| Plan to re-enter India in January. |
“The Nifty going down from 6,300 to 5,900 levels would have instilled a sense of fear in them (PE firms), and hence, they started booking profits as well as losses.”
The stock markets are seeing another round of exits by high profile private equity investors in the last one week.
The PE firms to exit stocks are Warburg Pincus, which sold over half its shareholding in Amtek India, and Citigroup Venture Capital International (CVCI) encashing 7 per cent out of its total stake of 10.44 per cent in Jindal Drilling.
It is interesting to note that Warburg Pincus and CVCI booked losses and got out of their positions, while ChrysCapital's with its exit of Infosys reportedly made a killing of 129 per cent in profits.
Strictly speaking, a loss booked by a PE firm need not result in an actual loss. It is a loss on paper only, said the head of a research house, on condition of anonymity. Many a time the acquisition price itself is over invoiced.
On November 19, Stoneridge Investments, an account of Warburg Pincus International Llc, sold 38.02 lakh shares at an average price of Rs 64.8 in Amtek India, while CVCI sold 15.93 lakh shares of Jindal Drilling at a price in the range of Rs 565 and Rs 570.
Both these transactions were reportedly loss making to the sellers to the tune of 63 per cent and 11 per cent, respectively.
Market experts attribute this to a negative market outlook due to global cues, profit booking, and portfolio rejig.
With respect to Jindal Drilling, the general perception was that the PE exit could have come in the wake of a spat between the MD who was sacked by the Board on September 24 which said it had ‘lost confidence' in him.
“PE firms are booking profits where they have made money and redeploying the proceeds elsewhere,” said Mr Alok B. Agarwal, Head of Research, Mata Securities.
ChrysCapital's subsidiary Vandyck invested approximately Rs 50 crore in Pratibha Industries through a preferential allotment at Rs 92 a share.
Experts are also of the opinion that the Ireland episode is making some of the PEs exiting irrespective of profits or losses for this calendar year; these firms plan to re-enter India in January after taking stock of the situation in Europe.
Anyway, the QE2 inflows are bound to come in the first three months of the next calendar year, they say.
“PE firms as a breed have to take a call on market perception,” said Mr Kishor Ostwal, CMD, CNI Research. “The Nifty going down from 6,300 to 5,900 levels would have instilled a sense of fear in them, and hence, they started booking profits as well as losses.”
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