Private equity-backed firms are making up for the lacklustre PE deal climate. A number of PE-backed companies are on their way to the market with their initial public offerings.
The move implies revival in exit opportunities and may actually spur fresh deal-making.
Lack of exit visibility over the last one year has resulted in investors adopting a cautious stance. Now, the uptick in corporate valuations (the benchmark market index Sensex has doubled over the last six months) and an overall buoyancy in economic activity could push PE fund managers to take a call on new investments.
Some of the PE-backed firms which are on their way to float public issues include Vascon Engineers (HDFC Property Fund), IL&FS Transportation Networks (Trikona Trinity), Reliance Infratel (New Silk Route among others), DEN Networks (IL&FS Investment Managers and EMSAF), Hathway Cable (ChrysCap) and DB Corp (Warburg Pincus) to name a few.
While Warburg Pincus is looking to sell its entire 7% holding in DB Corp’s IPO, ChrysCap may be looking at a partial exit from Hathway and others such as Reliance Infratel is a pure new share issue rather than a combo of shares at issue and offer for sale.
These issues come after three PE-backed companies floated IPOs in the last one quarter starting with Mahindra Holidays in which government-owned bank SBI and Jacob Ballas struck a pre-IPO deal.
Then there was 3i-backed Adani Power and Pipavav Shipyard which had a group of PE investors including Trinity Capital, 2i Capital, SCB Asian Infrastructure Fund, New York Life Investment Management India Fund II (NYLIM) and Citadel.
PE-backed companies are going ahead with IPOs even as some such companies could not offer any major upside to their pre-IPO investors, post listing. For instance, in case of Mahindra Holidays, the scrip has failed to move past Rs 400-level even as SBI and Jacob Ballas has invested at Rs 479 a share in January 2008.