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Business News/ Market / Stock-market-news/  It is not the right time to be adventurous for private equity: Amit Dixit
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It is not the right time to be adventurous for private equity: Amit Dixit

Blackstone's Amit Dixit, speaking at the Mint's 'Annual Mint Private Equity Conclave 2017' on Thursday, had a word of caution on investing for the private equity sector

The price to equity multiple for midcaps was too high, the net income margin for midcaps doesn’t currently show much room for growth, while the commodity prices have also been inching up, Dixit said. Photo: Abhijit Bhatlekar/MintPremium
The price to equity multiple for midcaps was too high, the net income margin for midcaps doesn’t currently show much room for growth, while the commodity prices have also been inching up, Dixit said. Photo: Abhijit Bhatlekar/Mint

Mumbai: The current ‘vintage’ or the next few years is a time to be cautious and not adventurous for the private equity sector, said Amit Dixit, senior managing director and head of Indian private equity at Blackstone, while speaking at the Mint’s “Annual Mint Private Equity Conclave 2017" on Thursday.

The price to equity multiple for midcaps was too high, the net income margin for midcaps doesn’t currently show much room for growth, while the commodity prices have also been inching up, Dixit said.

Blackstone, the American multinational private equity (PE) firm, has been investing in India for the past 12 years, and has committed about $6.4 billion in the country—divided equally in its real estate and PE funds.

Typically, Blackstone invests in transactions over $100 million.

“Our view is, we are somewhat cautious around this vintage because the Nifty and the Sensex are at an all-time high. Midcaps, which is the primary area where private equity plays in, is materially high in terms of multiples... We are close to peak margins and at very robust multiples. So this is the time to be cautious," Dixit said.

For the debt or the credit market, Blackstone has launched an investment platform for the Asian market called the Tactical Opportunities group, which is identifying large deals in the Indian market, Dixit said.

It is important to select the right years in order to get desired returns from investments, he said.

“Golden vintage for the Indian private equity was 2011-14. The only regret I have is that we didn’t invest enough, and the investments we made in that vintage—S.H. Kelkar, Agile Electric, Sonalika Tractors were terrific investments."

Dixit highlighted three themes for the Indian PE sector, which he described as the rising tide does not lift all boats; the private equity teenage years are over in India and there is no free lunch.

He pointed out that sector selection for investing in the country has been critical for any PE firm and not so much the company in question. “Even though India may be shining or not shining, what sectors you participate in or not participate in, is very critical... and this theme of rising tide not lifting all boats will continue in India."

India is no more a “discovery market" but a mature market, and the teenage years of PE industry in the country are over, he said, adding that the last five years have seen half of total deals in excess of $100 million—a rarity in previous years. He said the family-owned businesses are getting comfortable in handing over control to professional management, giving enough supply for firms to invest in, he said.

“More Indian conglomerates are rationalizing their portfolio, driving more assets to the market," Dixit said. But distress assets are difficult to transact as negotiations take long and there are multiple approvals needed from parties including lenders, he said.

Depreciation of Indian rupee will also have an impact on transactions as 95% of private capital in the country was in dollars and the return expectation is also in greenback, he said.

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Published: 23 Feb 2017, 02:50 PM IST
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