The pace of exits for the Indian private equity industry accelerated in the last three years, with the period contributing to almost half of the exited capital since 2003, said consulting firm McKinsey and Co.
“In 2015, private equity had an overhang of unexited investment. Since then, the pace of exits has grown significantly, to $10.8 billion in 2017—a tenfold growth since 2009,” Mckinsey said in its report titled Indian Private Equity: Coming of Age.
“In fact, 48% of all exits since 2003 (by value) took place in the past three years,” it said.
Sales to strategic buyers comprised almost a third of exits (measured by value) from 2015 to 2017, the period under consideration in the report.
“This finding underscores the influence private-equity investors wield over exit approaches and timing to capture value, reposition portfolio companies as attractive acquisition targets, and steer other owners and investors through an exit process,” said McKinsey in its report.
Buoyant markets have recently facilitated sales to the public, it said, adding that these sales grew 1.5 times from 2015 to 2017 compared with 2011 to 2014, although such exits claimed a slightly lower share than they did over the longer period of 2003 to 2014.
In recent years, the industry has focused efforts on exits and returned more capital to investors than in previous years.
Capital calls exceeded distributions in 2017, although distributions have grown over the past five years, it said.
The increased pace of exits has also arrested the growth of unexited capital, according to the report.
The value of investments not yet exited in 2017 stands at 4.6 years of investment—falling from its peak of 6.2 years in 2014, said McKinsey.
This article was first published on livemint.com