The Hindu Business Line : Private equity firms — profit-booking to the fore in first six months

PRIVATE equity firms have been aggressively booking profits in the domestic market with the value of exits crossing $1.1 billion in the first six months of the year.

This was even as private equity firms made investments of $850 million upwards in the period. The first half of the year saw at least 12 high profile exits, according to industry data, with the largest one being private equity major Warbug Pincus' divestment of a chunk of its stake in Bharti.

Market watchers point out that the increasing number of examples of successful exits in the country is one of the major factors driving the entry of private equity firms in the country.

Warburg sold about 9.3 per cent stake in Bharti for about $867 million in the period in two transactions, taking its total stake sale in Bharti to 12 per cent (for some $1.08 billion). The returns on the investment could be gauged from the fact that Warburg had acquired 18.52 per cent in Bharti for about $300 million (before the company went public in 2002). Warburg still holds about six per cent in Bharti.

Another major exit was the sale of stake owned by equity firms AIG/GIC in Ambuja Cement for $200 million to Holcim.

The UK based private equity firm Actis and home grown ICICI Venture exited from two deals each in the period. Actis exited from its investments in India Infoline ($1.5 million) and Gujarat Pipavav Port Ltd ($7.5 million), while ICICI Venture sold stake in Arvind Brands ($24.7 million) and Indus League ($5.5 million).

The total exits in 2004 were estimated at about $550 million. "It is not only the returns on investments, but also the ease by which private equity firms are exiting from investments which makes India an attractive destination. This proves the soundness of the conditions here," an industry official said. Little wonder, according to some estimates, there are over 100 private equity firms now operating in the country.

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