PE and VC investors make a killing in the 2023 bull market

• PE investors like Softbank, Tiger Global, Bain and TPG could execute partial/full exits in 2023 due to a bull market run.
• New-age internet company stocks that have run up this year also offer exit options for strategic investors.
• Promoters have also sold off shares to the tune of ₹87,000 crore in 2023, says Kotak report.
  

Private equity and venture capital investors have made a killing during the Indian markets’ bull run. In over 29 large block deals, investors like Softbank, Tiger Global, Bain and TPG sold stakes in new-age internet companies as well as newly listed companies this year.

Indian stock markets have appreciated by over 7% in the last one year. The benchmark indices have also hit life-time highs multiple times during the year. New-age internet companies too have been charting a path to profitability and have been gaining value, allowing strategic investors to exit them.

The sell-off via block and bulk deals by PE investors has been broad-based during the year, says a report by Kotak Institutional Investors. But the most notable large deals have been in the new-age internet companies.

PayTM has seen the most sell-offs — with four block deals to the tune of ₹5,880 crore. Alibaba, Morgan Stanley Investment Management and Softbank were the top sellers.

Zomato, which recently announced its maiden profits, also saw three large deals in August by Softbank, Apoletto Asia and Tiger Global. Together they made around ₹1,360 crore during the sell-off.

“PE/VC investors have made exits through both the primary via IPOs, and secondary via block deals market routes. The trend of PE exits has accelerated in 2023 as PEs have used buoyant secondary market conditions to sell their holdings both in full and part to institutional (foreign and domestic) and retail investors,” said a report by Kotak Institutional Investors.

Tiger Global also sold shares in Delhivery via two deals making as much as ₹590 crore, while other mid cap companies like Restaurant Brands Asia as well as Bikaji Foods also saw strategic investors selling from the rising markets. PB Fintech also saw a share sale from Tencent.

The robust IPO market has also seen many PE and VC investors selling via offers-for-sale. “We note that offer-for-sale amounts have been significantly higher than fresh capital issuance amounts over 2018-23,” Kotak said.

In the eight months of 2023, fresh capital issuances are much lower than offer-for-sales. Very few IPOs like JSW Infrastructure and Utkarsh Small Finance Bank have been completely fresh issues.



Source: Kotak Institutional Investors

Financial services companies

Banks and the financial services sector have seen a good run all through the year, making up for the chunk of the large block deals. Investors like Bain Capital Private Equity, Integral Investments, Apax Partners and Bessemer India Capital Holdings have sold on the high.

Shriram Finance, Home First Finance Co, Five-Star Business Finance and L&T Finance Holdings have also seen share sales during the year.


Source: Kotak Institutional Investors

Promoter exist inches up too

Apart from strategic investors, promoters too have sold off shares in the secondary market to the tune of ₹87,000 crore during the year, as per the report. However, it is noteworthy that Adani Group’s ₹37,000 crore sell-off made up for 40% of the promoter holding sales.

“We would attribute only a small portion of promoter sales to bullish equity market conditions. A large portion of the sales by promoters pertains to holding companies of promoters raising cash to manage ‘high’ purported debt in promoter holding companies like Adani Group companies and Vedanta,” says Kotak.

As a result of the sell-downs, promoter holding in the BSE-200 Index has declined to 48.8% in the June 2023 quarter from 50.3% in the December 2023 quarter. These sell-offs were also absorbed by domestic investors including mutual funds, retailers and BFIs. Their combined holding increased by 90 basis points to 23.5% at the end of the June 2023 quarter.

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