With only a little over two months remaining for 2022 to end, private equity (PE) and venture capital (VC) exits in India are nowhere close to that of 2021 levels.
PE and VC firms encashed just $11.7 billion across 162 exit transactions during the first nine months of this year, show data from research firm Venture Intelligence.
In terms of value, this is a 56.5% drop from the January-September period of 2021 when investors had made $26.9 billion by selling stake in 204 companies.
To be sure, 2021 was a bumper year in terms of exits for PEs and VCs, who normally struggle to cash out of their portfolio companies. During the entire 2021, PEs and VCs reaped $37 billion from 283 deals. In 2020, the number of exit deals stood at 163 and the amount PE firms made from them was $6.9 billion.
Last year, exits received a boost as India’s benchmark stock index, the Sensex, rose nearly 22% aiding the public listing of five startups in the country.
It all began with the stellar IPO of food delivery startup Zomato in July 2021 which prompted other startups such as CarTrade.com, beauty marketplace Nykaa, insurtech player PolicyBazaar, and fintech giant Paytm to hit the Indian bourse. Separately, Freshworks became the first Indian SaaS startup last year to get listed in the US.
However, with growing uncertainty in the global markets and dropping valuations this year, investors have now developed cold feet towards new exits.
From an investor’s perspective, exits have been a challenge, PE veteran and ex-CEO of KKR India Sanjay Nayar recently told DealStreetAsia in an interview.
“People [entrepreneurs and investors] should be smart. If you get an exit at a certain price, you should just be exiting. Everyone can’t get the moon always,” Nayar, who recently founded tech fund Sorin Investments, said.
Meanwhile, Sanjeev Bikhchandani, founder and vice-chairman of Info Edge added: “Exits in India are hard. Inception to IPO, anything less than 10 years is really rapid.”
In top PE-VC exits this year, global investment firm Actis exited Sprng Energy and sold its stake to Shell Overseas for $950 million in April 2022. During the same month, General Atlantic and Sequoia Capital India sold their stake in Mu Sigma to its promoters for $501 million.
In other exit deals, General Atlantic and Fairfax Holdings raked in $486 million when Bain Capital and TPG Growth acquired their stake in IIFL Wealth Management in March. Meanwhile, KKR and Baring Asia sold their stakes in Max Healthcare Institute and Coforge for less than $500 million during the same month. Both were public market sales.
PE firms typically exit their portfolio companies by way of trade sales, public listing, recapitalisation and secondary sales.
A trade sale is the most common exit route for PE and VC firms as trade buyers, in the same industry, are often more likely to realise synergies with the business and are, therefore, the most natural acquirers.
Public listing, on the other hand, takes place during favourable market conditions. That explains how startups raised $5.6 billion from domestic listings, paving the way for a full or partial exit for PE and VC investors last year.