CDC to make $56m from UTI Bank pie sale to HSBC

CDC Capital Partners, the private equity investor, will gain $56 million from the sale of its stake in UTI Bank to HSBC. This is provided the central bank clears the entire stake sale of 20 per cent in favour of the foreign bank.

The Reserve Bank of India (RBI) has cleared the first phase of the sell off to the extent of 14.7 per cent, which translates into a gain of $41 million for CDC.

Private equity investors have made good gains on their investments in the country. ChrysCapital generated an internal rate of return in excess of 135 per cent on the sale of its investment in Spectramind to Wipro.

Jardine Fleming and JP Morgan are equally expected to make a decent return in the NDTV's initial public offering, as in the case of GE Capital and ICICI Venture in TV Today Network's IPO last year, stated PricewaterhouseCoopers (PWC) associate director Sanjeev Krishan.

"Private equity investors are not here for the long haul. Their time horizon is roughly three to four years by which time they look for an exit route," said a senior official associated with a leading private equity investor.

With valuations in the capital market looking bright, many private equity investors are looking at exit options as in the case of Warburg Pincus' $300 million investment in Bharti Tele-ventures, which has doubled in value.

Other well known successful private equity investments (yet to be divested) include Citibank's investment in I-flex and Jindal Iron & Steel and Barings Investment in MphasiS BFL, said PWC in its recent report on private equity investment.

"While private equity investors have made huge gains, they have been responsible for supporting and promoting growth in certain industry segments in India""specifically in the BPO and the technology sector ""Daksh, SpectraMind and MSource being prime examples," said Krishan.

Commenting on the government's decision not to divest profitable public sector undertakings, Krishan said: "Private equity investors were never large in this segment. However, with state governments selling profitable PSUs, there is interest in this segment."

CDC Capital Partners (now Actis) took 28.5 per cent stake from the state government for approximately $ 57 million in Punjab Tractors.