Private equity firms in India realised $6.8 billion in 2012, up 65.8 percent from the $4.1 billion worth of exits during 2011, according to the India Private Equity Report recently released by Bain & Company.
Firms sold a total of 115 companies during the year, a 30 percent increase on the 88 exits completed in 2011.
The proportion of deals exiting through public markets was about 40 percent, with secondary and buyback deals accounting for 35 percent of exit volume, the report showed.
In particular, exits in the financial services sector boomed – increasing by 438 percent to $2.1 billion from $390 million the year before. These included Carlyle's $1.1 billion exit from HDFC, Warburg Pincus' $460 million exit from Kotak Mahindra Bank and Temasek's $299 million exit from ICICI Bank.
Financial services companies provided exits for
Exits have continued this year, with a number of secondary sales in India. These include emerging markets firm Actis selling its minority stake in auto components maker Avtec to Warburg Pincus; and Kohlberg Kravis Roberts buying Warburg’s controlling stake in tire maker Alliance Tire Group for an estimated $500 million, both in April, Private Equity International reported earlier.
The figures are positive for India’s private equity industry, which has focused its efforts on divesting a huge overhang of unrealised investments. According to Bain figures only $30 billion has been realised of the $85 billion invested in India since 2000.
This discrepancy has caused a vast number of LPs to lose interest in what many see as a flailing private equity market. Globally, $320 billion was raised for private equity funds during 2012, but only $3 billion of that was mandated for India, according to the report. This compares to the $7 billion allocated to India by country, regional and global funds during 2011.
The report noted that similar to 2011, 80 percent of capital raised for Indian private equity last year was by foreign investors due to the inability of insurance companies and pension funds to invest in the asset class. The other 20 percent came from Indian high net-worth individuals and corporations.
Nevertheless, fundraising in 2013 looks positive, according to Bain. In fact, firms highlight exits and valuations as far more concerning challenges than raising capital. Moreover, the levels of dry powder have dropped to $11 billion from $17 billion in just a year, sparking interest from investors.
David Seex, head of Asia at Adveq in Hong Kong, explained to PEI earlier that as few investors are committing to India funds and the capital overhang dries up, India is now ripe for investment.
“The issue is there has been too much capital,” he said. “India is now becoming an interesting place to invest again in terms of capital supply and demand.”