Investors in private equity are getting to see the face of money as general partners (GPs or fund managers) orchestrate record exits from portfolio firms on the back of booming stock markets. Private equity exits have touched $3.5 billion in the first nine months of calendar year 2010 across 109 deals, according to VCCEdge, the financial research platform of VCCircle.

With three more months to go (in this calendar) and a very robust IPO pipeline, the total value of exits is expected to cross the earlier high of $3.66 billion in the entire calendar year 2008. Exits through buyback (promoters buying back the investors' stake) lead in terms of deal value while open market route saw the highest number of deals.

"The public markets today are very open for business. Bankers are extremely busy with the pipeline of IPOs that are coming. So there is definitely an increased activity of exits that we are seeing as a result of the strong public markets," said Sumir Chadha, managing director of Sequoia Capital India.

"Given that the public markets hold at current level or better, there will be heightened amount of exit activity," added Chadha.

The venture and growth capital investor has seen some of the notable exits this year - SKS Microfinance (through IPO), Manappuram Finance (open market sale) and Dr Lal Pathlabs (secondary sale to TA Associates). Two of its companies - Micromax Informatics and Ind-Barath Power Infra - have already filed DRHPs for a listing.

This calendar year has so far seen 13 private equity exits worth $442 million through the IPO route, which is the highest in both value and volume terms over the last five years. Many companies that raised funding 2005 and 2006 have matured for a listing, thus creating a healthy pipeline for PE exits.

Also, institutional investors are lapping up the unique stories that private equity funds have typically been the first to back in India. "The real estate and power IPOs have saturated the market. Any stories which are different from that, there is a lot of appetite in the market," said Nainesh Jaisingh, managing director at Standard Chartered Private Equity Advisors (India).

Some of the unique issues this year, which were private equity backed, saw a strong demand from the capital markets. These include SKS Microfinance (first MFI to list), Jubilant Foodworks (one of the first QSR chains to list) and Career Point Infosystems (first test preparation firm to list).

Also, private equity investors are making the best of the present upswing in the markets in order to create liquidity in their portfolios. "Investors want to take as much advantage as possible because in the past we have seen, in the aftermath of September 2008, the IPO window closing very quickly," said Vishal Gupta, managing director of Bessemer Venture Partners India.

Many PE investors, who typically have lock-in on their investments, sell their holding in the market after the period expires. These open market exits accounted for 45 deals worth $661 million this calendar year.

But it may not be celebration for all the Indian PE investors as many may have to hold on longer for a possible exit, explained Chadha. "My worry is that a lot of the investments that were made in 2007 and the first half of 2008 are not looking very good today because they were done at a very high valuation in a bull market. So, its not exits for everyone as many firms that did a lot of deals during the peak and probably will not see exits for a while," said Chadha, who is also the co-chairman of the Indian Venture Capital Association (IVCA).

Buyback accounted for the largest component of PE exit value this year, with deals coming mostly from the real estate sector. There were 12 exits from buyback worth $1.5 billion, with real estate accounting a lions share of deals worth $1.1 billion. Major buyback deals include DLF Assets buying back stake of Symphony Capital and Sahara's Aamby Valley Ltd buying the stake Siva Ventures.

More than a dozen real estate companies, many of which are private equity backed, have filed their DRHPs with SEBI for listing. The IPOs in the real estate sector have been tough till earlier this year but the markets seems to be opening up now, said Chadha, referring to the latest $250 million QIP of Housing Development and Infrastructure Ltd, the fourth-largest realtor in the country.

"I think IPO is going to, by far, be the most common form of exits since the M&A markets is relatively new. But M&A is becoming more important than it used to be traditionally," said Chadha, who added that several of Sequoia’s portfolio companies are in discussions to be sold.

The mergers & acquisitions have seen an increased activity over the past 3-4 months.  Some of the major PE exits from M&A include Kalanithi Maran’s acquisition of Spicejet  (backed by WL Ross, Goldman Sachs & Istitihmar), NTT Data Corporation’s $199 million buy of Intelligroup Inc. (backed by SAIF Partners and Peepul Capital) and Atos Origin’s $100 million buy of Venture Infotek (backed by Kubera Cross-Border Fund).

"M&A remains more opportunistic and depends on circumstances, and typically happens more in early stage and in non-Indian markets. Indian promoters are not willing to pay the price and prefer to build the business from scratch," added Gupta of Bessemer.

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