India: PEs Exit from MFIs with Manifold Returns

Apr 2016
India, April, 27 2016 - With Bengaluru-based microfinance company Ujjivan going public on Wednesday, expectations are high that it will bring in the same levels of returns as its peers for PE players.

Equitas Holdings during its initial public offering earlier this month saw 10 investors exiting with returns ranging from two to 13 times. The sector on the whole has seen exits with similar returns for the top deals in the past four years.

IFC, Mauritius Unitus Corporation, FMO, Sarva Capital, WCP Holdings and Women's World Banking Capital Partners are some of the investors likely to exit Ujjivan. Analysts said for a well-established player like Ujjivan, valuations were expected to be reasonable.

According to data from research firm Venture Intelligence, PE investors saw a whopping rise in their returns during exits from MFIs - from $800,000 in 2011 to $62 million in 2015. In all, the sector saw 20 exits during the period.

However, the largest exits came through when SKS Microfinance went public in 2010, which saw five investors exiting with $193 million. These were Sequoia Capital India, Unitus, Sandstone Capital, Saama Capital and Kismet Capital. Kismet exited with a return of seven times at $155 million. While Unitus' returns also multiplied over seven times, Sequoia realised over four times the amount at $5 million, according to the data.

PEs exit from MFIs with manifold returnsIn an earlier exit in Equitas during May, 2014, when Bellwether and Kalpathi Investments made secondary sales to Creation Investments and others, the returns for them were over two times and 12 times respectively. In another exit from Equitas, in July 2010, Aavishkar Goodwell saw its returns multiply eight times through secondary sales to Canaan Partners at around $5 million.

In March 2010, Lok Capital exited from Spandana Sphoorty Financial through secondary sales to Helion Ventures making over four times. Bellwether and Michael & Susan Dell Foundation too opted for secondary sales exit in Ujjivan Financial Services, and both saw returns of over two times.


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