The Carlyle Group’s $1.8 billion (Rs7,380 crore) Asia Partners II (CAP II) fund, the firm’s second Asian buyouts fund, has broken its jinx in India, and, in the process, set a new record for private-equity transactions in the country.
Nearly two years after setting up a buyouts team in Mumbai, the New York-headquartered PE giant has struck its first big deal, paying Rs2,638.35 crore for a 5.6% stake in mortgage major Housing Development and Finance Corp. (HDFC). While the deal does not quite make the grade as a buyout deal, it is nonetheless a landmark deal—it marks the biggest investment by a PE firm in an Indian firm till date.
HDFC sold 18 million shares to Carlyle and Citigroup at Rs1,730 a share to raise Rs3,114 crore. This increases the company’s capital by 7.11%. Citigroup is buying the shares to retain its holding in HDFC at the same level (as it was before the issue), 12.3%. HDFC said it would use the money to maintain its 23% stake in HDFC Bank, which is raising around $1 billion through a share sale. It also said the money would be used to fund growth in its own business and in insurance.
Carlyle’s seven-member India buyouts team is led by former DSP Merrill Lynch M&A specialist Rajeev Gupta. While Gupta was not available for comment, Raj Kataria, MD (investment banking), DSP Merrill Lynch, who advised Carlyle on the investment, said: “The investment has been made from Carlyle’s large cap fund (Asia Partners II). This fund has an appetite for $300-400 million deals.” Carlyle also does growth investments in India out of a $668 million Asia fund, led by former Hathway Investments chief Shankar Narayanan. Carlyle belongs to the club of high-profile PE firms that entered India in mid-2005, with specific buyout mandates for the country.
The other notable one is New York-based Blackstone Group, which came in with a mandate to do deals worth $1 billion here. Blackstone registered its first major deal in January this year with a $275 million investment in Hyderabad-based Ushodaya Enterprises for a minority stake. The Indian market is still not mature enough for buyouts as promoters of Indian firms don’t like to sell controlling stakes, a pre-requisite for a buyout. Carlyle and Blackstone may have taken an early bet on the market, but they may have to wait for their buyouts mandate to play out. Before HDFC, Carlyle did a clutch of low-profile deals such as a $20 million investment in Ahmedabad-based Claris Lifesciences, $55 million in Maytas Infra and $20 million in Newgen Imaging.
Reuters contributed to this story.