"Some limited partners are now exiting even at lower valuations as they are on the verge of bankruptcy. They are resorting to desperate sale as they are facing trouble back home," SMC Capitals Equity Head Jagannadham Thunuguntla said.

1. Secondary sales find fervour with PE players
Press Trust of India / New Delhi April 7, 2009, 15:11 IST
Global economic downturn has given rise to a new trend in the private equity scene, secondaries,
wherein partners in a PE fund are preferring to liquidate their position to another party to meet
redemption pressures.
quot;Going forward we will see more secondary deals in the Indian private equity space. Now more
such deals are coming to the fore as increased number of partners are looking at liquidating their
position to meet prior commitments,quot; Venture Intelligence CEO Arun Natarajan said.
Known as 'Secondary deals' in Private Equity parlance, 'secondaries' refer to a Limited Partner
(LP) or the part owner of the fund selling its stake in the fund to another partner or a third party
to seek an exit option.
Echoing similar view KPMG PE Advisory Group Head Vikram Uttamsingh said: quot;PE industry
will see a lot less deals in 2009. Secondary sales will increase as some PE firms and LPs will feel
global pressure to exit their India investmentquot;.
Analysts believe that with the fall in PE valuations, the partners are now exiting the funds at
much cheaper prices.
quot;Some limited partners are now exiting even at lower valuations as they are on the verge of
bankruptcy. They are resorting to desperate sale as they are facing trouble back home,quot; SMC
Capitals Equity Head Jagannadham Thunuguntla said.
As per Venture Intelligence, in 2008, there were seven secondaries in India, including ICICI
Venture's stake sale in Subhiksha to Premji Invest for USD 56 million.
quot;With increasing number of partners planning to divest their stake, decision making by the new
partner has become fast as those who are investing in the fund are mainly divesting their
portfolios,quot; Natarajan added.
Analysts feel secondaries can turn out to be a profitable option in the bull market, but the current
financial meltdown is leading to partners exiting at loss, while some owners with cash reserve
entering at low prices.
quot;PE funds invest mostly in unlisted space wherein valuations becomes difficult at the time of
exit. Since the companies are now facing extremely depressed valuations, the exiting partners are
doing so at losses,quot; Thunuguntla added.

2. Besides, US-based research firm Preqin has said that the secondary market would continue to
grow from a niche sector to a vital part of the PE industry, as increasing number of funds want to
take advantage of the secondary transactions.
quot;Over the course of 2009, we predict that the number of secondary sales will increase, with both
buyer and seller confidence being buoyed by new fund valuations,quot; Preqin spokesperson Tim
Friedman said.
Thunuguntla said, quot;PE partners are now realigning their portfolio to match their current
requirements as more and more funds are now suffering the spill-over effects of the collapse of
some of the major US banksquot;.