PE firms make record exits of $9.4 billion in 2017

Investments too at an all-time high of $19.5 billion in the first nine months of the calendar year

Private equity (PE) investors have sold a record $9.4 billion worth of shares in the first nine months of the year, against the previous high of $6.6 billion in 2016. 

According to the analysis of consultancy firm EY, it comes on the back of $4.8 billion being sold on the stock markets through secondary ($3.4 billion) and primary ($1.4 billion) deals. Prem Watsa-led Fairfax Financial sold a $558 million stake in private-sector general insurance player ICICI Lombard through an initial public offering (IPO) last month. This is the biggest ever exit for a PE through an IPO in India so far.   

“There was hardly any liquidity in the market till 2014. But after the Narendra Modi-led government was elected, markets started de-frosting and now they are on the  boil,” said Raamdeo Agrawal, co-founder and joint managing director, Motilal Oswal Financial Services. 

“Valuations, in fact, are better than what PE investors ever thought were possible. So, it is a great time for them to get out of whatever they had bought earlier,” he added.

It is not only the stock market where PE players are making record exits. Sales from one PE fund to another also saw a new record with $3.1 billion exit made in the nine-month period. This includes the biggest exit of the year in which Tiger Global sold a stake worth $800 million to SoftBank Vision Fund. In another such deal, Apax Partners sold a stake worth $720 million in information technology outsourcing firm GlobalLogic to Canadian pension fund CPPIB.

“The macroeconomic triggers are very encouraging for investment,” said Sanjay Nayar, chief executive officer, KKR & Co India. “Political will is significantly higher, and the government is looking to provide the right kind of stimulus, which will have multiplier effects, especially for private capital providers,” he said.

KKR made one of the largest exits through secondary sale on the stock market this year, selling its stake worth $236 million in Dalmia Bharat.

The only place where the exit deals are lower than last year is in the space of PE selling its stake to a strategic buyer. The nine months have seen strategic sale worth $752 million, down from $2.7 billion worth of sales last year. The largest sale in this space in the year was International Finance Corporation’s, which sold its stake worth $246 million in Tikona Digital Networks to Bharti Airtel. 

The record exits by PE players are also coming along with the record investments. The period saw investments worth $19.5 billion made in this period against $16 billion in 2016, said EY.

“Record exits as well as investments in the year clearly shows that the PE industry in India is maturing," said Vivek Soni, partner and leader - Private Equity Advisory, EY in India. “With buoyant capital markets expected to continue in the near-term, PE exits may remain at record levels in the near future,” he says.