Top private equity firms step up India investments

Mumbai: Marquee private equity (PE) firms, which include Temasek Holdings Pvt. Ltd, Warburg Pincus India Pvt. Ltd and KKR and Co. Llp, have stepped up their pace of investments in India although they continue to lag non-traditional investors like SoftBank Corp. and Tiger Global Management Llc, which have been more active so far this year.

PE firms had invested $8.4 billion in India between January and September, as against $7.8 billion in 2013, according to Grant Thornton, a consultancy. In terms of volume of deals, 2014 has already seen a 38% jump compared with the previous year.

However, investments so far have been dominated by those looking at newer sectors like e-commerce. Softbank leads the tally of investors with an investment of $837 million, while International Finance Corp, an arm of the World Bank, has invested $822 million. Tiger Global has led investments of $1.7 billion but this data includes the amount invested by its co-investors.

The three firms did not respond to emails sent on Tuesday.

However, activity from the big three PE firms has picked up in recent months. Warburg Pincus, for instance, announced three deals in October, when it invested in Kalyan Jewellers, Laurus Labs Pvt. Ltd and Cartrade.com. Warburg invested Rs.1,935 crore across these three deals.

Apart from the three new deals, the firm gave additional funding to existing portfolio companies including Capital First Ltd, Au Financiers (India) Pvt Ltd and Quikr India Pvt Ltd. Warbug gave an additional Rs.128 crore to Capital First but details of additional investments made in other portfolio firms were not available.

"Warburg Pincus has been an active investor in India over two decades, partnering with high quality entrepreneurs and distinctive management teams to build durable businesses. The firm has continued to invest in India through the peaks and troughs of the economic cycle," Niten Malhan and Vishal Mahadevia, co-heads and managing directors at Warburg Pincus India, wrote in response to an email query.

"As the growth and investment climate in India improves, we are well-resourced to continue and further scale the pace of investments," they wrote.

Singapore-based Temasek has announced two investments since May, including an investment in online marketplace Snapdeal.com. Temasek, along with Blackrock Financial Management, PremjiInvest and others, put in $100 million into snapdeal.com.

More recently, on Monday, Temasek acquired 10.16% in privately held Ahmedabad-based company Intas Pharmaceuticals Ltd from its existing PE shareholder ChrysCapital Management Co. Temasek did not disclose the amount it has invested in the company. On 10 November, Mint reported that the deal was valued at Rs.880 crore.

"This has been one of our most active years for investments, including India. As a long term investor, India remains a key destination for our investments and we continue to be optimistic about its long term growth story and potential," said Ravi Lambah, senior managing director, investment, co-head, India for Temasek.

KKR & Co has also been active in the Indian markets this year but has chosen to focus on debt deals. On Monday, KKR announced a deal to provide a flexible credit facility of Rs.1,802 crore (€235 million) to Amtek Global Technologies Pvt. Ltd, a Singapore-based sudsidiary of auto component maker Amtek Auto Ltd.

Prior to this, KKR had invested Rs.1000 crore in GMR Holdings Pvt. Ltd on 17 September 2014. The fund's only equity deal this year has been a Rs.1400 crore investment in Gland Pharma and Gland Celsus Bio Chemicals Pvt Ltd. While the deal was announced in 2013, it was closed only this year after receiving government approvals.

"India is a holistic solutions market for us where we are doing transactions across segments like buyouts, significant minority stake acquisitions, pure equity investments and long term credit financing. This year we have executed $700 million from our credit platform in the country and we have also invested over $500 million in private equity space over the last 18-24 months." said B.V. Krishnan, managing director, credit and capital markets at KKR.

To be sure, a number of the deals this year have been done in the secondary market, which includes one PE firm selling its holding to another fund. This is partly because funds are looking to exit from investments which were made between 2006-09.

Most funds tend to hold investments for a period of four to five years but volatility in public markets and poor economic conditions have made it tough to funds to exit at appropriate valuations. This has now changed with the markets picking up and hopes of a rebound in the economy which grew at below 5% for two consecutive fiscal years till fiscal 2014.

"There are a lot of PE secondary transactions that will come into the pipeline because funds who had invested during 2006-09 are looking at exits with reasonable returns thus those take outs become large sized deals for our PE and credit business," Krishnan added.

According to Grant Thornton, while the improved sentiment has led to some pick up in deal activity, a significant growth in fresh investments will take time.

"Having said that, investor confidence is back. and initial public offering (IPO) market is slowly coming back and we have seen some exits happenig and thus investors are keen to invest through both debt and equity route," said Raja Lahiri, partner at Grant Thornton.

Ajay Garg, managing director at boutique investment banking firm Equirus Capital Pvt. Ltd said he expects a number of secondary market deals in the next 12-18 months that will drive bigger transactions in the market.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.