PE investment exits reduced in 2012
Bangalore- Private Equity exits have significantly decreased as compared to last year, as the liquidity in the market is limited and several PE firms have been waiting for better returns.
Real estate in India has witnessed around $288 million of PE fund exits in 2012 while it had seen the exits of around $457.32 million in 2011, according to a data research firm.
Most of the PE exits have happened at the project level and the most common route was through buybacks, in which developers repurchased stakes from investors.
There are projects which had got PE investments around five years ago, that are supposed to reach completion and need to return money to the investors. But funds are stuck at project and company levels due to project delays and present economic scenario. Several such vintage funds have postponed their exits to 2014 seeking better returns.
Analysts expect that more exits would be seen in projects that are mature assets as the risk profile is lower. Every exit requires some external source of capital, either debt or equity, but at this stage, the former seems expensive while equity has dried up.
Some fund managers, notably the ones who have fared well, are still positive about making profitable exits. ASK Property Investment Advisors has gained returns of 2.5 times the investment and has made its first ever exit this year from a project in Noida.
Indiareit Fund Advisors Pvt. Ltd has sold about Rs.440 crore worth of investments this year. Kotak Realty Fund has witnessed exits worth around $180 million this year though some of them were partial exits from residential projects and may not have been announced.
However, analysts say that not many will be able to make profitable exits in the coming months. This year has seen several legal tussles over exits between funds and developers. Several PE funds have even initiated proceedings against developer partners that have sought to impose restrictions on selling stakes in projects or in the companies. Such issues are expected to increase in the days to come. Once the private equity firms realise that capital availability would remain low, then they are likely to put high pressure on developers to give them exits.
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