Foreign private equity funds are likely to exit completely or partially the financial services space in the near-term as part of profit-booking, but will stay invested to cash in from the long-term growth story.
"Recent exits of some of the foreign PE players are pure profit booking. This trend is likely to continue in the near-term. However, foreign fund houses will remain invested in the financial services sector in the long-run to cash in the growth opportunities in this sector," investment banking firm Ladderup managing director Sunil Goyal said.
He also said profit-booking is necessary for fund houses to raise further capital for further investments.
Recently, foreign PEs like Carlyle Group, Warburg Pincus, Tamasek Holdings along with sovereign wealth fund of Malaysia, Khazanah Nasional, exited or partially exited their investments in financial services space.
While Khazanah on Monday sold its entire holding in private sector lender Yes Bank for about USD 110 million through block deals, US private-equity giant Carlyle Group sold a quarter of its stake in the country's top mortgage lender Housing Development Finance Corp (HDFC) for USD 270
million last month.
Similarly, Warburg Pincus had sold a little over 1 per cent of its holdings in the private sector lender Kotak Mahindra Bank for USD 73 million and Singapore government owned Tamasek had also sold 1.4 percent of stake in ICICI Bank for USD 300 million last month, raking in huge profits.
Khazanah, for instance, has sold its 4.2 percent stake in the Mumbai-based lender at a premium of over 150 per cent profit in five years.
Referring to this trend, a fund manager in a domestic PE firm said though this is a clear trend of profit-booking, it also shows the uncertainty in the stock market which prompted these players to offload or part offload their stakes in the financial services companies.
"When the stock market is looking for a direction from the budget, any upward trend gives an opportunity for a PE to exit from a listed entity," he said.
He, however, said the domestic PE firms are likely to stay invested in the financial services space and may buy the offloaded stake of these foreign PE funds.
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"Recent exits of some of the foreign PE players are pure profit booking. This trend is likely to continue in the near-term. However, foreign fund houses will remain invested in the financial services sector in the long-run to cash in the growth opportunities in this sector," investment banking firm Ladderup managing director Sunil Goyal said.