New Delhi: Singapore-based Standard Chartered Private Equity Advisory (India) Pvt. Ltd (SCPE) has deployed in India $115 million (Rs452 crore), or 16%, of the $700 million that it has spent from its current $1 billion pan-Asia fund. The amount invested in India excludes one undisclosed deal.
The bank’s total investment in India, including from a $100 million local fund (the erstwhile Merlion India Fund in collaboration with Temasek Holdings Advisors Pvt. Ltd), stands at $222 million in five years. So far, the firm has invested $700 million of the pan-Asia fund, raised in 2002, across the region.
Standard Chartered’s Mumbai-based private equity arm has been investing in the country since 2002, looking for companies that exploit India’s low-cost arbitrage, the growing domestic consumption and infrastructure.
The India team was based in Singapore until 2005, when Nainesh Jaisingh, managing director, SCPE India, brought the team to Mumbai because the increasing competition required a local presence.
Since then, SCPE has created a five-person team in India and done five deals from the pan-Asia fund. The most recent and largest disclosed deal closed last week: $50 million into genset manufacturer and power solutions provider Powerica Ltd. The firm has done three deals, totalling $107 million—ABG Shipyard Ltd, Sutherland Global Services and Punj Lloyd Ltd—from the erstwhile Merlion India Fund. The fund came up mid-2003 and was absorbed into SCPE’s operations in 2005.
Funds that span across geographies usually have no set investment parameter for one country, and SCPE’s pan-Asia fund is no different. Jaisingh estimates that $250 million will be deployed in India by the time the fund is fully invested, with similar amounts across other countries. For mid-sized investors such as SCPE, deal-making has turned increasingly competitive as bigger firms and funds flood the market. Providence Private Equity Partners Llc. and Apax Partners entered last year, and Kohlberg Kravis Roberts & Co., Cerberus Capital Management Lp. and Bain Capital Llc. are moving towards a direct India presence. On the domestic front, ChrysCapital Investment Advisors (I) Pvt. Ltd raised a milestone $1.25 billion fund in August. ICICI Venture Funds Management Co. Ltd, Kotak Mahindra Bank Ltd, Yes Bank Ltd, and Avendus Advisors Pvt. Ltd in partnership with Mayfield Fund are in looking at raising new funds. Many have their eyes infrastructure, real estate, distressed asset and mezzanine funds. While there is no time frame for the full deployment of the $1 billion proprietary fund, SCPE is likely to raise its next round for Asia focusing on its interests in infrastructure, real estate and distressed assets. Jaisingh, however, would not confirm this information.
“My biggest issues is what I call ‘first deal syndrome’,” he said. “In every deal there is that one guy who is bidding, who is desperate to do his first deal in India.”
This is one of the factors, in addition to higher promoter demands and hedge funds putting up top dollar, that has contributed to increased valuations. Jaisingh said the result of this will be that private equity investors will become more specialized over the next one or two years.
SCPE will continue to be flexible across investment types—looking for ownership change deals like many other firms—but focus on “young companies with high quality promoters.”