India’s economic slowdown coupled with a credit crisis is creating a surge in demand for capital from beleaguered companies that are providing Blackstone Group Inc. with buyout opportunities in Asia’s third-largest economy.
“We are not taking a cautious stance of watch and wait," Amit Dixit, Blackstone’s senior managing director, said in an interview in Mumbai on Wednesday. “We are actually taking a forward-leaning stance."
For Blackstone, India is the “strongest performer" in the world, said Stephen Schwarzman, chief executive officer of the world’s largest alternative asset manager. The company, which has invested $6 billion in India in the past 18 months, is scouting for opportunities as financiers and banks focus on recovering from a crisis that began with the collapse of an infrastructure financier in 2018, slowing down lending in the process.
Central bank data show loan growth sunk to a more than two-year low in February, despite the Reserve Bank of India lowering borrowing costs five times last year. The world’s highest bad-loan ratio amid waning consumer demand in an economy that’s set for its weakest expansion in 11 years has stymied lending.
“When growth slows down, your credit off take goes down," central bank Governor Shaktikanta Das said in an interview on Tuesday. With sales dropping at corporates “it could impact their behavior in terms of repayment of loans."
In India Blackstone, which operates three businesses including private equity, real estate and tactical opportunities, has acquired a shadow bank, and manufacturers of auto parts and packaging material. The fund is also the largest owner of commercial real estate in India and was the first to sell units in a real estate investment trust last year.
“Underlying theme of slowdown in the economy combined with the credit crisis has led to this acceleration," said Dixit.
In January, Blackstone invested ₹380 crore ($52 million) in a warehousing unit of Allcargo Logistics Ltd. with an option to increase the stake over the next 12 months based on achievement of pre-agreed performance milestones. Last month it proceeded with the acquisition of Coffee Day Enterprises Ltd.’s technology park by paying the first tranche of ₹150 crore out of the total ₹2700 crore.
Blackstone sees buyout opportunities increasing across the world as the coronavirus outbreak spooks financial markets and hurts company valuations, said CEO Schwarzman.
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