With stock markets on a roll and valuations firming up, PE firms are hoping to make some good exits this year, reports Nitin Shrivastava in Mumbai. In the last three months alone, two sales have resulted in profits in excess of $100 million while two others have seen profits of a more modest $50 million. A report from Bain & Co says investors have been able to take home only $31 billion in the last six years while they invested $90 billion; the more profitable exits have been in the healthcare and financial services spaces. But that’s changing.
In May, Fidelity Growth Partners exited its 25% stake in Lauras Labs — acquired two years ago for around $40 million — to Warburg Pincus for $150 million. In June, ChrysCapital sold its 10% stake in Gujarat-based Intas Pharmaceuticals at nearly 12.5 times the buy cost of $11.5 million nine years ago, netting over $129 million in profits. Raja Lahiri, partner at Grant Thornton India, sees valuations improving for consumer healthcare and IT spaces “Rising valuations will not hamper deals because buyers will have good visibility on earnings potential,” Lahiri says. Although 2014 hasn’t seen any blockbuster exits like those in 2013 — when TPG Capital and Warburg Pincus made returns of over $500 million and $340 million, respectively, selling their stakes in Shriram Transport Finance and Alliance Tire Group — there could be a few. Satish Mandhana, managing partner, IDFC Alternatives, says, “The extreme pessimism has gone leading to an expansion in multiples, despite very little change in fundamentals so far.”