Private equity (PE) firms in India believe prospects will improve in 2013 as the public market slowly opens up and secondary deals rise, although fund-raising will remain a challenge for many.
“The outlook for PE in 2013 and 2014 is obviously challenging for fund-raising. I would say the industry is optimistically cautious as the scenario looks better than the last two years,” said Gulpreet Kohli, managing director at ChrysCapital Investment Advisors. “Exits will be good only if the IPO (initial public offering) market picks up and the few IPOs in 2012 are test cases for future prospects.”
“If the IPO market improves, you will see several exits through these. Several of the PE portfolio companies have filed their documents with Sebi (the Securities and Exchange Board of India) and are ready to go to market when there is a decent window,” said Vikram Utamsingh, head of transactions and restructuring and private equity advisory at consultancy firm KPMG India.
There was one IPO listed in November, which raised $1.56 million from the public. The total amount raised through IPOs between January and December 2011 was $1.20 billion from 30 IPOs, according to the latest Dealtracker report by consultancy firm Grant Thornton.
“There are a lot of opportunities for PE firms in India next year because there is bound to be a shortage of capital here. Also, the days of lobbying are over and most of the sectors are open to foreign investment,” said a senior fund manager of a foreign PE fund.
“The number of quality opportunities has increased as more and more firms today need capital. The number of funds competing against each other for deals has gone down. As PE and venture capital firms mature, they pay the right price for a stake in the firm and the deals are closing faster than usual. Today, PE firms focus on exits right at the beginning of a partnership, they keep the exit strategy clear,” said Sachin Maheshwari, director at venture capital firm Zephyr Peacock India Management.
There were a total of 378 PE deals in India amounting over $7.04 billion investment between January and November this year, according to Grant Thornton. Pharmaceuticals, healthcare and banking and financial services together received 42% of the total PE investments.
However, the opening of the public markets is a moment of joy for few. “Only companies of a large size and strength will be well received at the IPO,” said Kohli