2 buyouts, $850 mn in deals: Blackstone arrives in India

2 buyouts, $850 mn in deals: Blackstone arrives in India

After a somewhat muted start, leveraged buyouts giant Blackstone Group Llc., which is headquartered in New York, unveiled five investments worth $850 million (Rs3,349 crore) in quick succession during 2007, among them two high-profile buyouts.

In terms of dollars deployed, Blackstone scores behind the likes of Temasek Holdings Pte Ltd (its $1.90 billion investment in Bharti Airtel Ltd alone puts it at the top of the heap) and ICICI Venture Funds Management Co., but there is no doubting the impact of Blackstone’s aggressive deal making moves.

The firm, which now has $98.2 billion assets under management globally, entered India in 2005 with $1 billion in its wallet.

Turning heads: A file picture of Akhil Gupta, managing director, Blackstone Advisors India. (Asheesh Shah/Mint)

Until 2007, Blackstone Advisors India Pvt. Ltd had made only a $50 million investment deal in Emcure Pharmaceuticals Ltd.

The second deal came a year ago in January when it announced that it would pick up a 26% stake in publisher and media holding company, Ushodaya Enterprises Ltd, for $275 million. But that deal has remained on paper as Blackstone is still awaiting the last government clearance.

“We were here for the long term, not in a hurry," says a concerned but somewhat sanguine Akhil Gupta, managing director, Blackstone Advisors India.

In June, Blackstone bought an 80% stake in business process outsourcer Intelenet Global Services Pvt. Ltd. Two months later, it grabbed an 80% stake in textiles manufacturer Gokaldas Exports Ltd.

Both deals turned heads because Blackstone, which expects an average IRR (internal rate of return) of 25% on investments, had so far spoken about “growth deals" in India.

Though this market has seen a smattering of such control deals—ICICI Venture and Actis Capital Llp. are notable practitioners—Blackstone’s two deals, specially because globally it is a buyout specialist, signal a subtle shift in the way PE firms might pursue deals in future.

Gupta says that the Intelenet and Gokaldas deals illustrated “mispricing in the market and that is classic private equity."

Yet, Gupta doesn’t see Blackstone in India necessarily as pioneers, but more as taking advantage of opportunities.

“The fact that we did two buyouts will not be representative of the future," he adds.

The reason for that is, most Indian promoters remain on a growth trajectory—or at least think they will continue to grow for a long time—and have no intentions of selling. While buyouts are not on a fast track, Gupta notes other aspects that were: The size of his team—eight investment partners plus four to be added, and two operating professionals; expanded new offices in Mumbai, and a deal size revised from a bottom bracket of $25 million to a hard minimum of $50 million and a “soft" minimum of $100 million.

Mint’s Private Equity Deal Counter 2007 (Click here)