Private equity players are finding it challenging to exit investments made due to depreciating rupee against the dollar and hence are opting for initial public offer route rather than strategic sale.
"There is some stress for private equity in generating returns due to rapidly depreciating rupee along with competition leading to higher valuations," said Bijou Kurien, Member, Strategic Advisory Board and Mentor, L Capital Asia (LVMH Group) at the India Retail Forum
"We are beginning to see in the last 3-4 years (that) most deals seem to be happening through other equity players, which are trade sales, or an IPO. These are some of the options people are adopting for exiting," he said.
Returns for private equity have dropped from 40-50 per cent in 2005-08 to 10 per cent in the last two years and holding period has risen to 6 years from 3 years previously, Kurien said.
Between 2000 and 2008, real estate and telecom had the lowest percentage of exits, while the consumer space was better, as the average returns were better with a much shorter exit period of 3-4 years compared to 6-7 years in other sectors, he said.
While USD 50 billion was invested in 2000-08, only USD 16 billion exited in the period subsequent to 2008, he pointed out.
"The USD 16 billion that exited, were at returns which were not very flattering compared to what these funds would normally get in China. The average returns was only 1.7x on an average while the balance is still stuck," he said.
Between 2000 and 2014, USD 103 billion was invested and around USD 12 billion will be invested this year, Kurien indicated.
"Private equity has contributed to 45 per cent of the equity financing in the last four years," he said.
Fifty per cent of the PE investments has been deployed in large corporates (with a turnover of greater than USD 125 million), which contributes to 20 per cent of the deals.
