Mumbai: New York-headquartered private equity (PE) firm Warburg Pincus, the largest PE investor in India by investments, has made its first buyout deal in the Indian market. This week, it joined hands with Indian tyre industry entrepreneur Yogesh Mahansaria to acquire Israel-based Alliance Tire Company Ltd for $150 million (Rs606 crore).
This is the second India-centric buyout deal in less than a month—on 18 June, Blackstone Group, also based in New York, backed a $200 million management buyout of Mumbai-based Intelenet Global Services Pvt. Ltd. Warburg was not available for comment on the deal.
The firm’s partner in the acquisition, Mahansaria, was the former chief executive officer of Balkrishna Tyres—a subsidiary of Balkrishna Industries Ltd—that manufactures tyres for vehicles used in agriculture and construction. As part of the acquisition, the new management has plans to expand the company and develop low-cost sourcing capabilities in India.
Alliance Tire Company produces specialty off-highway and passenger vehicle tyres for customers across the US, Europe, Japan and Latin America. The firm is currently investing from an $8 billion global fund, Warburg Pincus IX, L.P, which was launched in 2005.
Warburg—a significant player in the US and European buyout markets—has done such deals in other parts of Asia. The PE firm has done about half a dozen buyouts in the US and a couple in China. In India, where the firm has been investing since 1999, the emphasis has been on growth deals and at times early-stage deals as well. It has invested $1.5 billion here till date, including in Bharti Tele-Ventures (now Bharti Airtel), Gujarat Ambuja Cements, Housing Development Finance Corporation (HDFC), Kotak Mahindra Bank, Max India, Moser Baer, Nicholas Piramal, Sintex Industries, Lemon Tree Hotels and WNS Global Services.
While buyouts have not been as prevalent in India compared to China and Korea, they have recently been on the rise. Apart from the Blackstone-Intelenet deal in June—Blackstone picked up an 80% stake in the business process outsourcer, while the Intelenet management retained 20%— London-based emerging markets PE investor Actis Capital LLP and Indian PE firm ICICI Venture Funds Management Co. are considered pioneers of buyouts in India.
Actis picked up 23.45% in Punjab Tractors in 2003 at an investment of $60 million and exited in favour of Mahindra & Mahindra (M&M) this year. While this was not a typical PE buyout deal—PE firms usually take a controlling stake—Actis came on board as a significant shareholder in the state government-owned tractor maker with a mandate to usher in better management and operating practices.
M&M acquired Actis’ and the Dabur family’s combined 43.5% stake in March for $212 million. ICICI Venture bought the Tata Group’s 50% stake in Mumbai-based information services company Infomedia (then Tata Infomedia) for Rs100.7 crore in 2003.