Forex outflows via PE exits, MNC profit repatriation surge

economictimes.indiatimes.com:

MNC profits last fiscal led to a record outflow of foreign exchange — nearly double the net foreign direct investments. As more private equity investments mature in the next few years, the outflows could be more than inflows.Forex outflows under the head 'Income on equity and investment fund shares' in the balance of payments, which represents repatriation of income from foreign investments such as MNC profits, hit a record $40 billion compared with net foreign direct investment of $27 billion, data from the Reserve Bank of India (RBI) showed.

Outflows under this head, on aggregate, exceeded $100 billion in three years since the Covid induced lockdown in March 2020. While forex outflows under this head were $ 33 billion in FY21, they rose to $36 billion in FY22 and $40 billion in FY23.

As past investments by the PE firms mature over the next few years, more such outflows are expected. But economists do not see a big concern from PE investments as a lot of MNCs repatriated higher amounts to salvage their balance sheets back home due to the Covid-induced slowdown.

«We do not see any material sense of worry, as a lot of the increase in dividend payments may not be on account of just PEs, but also MNCs repatriating more given inflation and Covid-related pressures,» said Rahul Bajoria, managing director and head of emerging Asia (ex China) Economics at Barclays. Private equity exits amounted to $24 billion in the calendar year 2022, according to global consulting firm Bain and Company.

There were cancellations of many planned IPOs of consumer tech firms, such as OYO, MobiKwik, PharmEasy, BoAt, and others that impacted the exits. Yet, «the buoyancy in the Indian stock markets (with Nifty reaching its all-time high in November)