In a conversation with Mint, Mohammed Alardhi, executive chairman of Investcorp and Rishi Kapoor, co-chief executive of Investcorp, talk about the $28 billion alternatives investment manager’s plans for the future, especially in the Indian market, where it entered in January this year. Edited excerpts:
Many investors from the Gulf have been active in India for past several years. But Investcorp has entered the country only in 2019. What were some of the reasons that led you to set up an office here?
Alardhi: We believe in India’s future as it’s one of the fastest growing economies, it has the world's largest youth population and people are hard-working and entrepreneurial. Also, a lot needs to be done in infrastructure and we want to be a part of this growth and this story. We came here, bought IDFC Alternatives’ private equity and real estate business less than a year ago, and it has been going well for us. Like in any other economy, there are bottlenecks and weaknesses in India but we are here for the long-term, we did not come here to stay for a year or two, we want to stay here forever. Investcorp’s history is like that. We started about 40 years ago and in the US, Europe and Gulf, and we have gone through many crises but we have always moved past them and continued.
Where do you see Investcorp in the next five years?
Alardhi: Our vision for the firm is that we want to be a respected global investment firm in the alternatives space. Any gaps we have in the alternative space, we want to fill them. So, we didn’t have an infrastructure business, we started an infrastructure business. We were not in India; we are now in India. We weren’t in China; we are now in China. In the US, we started there four decades ago and now we want to go deeper into that economy. Our vision is that in the next five years we want to go to $50 billion in assets under management and really become a more global firm. In India, our target is to grow the business to $1.5 billion in assets under management over the next five years
In terms of investments, what will be some of the focus areas in India?
Kapoor: Part of our investment thesis for India or any other market is that we have to be nimble and flexible and look at any opportunity as it presents itself. Part of it is aligning with the long-term secular trends that we see would play out in the next 25 years. As far as India is concerned, a couple of those long term secular trends are really the core of our investment thesis. One is the mass-consumption story and we want to invest in companies that create access to good quality goods and services available in an affordable format. In terms of sectors, we are looking at healthcare, financial services, retail and consumer-tech, and all of these really tie back to the mass-market consumption theme that will be led by a growing middle class with higher levels of disposable incomes. The second thesis, which is more in an opportunistic sense, is around the lack of credit availability in India. So, we have been providing credit within our real estate business. It’s a challenging space but there is an opportunity around it and we look at ourselves from the perspective of a credible provider of capital within the affordable mid-market housing space. That, I feel will help us generate a good risk-adjusted return. So, these are some of the core thesis that we are looking to back in India.
What, in your view, are some of the risks when it comes to investing in India?
Alardhi: India has an ambitious target of building a $5 trillion economy, which is great, and we believe it is achievable too. But it will take relentless effort to make through this journey, you cannot slow down or stop or take your eyes off that target. Also at the same time, all engines have to be fired up—whether it is credit or taxes or ease of attracting investments. I think the challenge is really to continually make India an attractive market and get rid of all the roadblocks and bottlenecks, as we continue on this journey.
Going forward, would you look to do more control deals?
Kapoor: Our DNA is control deals but we recognize that in markets like India, China and Middle East, which are all emerging markets— growth capital plays a pivotal role. This, as in these markets it makes more sense to make our investments aligned with the entrepreneurs and look for that next layer of growth in partnership with them. As the market matures, it is inevitable that buyouts will become a greater proportion of the overall PE. Right now if it is around 20%, it may become higher in India and we will also evolve with the market.
Ridhima Saxena contributed to the story