Mumbai: Fresh from a successful $4.13 billion initial public offering on the New York Stock Exchange, private equity investor Blackstone Group LP is putting its investments plan in India on the fast track.
It is close to finalizing about six new deals here, which could take its portfolio size to nine from the current three—Emcure Pharmaceuticals Ltd, Ushodaya Enterprises Ltd and Intelenet Global Services.
In next two years, the firm expects to have a total of over $2 billion invested in the Indian market, a senior Blackstone executive, who did not want to be named, told Mint.
The specific size and nature of deals couldn’t be ascertained. Globally, Blackstone is coming off a $20 billion deal to buy Hilton Hotels Corp.
A spokesman for Blackstone said the company was in a quiet period and couldn’t comment.
Blackstone, which set up shop in India in 2005 with an announced $1 billion investment fund, is also set to expand its presence over the next few weeks—literally.
It will move out of three five-star hotel rooms that it currently operates from, two in south Mumbai and one in its western suburbs, into a single, 15,000 sq. ft office in Express Towers at Nariman Point, this city’s business hub. Blackstone India’s 10-member team, led by managing director Akhil Gupta, will also be expanded significantly, the executive said. The investment team meets every Tuesday.
Out of the $1 billion that was allocated in 2005, $525 million has already been deployed. The firm’s most recent deal was last month’s buyout, for $200 million, of the Mumbai-based business process outsourcer Intelenet. Blackstone backed a management buyout bid and picked up a 80% stake in the firm.
Earlier, it had invested $50 million in Pune-based Emcure and $275 million in Hyderabad-based Ushodaya, a media company. So far, Blackstone has not collaborated with other private equity investors on Indian deals and is likely to continue with this strategy, though it left the door open to a few exceptions.
“We may, at times, collaborate with an early-stage venture capital investor if we feel the need to bring that kind of expertise on board,” said the same senior Blackstone executive.
Though the company does not have a fixed upper or lower limit on the size of deals it will pursue, it expects the range to remain at $25-400 million, given the nature of the Indian private equity market.
“The investment horizon per portfolio company in India will be around five to six years,” the Blackstone executive said. “This is longer than the norm in the US market, but is necessary here to achieve average IRRs (internal rates of return) of 25-30%. India is still largely a growth market and investors need to have a longer-term view.”
Till recently, the firm used to consider India and China its key target markets outside the US. In May this year, the Chinese government invested $3 billion in the firm for a 10% stake. The investment gives Blackstone an edge over other global private equity firms in buyouts and distressed asset sales originating in China.
“So far, we used to consider India and China as equal opportunity markets,” the executive said. “However, the scale has tilted in favour of China because of the Chinese government’s initiative (in bolstering private equity investments).”
Buyouts, as the Intelenet deal indicated, are a focus in India as well, but the firm views India as more of a growth market for now. Here too, Blackstone has thrown in its lot with the government in promoting private equity investments.
It teamed up with Infrastructure Development Finance Corp. and Citigroup to commit $250 million to kick-start a proposed $5 billion infrastructure fund promoted by the finance ministry-backed India Infrastructure Finance Co.