$700 mn buyout deal shows new way of moving assets, holding equity in India

A relatively new portfolio management tool allows private equity managers to move assets around more easily, as a way to hold them for longer

By Preeti Singh

A new method for private equity funds to return profits to investors may gain traction in India. 

ChrysCapital Management Co. recently used a so-called continuation fund to raise $700 million from investors to maintain its minority stake in National Stock Exchange of India Ltd. This relatively new portfolio management tool allows private equity managers to move assets around more easily, as a way to hold them for longer. 

ChrysCapital’s transaction, one of the largest on Asia’s secondary market, helps set the stage for private equity funds in India to have another option for their investment stakes, Kunal Shroff, managing partner at the India-focused firm, said in an interview.

 

A firm can raise a continuation fund to move an asset or multiple assets from prior funds and allow investors in the original funds to either roll over their commitments into the new vehicle and sometimes add new capital, or to cash out and take liquidity.

The success of this continuation fund is “a positive signal to investors that India can get you liquidity — not just from block trades of a billion dollars that some of our peers have done, or through sales to other PE funds or strategies,” said Shroff, who’s been at the firm since 1999.

Single or multi-asset continuation funds have gained more traction in the US and Europe. They made up 76 per cent of the private equity deal flow globally last year, according to a report by Evercore Inc. These so-called sponsor-led transactions accounted for less than half of the $114 billion secondary market deal volumes, the report said. 

These transactions are still rare in Asia however. 

ChrysCapital’s fundraise to hang on to its 4 per cent stake in NSE was more than double its original target, Shroff said. It also rolled over all its share of profits, or carried interest, on the deal into the new fund, reflecting its “skin in the game,” he added.

The latest deal values privately-held NSE at between $17 billion and $18 billion and the firm still has a lot of runway for growth, Shroff said. Plans for taking the company public, a move that’s been in the works for years, are not yet firmed up, he said. 

HarbourVest Partners LLC, LGT Capital Partners AG and Pantheon Ventures Ltd came into the continuation fund as new investors, and UBS Group AG was an adviser to the deal. 

ChrysCapital has more than $5 billion of assets under management and has returned $6.5 billion to investors through more than 70 exits, according to its website.