L Catterton to step up India focus over 2 years

The PE firm, which raised a $1.4 billion Asia fund in 2019 to deploy in China, Japan and India, is scouting for opportunities across consumer sub-segments, Anjana Sasidharan, partner and head of India at L Catterton said in an interview.

Founded in 1989, L Catterton manages around $33 billion of equity capital across private equity, credit and real estate.

So far in India, it has invested in companies such as Reliance Jio Infocomm ($250 million along with co-investors) Sugar Cosmetics ($50 million along with co-investors) and Drools Pet Food ($60 million).

A lot is going in India’s favour for global investors to be excited about, Sasidharan said.

“It’s the fastest-growing large economy and has the opportunity to become the third-largest economy, say, by 2030, even by conservative estimates. However, I think, what’s exciting for us is that 60% of GDP (gross domestic product) is driven by consumption. And, therefore, we are sitting in an ecosystem where what the consumer does today has a disproportionate impact on growth. Because, as per capita income grows, discretionary income grows, and the impact on consumption will be more than what the GDP growth truly reflects," she said.

According to Sasidharan, the growth of organized sectors is 1.5-4 times of the unorganized segments.

“That presents a very interesting opportunity for firms like us for looking very closely at the consumer space."

New themes within the consumer segment have emerged, she said. “Segments like beauty, personal care, food and beverages, travel, skilling and upskilling, and retail and accessories, are interesting spaces for us, but we are relatively more cautious on fashion-type segments. We like businesses where there is a little bit more ability for us to ensure there are sustained moats versus a likelihood of it being a fad."

L Catterton is likely to write checks of $25-150 million in growth-stage startups. With the Indian market maturing, it is also open to selective buyouts, she said. “So, to that extent, we are definitely very long on India. The market is actually more attractive than most."

However, India also commands a premium, which is often a subject of critique among many global investors, said Sasidharan.

“But, we are disciplined. Unfortunately, I have said no to many good companies, because we like everything except the valuation. We believe that the stage at which we see companies, you can actually pick up a good company, and make a bad investment if you don’t pay the right price. So, we try to avoid such situations. We at least try to make sure that to the extent possible, even if it is a bank process, we are often not the highest paymasters."

Now that the valuations of most companies have been reset since the 2021 funding boom, the PE firm is expected to increase its pace of investments in India.