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Chennai, Jan. 24

SEVENTEEN private equity and venture capital-backed companies raised about $950 million via initial public offerings during 2005, according to a Venture Intelligence India study.

Private equity (PE) and venture capital (VC) companies obtained exit routes for their investments in 42 Indian companies during 2005.

These figures compared favourably with the 30 liquidity events (including six PE-backed IPOs) during the previous year, the study shows.

"The highly successful IPOs of PE-backed companies such as Suzlon Energy as well as Oracle's buyout of i-flex in 2005 proved that the Bharti-Warburg Pincus deal was not a one-off and solidified the India story among the international PE investors," Mr Arun Natarajan of Venture Intelligence India, a division of TSJ Media, said in a press release.

"While it is encouraging for PE investors to see the emergence of a healthy climate for liquidity opportunities in India, it is early days as yet. It is crucial for PE and VC firms to demonstrate a successful track record of exits before marquee investors, especially foreign institutions, will consider investments into their future funds," Mr K.E.C. Raja Kumar, CEO of the Bangalore-based UTI Venture Funds, which has realised exits and distributed 60 per cent of the capital of its first fund, was quoted in the release.

The largest PE-backed IPO during 2005 was that of wind energy turbine maker Suzlon Energy, which raised $342 million. Citicorp, which had invested $22.5 million in Suzlon in April 2004, sold shares worth $29.9 million as part of the IPO.

Other top PE-backed IPOs during the year included Punj Lloyd, HT Media, YES Bank, Shopper's Stop and PVR Cinemas, the study revealed.

The year also saw early-stage focused SIDBI Venture Capital obtain its first exit via an IPO with the $6 million Compulink offering.

PE firms also realised some exits during 2005 via M&A and secondary deals. Warburg Pincus completed its exit from Bharti TeleVentures during 2005 - selling a 6 per cent stake for $560 million via the stock markets and a final 5.65 per cent holding to the UK-based Vodafone for $847.5 million.

At the time of Warburg's final stake sale, Bharti was valued at $15 billion - 10 times that when Warburg invested in the company five years ago. Warburg's total realisation: over $1.6 billion - more than 5.5 times its original investment amount, the study said

Two other "trade sale" exits during 2005 - acquisition of CVC International's stake in i-flex by Oracle and the exit of Actis and AIG from BPL Communications - also involved transactions worth over $500 million each, the study said.

(This article was published in the Business Line print edition dated January 25, 2006)
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