<div>Just at a time when exits were beginning to pick up in the country, paving the way for private equity investors to cash out profitably from their portfolio companies, there comes a dampener - depreciating rupee against the dollar.</div><div> </div><div>Private equity investors are increasingly finding it difficult to get an exit route for the investments made due to the depreciating rupee against the dollar and therefore opting for initial public offerings rather than strategic sale.<br> </div><div>“There is some stress for private equity in generating returns due to rapidly depreciating rupee along with competition leading to higher valuations,” said Bijou Kurien, Member, Strategic Advisory Board and Mentor, L Capital Asia (LVMH Group) in India Retail Forum 2015. Returns for private equity has dropped from 40-50 per cent in 2005-08 to 10 per cent in the last two years and holding period has rose to 6 years from 3 years earlier, Kurien added.</div><div> </div><div>So far, 2015 proved to be a bumper year for private equity and venture capital exits. This is even as the overall exit scenario all these years have remained grim. As per research firm Venture Intelligence, private equity and venture capital firms in the country realised over $6 billion (Rs 38,000 crore) via share sales in the January – July period this year. This seven month figure is 33% higher than the $4.5 billion realized by investors in the previous best full calendar year of 2010.</div><div> </div><div>A single PE investment cycle usually lasts 5-7 years after which PE firms normally exit by way of trade sale, public listing, recapitalisation and secondary sale. Trade sale is the most common exit for private equity investments as trade buyers in the same industry are often more likely to realise synergies with the business and are therefore, the most natural buyers of the business. Typically, public listing takes place during positive market conditions as prevailing at present.</div><div> </div><div>Commenting on the valuation matrix, industry experts at the panel discussion said digitisation of retail business has helped in bringing the price sensitive middle class Indians closer to consumption and in turn aided the entrepreneur scale up his business much faster than the brick and mortar economy that has helped the valuations soar.</div><div> </div><div>“Without compromising on the quality, the e-commerce evolution has helped in sustaining a scalable business not necessarily on financial matrix of being profitable, but in terms of creating value,” said Bharat Banka, Founder and Ex-CEO, Aditya Birla Private Equity.</div><div> </div><div>However, experts also said that for any business to sustain, it is absolutely imperative to create value and profit. In today’s day and age, fund managers are increasingly investing in changing consumer behaviour and attitude. Hence, the normal valuation matrix is not being applied by fund managers while valuing the digital business rather than the brick and mortar conventional business, referring to the current valuation attracted by startups like Snapdeal and Flipkarts.</div>
