Foreign investors rush to book profits via secondary sales

There have been over 25 large block deals in the past six months in which foreign funds, including Blackstone, Apax Partners, SoftBank, Tiger Global, Bain Capital and General Atlantic, among others, have sold shares worth nearly ₹35,000 crore. Secondary market deals have largely revived from sustained and continued domestic flows.

In the latest block deal, US private equity giant Blackstone sold its remaining 20.50% stake in Sona BLW Precision Forgings for ₹4,917 crore to a clutch of investors last week. Last August, Blackstone sold 79.4 million shares or 13.6% stake in the company for ₹4,044 crore.

Last week, Japan’s Sumitomo Wiring Systems sold a 3.4% stake in Samvardhana Motherson International for ₹1,612 crore. On March 8, private equity fund Apax Partners LLP sold 10.8 million shares or 2.90% stake in Shriram Finance, the retail lending arm of Chennai-based Shriram Group, through a secondary market transaction for ₹1,330 crore. Earlier in January, Apax sold shares worth ₹1,040 crore in the company.

China’s Alibaba Group sold a 3.3% stake in Paytm parent One97 Communications through the open market for ₹1,378 crore last month. Alibaba sold a 3% stake in January, which raked in ₹1,031 crore.

Since October 1, only 22 companies have been able to raise about ₹16,500 through initial public offerings. The Nifty index has declined over 6% so far this year, with foreign portfolio investors selling shares worth ₹19,091 crore during this period. FPIs sold shares worth ₹1.26 lakh crore last year.

The large block deals have brought the stock prices under pressure as the deals were executed at a 5-10% discount to the prevailing market price. While Sona BLW shares have declined 10% in the last month, Samvardhana Motherson plunged 15% and One97 Communications nearly 8%.

Bankers, however, said the ability of large investors such as private equity funds to take large exits should be seen positively and reinforces the message on the attractiveness of the Indian capital markets.

“The recent deals show early investors, including private equity funds, monetised their stakes as they had already made significant returns, being early backers to the companies,” said Gaurav Sood, head-equity capital markets at Avendus Capital. “The fact that such large exits can happen with minimal impact cost shows the depth of the Indian markets, which has become much more liquid and robust in the last few years. Both FIIs and DIIs are willing to take large bite sizes in quality companies.”

“While FIIs in secondary markets have been sellers due to the global interest rate environment, specifically to these blocks and capital market transactions, we have seen strong interest by FIIs,” said Sood.