Why this Swedish PE firm is willing to bet $5 billion in India this year

Jean Eric Salata, chairperson of EQT Asia and the firm’s head of private capital for Asia
Jean Eric Salata, chairperson of EQT Asia and the firm’s head of private capital for Asia

Summary

Swedish private equity firm EQT will seek out healthcare and financial services companies apart from its traditional focus on IT services firms in India

MUMBAI : After investing about $2 billion in India last year, Swedish private equity firm EQT is lining up deals that could lead to another $5 billion worth of investments in the country this year.

EQT got its first taste of India in October 2022 after it acquired Baring Private Equity Asia—which once owned Hexaware Technologies Ltd—and has since signalled a strong investment appetite for the country.

“At the moment, I have to say that our pipeline is as active as I've ever seen it," Jean Eric Salata, chairperson of EQT Asia and the firm’s head of private capital for Asia, said in an interview with Mint.

“We currently have $5 billion worth of pipeline in advanced stages of final negotiation for investment (in India) this year. That shows the kind of activity level we are seeing," added Salata, who had started UK-based Baring’s Asia PE investment before leading a management buyout of the programme in 2000.

EQT, which has over $250 billion of assets under management globally, is among the largest private equity firms in Asia.

India’s economic growth at 7-8% a year makes the country a compelling investment destination for firms like EQT, Salata said. Further, EQT’s expansion in the country is also because it is now looking at multiple sectors such as healthcare and financial services in addition to its historic preference for IT services, where it has struck gold multiple times before.

Last year, in June, EQT (then known as BPEA EQT) acquired a 60% stake in in-vitro fertilisation chain Indira IVF in a deal valuing the business at about $1.1 billion. 

A month later, EQT and India-based PE firm ChrysCapital announced the acquisition of a 90% stake in Credila Financial Services from HDFC, valuing the business at 10,300 crore, or $1.2 billion. In December, EQT acquired a majority stake in IT services company Indium Software for an undisclosed sum.  

The PE firm (including BPEA's record) has invested about $9.45 billion in India over the previous 5 years. “Our average equity cheque now is probably around $1 billion," Salata said, adding that the firm’s sweet spot lay in identifying deals where companies could be sized at $1 billion-$2 billion in enterprise valuation.

EQT has been concentrated around IT services in India, having seen significant success in this segment, though in the last two years it has focussed on diversifying its portfolio.

The PE firm has invested in 12 IT services platforms in India and executed 37 bolt-on acquisitions (wherein the platform it invests in acquires another company). Cumulatively, EQT has invested $5 billion in the Indian tech services segment. These investments have fetched an internal rate of return of 34% and 3.9 times the gross multiple on capital invested, according to a 6 March report by EQT.

The firm’s successful investments in IT services include Coforge (formerly known as NIIT Technologies), CMS Info Systems, and Hexaware Technologies (which Barings sold to Carlyle Group in 2021 for $3 billion). EQT has sold $2.5 billion worth of shares in Coforge and CMS combined through the public markets over time.

Some of EQT’s other IT services investments include Hinduja Global Solutions and IGT Solutions.

Going forward, the PE firm will focus on acquiring controlling stakes in companies that have “good long-term growth potential and are structural growth drivers," said Salata. These include sectors such as healthcare and financial services, apart from IT services. “Increasingly, we’re looking at other areas like manufacturing businesses, consumer businesses, where we just see good long-term growth."

The deepening of the Indian stock market and the shift to domestic pools of capital is also a positive indicator of growth for India, Salata said. This is significant for EQT given that it plans to tap Indian markets for its Asia funds later, Salata added, declining to provide further details.

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