Private equity players feel good exits nigh

Stability in the stock market and growing business confidence are expected to help private equity (PE) investors not only sew up a raft of deals, but also make successful exits this year. Many investments, made 4-6 years ago, are currently in the final stages of maturity.
Alok Gupta, managing director & CEO of Axis Private Equity, said the increased level of activity in the primary capital market witnessed through qualified institutional placements and initial (IPO) public offerings and follow-ons are giving hopes of decent exits for private equity investors.

Axis itself has been approached by potential investors for a strategic sale in one of the companies it has invested in.

“We are currently evaluating the proposal. If it goes well, we could partially or fully exit it,” Gupta said, without divulging further. He isn’t alone in pursuing exits. Kotak Private Equity, Milestone Capital and Sun-Apollo among others that plan to make exits in the coming year and more so within this fiscal ending March 31, say sources familiar with the development.

“We should be doing 2-3 exits in the upcoming quarter or so,” said Ashish Joshi, managing partner - real estate, Milestone Capital Advisors, adding that exits by PEs and funds “will be showcased to build investor confidence”.

Options like IPOs, strategic or trade sale have not been looked at by Milestone mainly because the investments have been in different special purpose vehicles (SPVs).

“Exits in SPVs,” Joshi said, “depend on the structure that one has. In our case it is small equity and a large portion of debentures. As and when there is surplus available in the project you take out a large portion of the surplus either through interest or redemption of debentures. We are envisaging more than 20% in returns for all the exits we will do within this fiscal.”

The economy shifting to a higher orbit adds to the sanguinity because they help equities form higher bottoms. This, private equity investors say, is expected to boost sentiment.
Kotak Mahindra Bank’s private equity arm is exploring a combination of public and strategic sale for their exits in 2010. Nitin Deshmukh, CEO, private equity, Kotak Investment Advisors Ltd, said the next fiscal will see the company making many exits.
“It will be a mix of strategic sale and IPOs,” he said. Investment banking sources said Kotak has some investments (in Mumbai and Delhi) maturing from its domestic funds, which will be the ones to head for the door.