As Warburg exits Bharti Telemedia, Airtel plans to buyback its stake

Warburg Pincus sold stakes in three companies in India in just a month, fetching the US private equity giant ₹2,500 crore ($345 million), even as the pandemic has slowed the overall pace of exits for buyout firms.

Warburg Pincus carried out liquidity transactions in Bharti Telemedia Ltd, Gangavaram Port Ltd and Kalyan Jewellers India Ltd by selling fully or partly its investments in these companies.

The New York-based PE firm was allotted a stake in parent Bharti Airtel for a part of its stake in Bharti Telemedia.

Bharti Airtel Ltd said on 17 February that it will buy back Warburg’s 20% stake in its direct-to-home television unit Bharti Telemedia Ltd for ₹3,126 crore. In December 2017, Warburg Pincus acquired the 20% stake in Bharti Telemedia for ₹2,258 crore. As part of the latest deal, Airtel will issue 36.47 million of its own shares at ₹600 apiece to Warburg Pincus and pay ₹1,037.8 crore in cash.

Earlier this month, Adani Ports and Special Economic Zone Ltd, the flagship company of billionaire Gautam Adani, said it will buy Warburg’s entire 31.5% stake in Andhra Pradesh based Gangavaram Port for ₹1,954 crore.

The PE firm will, separately, buy ₹800 crore worth of stake in Adani Ports.

The Gangavaram exit is specifically crucial for Warburg Pincus since it is a legacy investment, with the firm having picked up the stake in 2007 for ₹150 crore. The PE investor had tried to exit the investment several times, either through sale to a strategic investor or an initial public offering, but those failed to materialize prior to the deal with Adani.

Warburg will also pare its shareholding in Kalyan Jewellers through the jewellery retail chain’s IPO, which opened on Tuesday.

The PE firm, which holds a 32% stake in the company, will reduce its shareholding to 24% by selling shares worth around ₹250 crore. Warburg, which first invested in Kalyan Jewellers in 2014, has invested a total of ₹1,700 crore in the company.

An email sent to Warburg Pincus on its recent exits did not elicit a response.

The three exits recorded by Warburg in quick succession come at a time when the industry has seen a slowing down of overall exit activity globally. According to EY-India Venture Capital Association, the Indian PE/VC industry recorded $6 billion worth of exits in 2020, the lowest in six years.

While 2020 was a slow year for exits, 2021 is expected to see a sharp rise in exits on improving macro environment and global liquidity, industry experts said.

“We expect exits to pick up pace, and we may see as much as $14-15 billion worth of exits in 2021. This will be driven by several factors, such as an increase in exits through IPOs and PEs exiting/paring positions in listed firms, given the buoyant stock markets. The explosion of SPACs in the US offers an exit route to PE/VC backed firms,” said Vivek Soni, partner and national leader, private equity services, EY. SPACs are publicly traded shell firms with no commercial operations, which help unlisted firms go public through mergers, skipping the time-consuming conventional IPO route. ShareandStocks.com