The long line-up of private equity funds that have invested in Indian companies in the last 5-10 years finally has some reason for cheer. After waiting for years for an opportunity to sell their stakes, many of them have been able to cash out recently. During the quarter ended June 30, private equity funds managed to notch up exits worth a significant $1.78 billion.

IT, IT-enabled lead

This was twice the number for the first quarter and five times the number for the same period last year, data from Venture Intelligence and the recent PwC MoneyTree report show. Private equity funds usually pick up equity stakes in unlisted new ventures in the hope of making hefty gains when the firm goes public. Firms from the information technology (IT), IT-enabled Services (ITeS) and manufacturing segments saw private equity firms cashing out the most. Together they contributed 57 per cent of the total money raised from exits for the quarter. The largest exit was private equity fund TPG Capital’s stake-sale in Shriram Transport Finance, which fetched it $301 million. SAIF, Goldman Sachs and Sierra Ventures sold stakes worth $270 million in the CSS Group. Private investors also cashed out of their stakes in Just Dial at $130 million during the company’s initial public offering.

Thanks to a relatively strong stock market, over half of these deals happened by way of secondary market sales, with funds selling their stakes to other investors. These fetched about $800 million. Public offers, including the IPO of Just Dial, also helped private investors raise about $500 million. “Exits in the form of secondary sale have brought a slew of new private equity investors into the sector,” says the report.

New investments

Meanwhile, fresh investments into the country by private equity funds also picked up in the June quarter. New investments saw an 18 per cent growth to $2.33 billion. The manufacturing sector led the investments in the second quarter with deals amounting to $796 million, a sharp rebound compared with last year.

KKR’s investment in Alliance Tire Group ($460 million) and Baring Asia’s stake purchase in Lafarge India ($257 million) led the deal activity in the sector. According to the report, “Stressed balance sheets have been a major contributing factor for driving manufacturing companies towards private equity funding.”

The IT/ITeS sector — a favourite with PE investors, ranked second in terms of deal value during the second quarter with $453 million flowing in. With the US market recovering this year and the weak rupee aiding software company margins, investor interest in the sector has picked up.

The defensive healthcare sector remained sought-after with good growth compared with last year. According to the report, “Consumer-focused sectors will continue to have investors’ attention in terms of fresh investments. However, sharp valuations continue to challenge them and a cautious approach seems to be setting in.”

> radhika.merwin@thehindu.co.in

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