Business Today – August 25, 2019

August 25I 2019 I BUSINESS TODAYI 37

their balance sheet and raise money
at a time when the business plan re-
quires more capital and projects re-
quire more time. PE (firms) are the
predominant form of funding at this
time when long-term equity is just
not present.”
The overall market capitalisa-
tion reached an all-time high of ` 157
lakh crore in January 2018. However,
there has been a severe polarisation,
with only a few Nifty50 stocks par-
ticipating in the rally. So, while cash-
rich companies are commanding re-
cord valuations, those requiring fresh
capital have seen a sharp decline in
market capitalisation, making it dif-
ficult for them to raise equity capital
from the domestic market.
“India is a capital deficient coun-
try and capital is needed across the
board. So, the presence of PEs is in-
creasing,” adds Vohra.

Divesting Non-core Assets
Besides cleaning up debt, the other
reason PE money is sought is divest-
ing of non-core assets by promoters,
leading to transfer of control. Gane-
shan Murugaiyan, Managing Direc-
tor and Head of Investment Banking
and Strategic Coverage, BNP Paribas
India, says larger business groups
are open to aggressive restructuring
of their portfolio by selling non-core
assets and re-deploying capital in
other businesses.
This is, however, in stark contrast
to the attitude of Indian promoters a
decade back when selling ‘family silver’
only meant financial despair. “Earlier,
control deals had a negative connota-
tion and were seen as a kind of distress
exit, whereas now it is considered al-
right to do it as part of portfolio man-
agement,” says Murugaiyan.
Often, succession planning at
family-run businesses also a reason

behind these exits. “It is no more the

general progression where promoter

thinks about succession planning as

second and third generations get into

the business. As they see the benefits

of a professional PE management,

and if the interest of the next genera-

tion lies elsewhere, they are comfort-

able bringing in PE investors,” says

Tarun Bhatia, Managing Director

and Head of South Asia, Kroll, a

global risk consultancy firm.

Vohra of Avendus says the pro-

moters are looking at setting up next

generation businesses for the next

10-20 years and exiting tradition-

al businesses due to change in the

global economic environment. “With

availability of control capital, deal

sizes have become bigger,” he says.

Max Group is a case in point.

Analjit Singh, Founder and Chair-

man of Max Group, sold his chain

of 13 hospitals to PE major KKR-

backed Radiant Life Sciences and

followed it up in February by selling

his 51 per cent stake in Max Bupa to

True North. “Our aim is to recreate

the Max India story all over again

by seeding high-potential businesses

and doing them the Max way, which

will likely create significant value

for those who stay invested with us,”

Singh had said in April.

Bhatia of Kroll says a key shift

has taken place over the last couple

of years — the Indian market has be-

come a lot more comfortable with the

concept of buyouts.

Moreover, says Murugaiyan, there

have been several successful exits –

PE to PE; PE to strategic investor;

or IPO in the Indian market – giv-

ing confidence to investors as well.

“Now there is an established proof of

concept that the entry and exit work

smoothly in India and can be done

for sizeable control deals as well,”

he says.

According to EY’s Private Equity

Monthly Deal Tracker, PE and ven-

ture capital exits were at $26 billion

in value in 2018, almost equal to the

value of exits in the previous three

years combined.

Supply Side Factors

A lot of PE funds have raised money

WHERE ARE THE BIG PE

PLAYERS INVESTING

Investment in India since

2006. Of this nearly $6
      billion has been invested
      in 34 deals in the real
      estate sector

$10

billion-plus

In June, it bought

Mumbai-based Radius

Developers, making it

the largest buyout in the

country’s office space

`2,500

crore

Blackstone

KKR

(about $3.6 billion):

Investment in Reliance Jio

Infratel in July 2019. The

biggest deal by any PE

player in India so far.

`25,215

crore

Bought RIL’s East West

Pipeline in March 2019

`13,000

crore

Acquired five assets

of Hotel Leela Venture

in 2019

`3,950

crore

Bought Hiranandani

office and retail assets

in 2016

$1

billion

Brookfield

2019: Ramky Enviro Engineers

2017: Radiant Life Care

2017: Bharti Infratel; 2017

2016: Max Financial Services

2016: SBI Life Insurance;

2016: Avendus Capital

2015: Emerald India

2010: Coffee Day Resorts