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April 5, 2012

In biggest sell-off quarter, Private equity firms cash in

MUMBAI: Private equity firms sold shares worth over $1.8 billion in the first three months of 2012, making it the busiest quarter of exits for long-term risk investors in India. Most of the selloffs came in the listed companies when the PE biggies like Carlyle, Temasek and Warburg Pincus liquidated holdings on the back of share price rebounds in volatile markets.

Initial data suggested that PEs exited in the January-March quarter almost 88% of what they sold in the entire 2011, and over 50% of what they recouped in 2010 which was the biggest year in terms of share sale till date.

The latest quarter topped the October-December period of 2010 when PEs redeemed $1.3 billion investments, said a JM Financial note of private equity sector in India. The record profit-booking by private equity investors came even as another data from Grant Thornton said fresh investments by value declined 22% to $2.01 billion in the first quarter of the calendar year.

PEs liquidated some marquee Indian stocks to show returns to their investors-called limited partners (LPs) in industry parlance who are mostly global pension funds, university endowments and family offices. Some of these profit bookings, which were struck a shade below ideal returns, were done even as the big global funds embarked on fresh fund-raise . LPs, of late, have raised concerns about the quality of returns on investments made into India, which is sitting on dry powder estimated at over $20 billion.

Mumbai realtor Lodha Group’s buyback of $508 million equity from a private equity arm of Deutsche Bank provided the single biggest exit. But the momentum came from Carlyle, Warburg and sovereign wealth fund Khazanah when they offloaded shares in the publicly quoted Indian banks. Warburg completed its exit from Kotak Mahindra Bank when it sold shares worth $486 million in January-March quarter this year.

Temasek divested $299 million shares in ICICI Bank, which it held for nearly eight years, even as Carlyle booked nearly two-fold return on its investment in HDFC when it sold shares worth $276 million. Khazanah sold Yes Bank shares worth $104 million in another deal in the banking space.

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