Mumbai: After investing as much as $850 million (Rs3,970 crore today) in 10 deals since 2002 in India, private equity (PE) firm General Atlantic Llc is looking to exit some of its portfolio companies. General Atlantic managing director Abhay Havaldar in a telephone interview talks about the investment themes this year. Edited excerpts:
Do you plan to exit some of your investments this year?
We have been invested in companies for a fairly long period of time and we continually review them for value and opportunity, which is basically looking at the price at which they are trading and potential liquidity options. The benefit we have is that many of our companies have been through the IPO (initial public offering) process, so we don’t have to do the planning that many PE firms have to do to take their companies public. There is only one company in our portfolio which is not public and that’s only a two-year-old investment. So we have an opportunity to exit almost all our investments in the public markets.
Valuation matters: General Atlantic MD Abhay Havaldar.
Are you exiting from Patni?
It comes up for review pretty regularly since we have already done so well in the investment. We have considered opportunities and will continue to do so. We have our own views on what is fair valuation and will do what we think is right for our investment. In terms of business it is doing very well and the management team is very good. So now the shareholders have to make their own decisions independent of the business. This is a unique situation where there is such a concentration of shareholding in that company.
What kind of exit do you see happening from Patni?
Here lies the challenge. Every shareholder has a view on how the company will perform. Based on that, each person comes up with what he thinks is the price at which he will buy or the price at which he will sell. There are so many shareholders and if there is an opportunity that the board finds appropriate, then they will recommend it to the shareholders and that is when we will have all these dialogues.
So it’s on valuation that there are more discussions?
Yes. Every conversation is about valuation because that is what everyone looks at in the final analysis. But this is a conversation which is appropriately held at the board meeting. Every shareholder wants to do something or let’s say someone else wants to come in and shows interest, then it’s the board that basically figures out if that is attractive for shareholders. But whenever they believe that it’s good for shareholders they will recommend it and the shareholders will consider it.
What about Genpact? Are you looking to exit it through a strategic sale in a merger and acquisition transaction?
Genpact is a five-year-old investment. We have already taken some liquidity on the market from Genpact. But it is the company that evaluates growth opportunities, including the M&A option. Since we have already sold some shares in the market, nobody should be surprised if we sell some more or don’t. This is purely a decision that is taken on value more than anything else.
Which sectors do you find attractive for investment this year?
We don’t necessarily consider only sectors when we do business, but focus on themes. There are a couple of themes which we have pursued for a while and a few have been relatively new. One is, where India is globally competitive, so that has worked along with the outsourcing theme. We have IT (information technology) companies and BPOs (business process outsourcers) in our portfolio which everybody understands. But let me you give you another example—Jubilant. We saw it as an outsourcing business model which would morph into a pharma outsourcing company because at that point in time they had a mix of both chemical and pharma. (The promoters of HT Media Ltd, which publishes Mint, and those of Jubilant Organosys are closely related. The firms have no promoter cross-holdings.) The other theme is consumption and infrastructure. All these themes are relevant to the opportunities we are considering now.
How does the deal pipeline look like?
There are good deals in the market, but more people competing for it. Also the biggest competition is the public market rather than the competition from PE. The public markets are giving higher values than what the private markets are willing to pay, which is why you are not seeing as much activity in PE.
Several PE firms that have media companies in their Indian portfolio are facing tough times. How has your experience been with media companies, especially since General Atlantic has exited NDTV Ltd?
Our experience was good since we made a good enough return for our investors. Media businesses have huge operating leverage. They have broadly two categories of revenue— subscription and advertising. Advertising revenue is a lot more volatile and is related to market sentiment. The founders of most of these media businesses have come in from the creative route, rather than being managers who run businesses. Also most media businesses in India are fairly young. Thus, managing the cycles requires a focused and efficient management.