Foreign investors buy into India story again, PEs monetise bets

Several large investors and funds, including Canada Pension Plan Investment Board (CPPB), Abrdn Investment Management, TPG, Warburg Pincus, General Atlantic, Carlyle, Sequoia Capital, T. Rowe Price International, Norges Bank, and Fairfax, among others, have raised hundreds of crores by selling shares in June.

Foreign portfolio investors bought shares worth ₹25,600 crore so far in June, while domestic funds invested about ₹6,000 crore during this period. Nifty and Sensex rallied over 9% in the last three months and hit record highs last week.

“For private equity funds that had partial exits during the record IPOs of 2021 and wanted to monetise their remaining holding, the market has given them the window. FPIs inflow of more than ₹75,000 crore in the current quarter has boosted their confidence,” said Ajay Saraf, head of investment banking and institutional equity at ICICI Securities. “A few promoters have also joined them, taking advantage of the bounce in the market.” In September 2022, there were block deals of nearly ₹14,000 crore, excluding the inter-se transfers, whereas in March 2019, the Indian market saw around ₹13,600 crore worth of block deals.

The ability of large investors such as private equity funds to take big exits reinforces the message of the attractiveness of the Indian capital markets, bankers said.”Global investors are now confident of buying into the ‘India Rising’ story as interest rates remain steady and inflation largely under control,” said Subhrajit Roy, India head of global capital markets at Bank of America. “Earlier, most deals were led by domestic investors, but now we have started witnessing participation from foreign investors as well, especially long-only investors.”

CPPB sold about a 1.6% stake in private lender Kotak Mahindra Bank on June 9 through open market transactions and took home ₹6,123 crore. UK-based Abrdn Investment Management sold its entire 10.2% stake in HDFC Asset Management Company for ₹4,079 crore on June 20. US private equity firm TPG sold its 2.65% stake in Shriram Finance for ₹1,390 crore on June 19.Another US-based private equity firm, Warburg Pincus, sold a 6.2% stake in jewellery retailer Kalyan Jewellers on June 16 for ₹725 crore. Carlyle sold its entire stake of 2.53% in logistics and supply chain solution startup Delhivery for ₹709.50 crore on June 22. General Atlantic offloaded Krishna Institute of Medical Sciences (KIMS) shares for ₹696 crore on June 20.

“Rich valuations, huge inflow from FPIs and DIIs, and benchmarks at peak…private equity players could not have found a better time to monetise their stake than this,” said V Jayasankar, head of equity capital markets, Kotak Investment Banking. “On the other side, such large exits at ease show the depth of the Indian markets, which has become much more liquid with another set of investors willing to take large bets.”

Fundraising is not restricted only to private equity players; some promoters have also encashed the surging Indian equities. Piramal Enterprises sold its entire 8.34% stake in Shriram Finance for ₹4,824 crore on June 21. Timken Singapore, the parent of Timken India, sold an 8.4% stake in its Indian-listed firm Timken India for ₹2,362 crore on June 20. Sion Investment Holdings, part of the promoter group, sold a nearly 13.7% stake in CMS Info Systems for ₹638 crore on June 9.