Bain Capital is looking to deploy around $1 billion in Indian companies over the next three years, underscoring the private equity firm’s bullish stance on this market despite the current economic downturn.
The US-based PE investor, which raised its fourth Asia-focused fund, the biggest so far, at $4.65 billion, has been a major investor in the country.
“If you look at over the last seven years, we have invested over $2.5 billion and are one of the biggest investors in the country. There is no reason why we cannot keep investing in India at the same pace," said Amit Chandra, managing director and chairman of Bain’s India office, on the sidelines of Sankalp Global Summit held in Mumbai.
Chandra said Bain’s focus on India will be on writing a few large cheques.
“Our investments in Axis Bank, Genpact and Hero MotoCorp were over $500 million. So, single deals will continue to be the strategy going forward, as we have always focused on big deals. Single deals for us have been in the $500 million to $1 billion range," he added.
While Bain does not have hard geographic allocations for deploying capital, Chandra said India features amongst the top three markets for the PE firm.
“India is one of the most important markets for us among the key markets that we invest in— Japan, China, India, Australia and South Korea. Historically, India has been 20-25% of any fund. This is just the Asia fund, we also invest into India from our global fund," he added.
Bain’s enthusiasm to deploy a billion dollars in Indian private equity over the next few years, comes at a time when markets have remained volatile in 2019 with Asia’s third-largest economy facing a slowdown, spurred by the collapse of infrastructure lending behemoth, Infrastructure Leasing & Financial Services (IL&FS), which triggered a credit crunch. With credit flow being impacted, consumption too has slowed as well as the country’s gross domestic product (GDP).
In October, the International Monetary Fund (IMF) slashed its economic growth forecast for India to 6.1% for the current fiscal from its July projection of 7%, citing weaker than expected outlook for domestic demand. While on 8 November, Moody’s Investors Service cut India’s credit ratings outlook to negative from stable citing concern that the government could be unable to help stunted economic growth.
However, Bain Capital remains bullish on investment prospects in India and considers the current bearish environment as a good time to deploy capital.
“This is a general feeling as when the economy is down, people get extremely worried and they stop investing. If you look at our history, we have actually made some of our biggest investments in companies when people were most bearish," said Chandra.
Citing the firm’s investment in Axis Bank, Chandra said that Bain’s investment was viewed with a lot of scepticism from across the industry.
“There was, at that time, deep scepticism about both the economy and the markets, and the company. I think long-term investors take a 5-7 year view on both economies and on stocks and are very different from traders. We look at structurally and fundamentally what is happening in the market and what the long term direction is," said Chandra.
Undoubtedly, there is a slowdown, but I think the long term India story is still intact, he added.
Last November, Axis Bank raised up to $1.78 billion ( ₹11,625.8 crore) through a private placement of shares from a clutch of investors led by Bain Capital.
Bain’s other investments in India include a $550 million investment in Hero MotoCorp Ltd in 2011, Pune-based pharmaceutical firm Emcure Pharmaceuticals Ltd, Larsen and Toubro Ltd (L&T)’s financial services arm L&T Finance Holdings Ltd and engineering services provider QuEST Global Services.