by the fund from any of its exits, according to the fund’s managing director Mukul Gulati.
The activity is being driven by the way capital markets are performing. (In the) last three years, the IPO market was virtually closed. Now, we are seeing healthy activity on the IPO front,” said Gulati.
Zephyr Peacock India is the private equity arm of New York-based Zephyr Management Lp.
New Silk Route, which has partly exited two investments through recent IPOs, made a return of 40% on its investment in Hubli-based VRL Logistics Ltd.
However, its seven-year-old investment in Ortel Communications Ltd gave it compounded annual return of just 8.79%.
New Silk Route didn’t respond to queries on returns made in recent exits but said that it has had “four liquidity events this calendar year across sectors like finance, consumer, logistics and telecom”.
“Over the last few months, NSR-backed companies Café Coffee Day, VRL Logistics and Ortel Communications completed successful IPOs. In addition to these three IPO events, NSR also did a strategic sale of Destimoney Enterprises,” said the fund in an email. “NSR remains optimistic about the opportunities in the Indian market.”
Source : ET
Company Secretary GAURAV SHARMA+919990694230 Email us [email protected]
https://gauravsharmaassociates.wordpress.com https://femaindiaservices.wordpress.com
Connect with our Facebook Page:- Click and Like our Page https://www.facebook.com/gauravdelhiravpage
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