Even as few large private equity and marquee venture capital exits were recorded this year, 2013 overall saw PE/VC exits soften compared with the previous year even as public markets climbed to new highs.
A deep dive into the 156 exit transactions worth around $3.5 billion reveals that even as liquidity routes such as M&As and PE to PE secondary transactions have gained traction as sources of exits, capital market deals still constitute a majority if one looks at the top private equity exits for the year.
Indeed, leaving aside Warburg Pincus' sale of Alliance Tire Group (ATG) to KKR, all other deals were market transactions.
The exits have come across a variety of sectors like financial services, auto components, healthcare services, electrical equipment and telecom.
Of the top five, two were multi-baggers, two generated average returns and one involved a haircut. All the returns are calculated in local currency and given that all the exits involved portfolio investments made when the rupee was valued much higher, depreciation of Indian currency means the returns in dollar terms would be much lower.
The year clearly belongs to Warburg Pincus boasting two of the top five exits this year by value. The top tier PE firm also sold stake in business process outsourcing firm WNS Holdings besides two less spectacular liquidity events where it exited or part exited with huge haircuts—Punj Lloyd and Amtek Auto. Warburg is followed by TPG Capital, Temasek and Apax Partners among those who pocketed the most money from exits.
TPG Capital sells stake in Shriram Transport for $615 million
Private equity major TPG Capital scored a multi-bagger when it sold its 20 per cent stake in Shriram Transport Finance Company Ltd, the Chennai-based commercial vehicle financier. TPG Capital, through its arm Newbridge India Investments II, sold its stake in two tranches for $615 million (around Rs 3,400 crore). The deal gives the PE firm 6-7x returns, making it the largest exit in India after it sold stake in Matrix Laboratories.
TPG Capital paid $100 million or Rs 450 crore for 49 per cent stake in the holding arm of the promoters – Shriram Holdings (Madras) Pvt Ltd – in 2005. In a corporate restructuring, the promoter arm was merged with the public-listed Shriram Transport.
The deal was the first transaction between TPG Capital and the $9 billion Shriram Group, which has interests in various sectors – from financial services to infrastructure to real estate. TPG Capital later invested in a number of Shriram Group companies.
TPG Capital’s exit also paved the way for Piramal Enterprises’ entry, which picked up 10 per cent stake in Shriram Transport.
Warburg Pincus sells stake in Alliance Tire for $418 million
Private equity major KKR & Co acquired a controlling stake in the Alliance Tire Group (ATG), in what turned out to be another multi-bagger exit for Warburg Pincus. The parties agreed to an equity valuation of $522 million and KKR also took $125 million on the balance sheet of Alliance Tire. This gave the company an enterprise valuation of nearly $650 million.
Warburg Pincus first invested to fund the $45 million acquisition of Israel’s Alliance Tire Company Ltd in 2007. Warburg Pincus later teamed up with Yogesh Mahansaria (former CEO of Balkrishna Tyres) and his father Ashok Mahansaria to form the Alliance Tire Group. The PE firm is said to have increased its total investment to approximately $100 million in Alliance Tire, giving the firm over four times returns. Warburg Pincus got over $400 million for its stake of around 77 per cent in the company.
Temasek part exits Bharti Airtel for $302 million
While the first two exits were profitable, the third one was not so. Singapore’s sovereign wealth fund Temasek part exited its six-year-old investment in Bharti Airtel, its single biggest investment in India, at a loss. It sold around one-third of its holding to Asian telco Singapore Telecommunications Ltd (SingTel) in a deal worth Rs 1,859 crore ($302 million or S$383.5 million).
SingTel, majority-owned by Temasek, disclosed it is buying 3.62 per cent additional stake in Bharti Telecom. Bharti Telecom is the single-largest shareholder of India’s largest and world’s fourth-biggest cellular operator (by subscribers) Bharti Airtel. The deal raised SingTel’s holding in Bharti Telecom to 39.78 per cent.
Apax exits Apollo Hospitals for around $225 million
Private equity major Apax Partners has sold its stake in Apollo Hospitals Enterprises Ltd, India’s largest hospital company by market value, through open market share sale. Apax sold around 12-13 per cent stake in the company for around $225 million through a series of market deals earlier this year.
According to VCCircle estimates, the exit was done at a multiple of over 2.75x. The shares were sold at Rs 830 a unit and its average share acquisition cost is pegged at around Rs 300 per share.
The deal was the first exit in India for Apax, which has to date closed only two other deals—iGate and GlobalLogic.
Warburg Pincus exits Havells for $215 million
In a deal that proves that investments made during the heydays of 2007-08 could still be turned around, private equity major Warburg Pincus exited electrical equipment company Havells India Ltd at approximately 2.5x returns. The PE sold nearly 14 per cent stake in the market earlier this year for Rs 1200 crore ($215 million), completing its exit from the nearly six-year-old investment.
The exit came on the backdrop of a turnaround at Havells, where at one point Warburg Pincus was down over 80 per cent in mark to market returns in early 2009. It also marked a strong partnership between an investor and an entrepreneur where the PE firm chose to pick equity in lieu of convertible securities at a huge premium to the then market price.
Havells acquired Dutch company SLI Sylvania’s lighting business in 2007 for $300 million to build a global presence. But with the global slowdown, Sylvania started reporting losses, turning a drag on Havells.
The company then restructured Sylvania by shutting down plants, reducing fixed costs and trimming workforce. Sylvania started reporting profits from FY11.
(Edited by Joby Puthuparampil Johnson)