Warburg Pincus makes big bets in India this year

Financial services top Warburg’s preferred sector this year


If Warburg does manage to close all the reported deals for 2015, then put together, these are already worth far more than what the firm invested in the whole of 2014 in India.
If Warburg does manage to close all the reported deals for 2015, then put together, these are already worth far more than what the firm invested in the whole of 2014 in India.

Mumbai: Global private equity (PE) firm Warburg Pincus has been extremely active on deal street this year. On Monday, The Economic Times reported that Capillary Technologies, a software maker, is in talks to raise about $45 million (approximately Rs.285 crore) in a funding round led by Warburg Pincus. This is the fourth deal this year that Warburg has been reported to be involved in.

Financial services top Warburg’s preferred sector this year. The fund is making a couple of big bets in the sector.

It is in talks to acquire brokerage firm Sharekhan Ltd, a deal worth almost Rs.2,400 crore. Warburg is making the acquisition bid along with General Atlantic, another global PE firm.

Warburg is also said to be in talks to acquire a 25% stake in L&T Finance Holdings Ltd, the financial services arm of conglomerate Larsen and Toubro. The deal is worth almost Rs.3,500 crore.

The PE fund has not shied away from investing in the e-commerce sector in India, where several other large PE funds are still sitting on the fence. This year, Warburg invested $133 million (approximately Rs.850 crore) in Ecom Express, a logistics services provider to the e-commerce industry. It has previously invested in Quikr and CarTrade.com.

If Warburg does manage to close these deals, then put together, these are already worth far more than what Warburg invested in the whole of 2014 in India. Last year, the fund invested in firms such as Laurus Labs, Kalyan Jewellers and CarTrade.com, in addition to making additional investments in its existing investee companies such as Quikr and Au Financiers. Warburg invested a little over $400 million (approximately Rs.2,400 crore) in these deals.

In 2013, Warburg made just two investments in Biba Apparels Pvt. Ltd and Avtec Ltd, with a total investment of under $100 million. Clearly, Warburg is more bullish on India than it was a couple of year ago.

An interesting point about Warburg’s renewed interest in India is the choice of sectors. In the previous decade, and also till 2011, the fund invested mostly in infrastructure and energy-related industries such as Gangavaram Port, ACB (India) Ltd, Lemon Tree Hotels, Continental Warehousing Corp. (Nhava Sheva) Ltd and Diligent Power Pvt. Ltd.

However, after 2010-11, Warburg’s portfolio shows a clear inclination towards sectors such as financial services, e-commerce and consumer retail. These are also the sectors which have seen the most traction from PE investors in the last few years, as economic slowdown hurt core industries such as infrastructure, manufacturing and power the most, forcing most PE investors to abandon these sectors. And it’s not just investments.

Warburg is also active on the exit side this year, having sold its entire 27% stake in healthcare chain Metropolis Healthcare Ltd. It is also said to be in talks with Gautam Adani’s Adani Ports and Special Economic Zone to sell its stake in Gangavaram Port in Andhra Pradesh.

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