equity market has taken a downturn and private equity players (PE) finding the HEAT

Right now the equity market has taken a downturn and private equity players (PE) finding the HEAT, because most of the private equity firms have invested in the in the mid-cap companies, where liquidity has been drained up and numbers, too, point to a slowdown on exits through IPOs. Its soooo hot that private equity players have already made six exits through IPOs in the first half of 2008, which has been doubled when you compare 2006 datas.

While IPO is a tough exit option, one could be through secondary sales or a strategic sale. A secondary sale is one where a smaller private equity player sells to a bigger private equity player.

ChrysCapital is one good example, which partly sold its stake in Shriram EPC, in a pre-IPO deal to the US-based Argonaut Partners.

There is also an alternate solution for private equity players to get out of this scenario. The option of selling out to a strategic partner.

Take the case of Actis, which sold its stake in Punjab Tractors to Mahindra and Mahindra, thereby helping the tractor industry consolidate in India.

While the going till now has been easy, those private equity firms will have to work hard and bring in their contacts and strategic guidance to grow companies. This is before they can exit and think of returns.

With bigger global private equity players like Blackstone, Carlyle, Barings and 3i having raised funds for India, what they will be looking out for is investee companies. In that scenario, one can surely expect exits through either the secondary sales route or selling out to a strategic partner over the next 12 months.