India's oldest and largest home-grown private equity firm ChrysCapital believes the block deal route has emerged as a viable and sizeable mechanism to explore exit strategies, especially with a spike in participation in recent times from domestic investors.
In an exclusive interview with Moneycontrol, Kunal Shroff, managing partner at ChrysCapital, elaborated on the shift in block deal trends over the years.
"The one difference between our PIPEs, blocks and exits that we did 20 years ago and now is that in those days you had to effectively look at foreign investors. Appoint a banker, the banker would go and see which of the global mutual funds and public market investors are keen and build a book. Today, if you look at the same block deals, you will see a reasonably strong percentage going to domestic investors. The viability of a block deal has increased quite a bit, so from our perspective, it's an interesting exit avenue for us to consider and you don't need to worry how you will find liquidity five years later if you are buying out a company," Shroff said.
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2023 has been an active year for block deals and according to data from Prime Database, PE and venture capital firms exited investments worth Rs 57,338 crores through block deals between January and August as compared to Rs 41,051 crores during same period last year.
Key examples include BPEA Equity selling its 26.6 per cent stake in Coforge for Rs 7,684 crores and exiting the digital and IT solutions player, Alibaba backed Antfin selling stake worth Rs 2,037 crores in Paytm and Everstone offloading 25 per cent stake for Rs 1,494 crores in Restaurant Brands Asia, the operator of the Burger King brand in India.
Earlier in September, ChrysCapital picked up 10 percent in engineering player GMM Pfaudler via the block deal route. But will the firm adopt the route more often going ahead? Shroff said the PE firm is 'excited by the window but would evaluate these opportunities at the right point'.
"Whenever, we make any investment, and you mentioned GMM Pfaudler, which is a block deal where we were buyers and not sellers, for us, it's always about understanding the business, the management and the entrepreneur and seeing if it fits with our investment objective. And when we make an investment, we will create a base case as well as alternate cases on how it is going to pan out in our assumption, how will we get our exit, are we taking this company public, are we selling to a strategic, are we selling to a third party?", Shroff said.
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"And you evaluate those along the journey as well. So at this point, we don't have any firm ideas if we have to follow a block deal or not, but at the right point, we will always evaluate it."
"When I look at the 75 odd exits we have had, it will be a full mix of block deals, strategic sales, private equity to private equity sales and everything in the middle. What excites us is that this avenue is becoming a viable and sizeable opportunity for us. We don't need to worry. If I have invested $100 million or $200 million in a company and I have made a 2x, is that too big a nugget to be digested in the public markets? We don't think so," he said.
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