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MUMBAI : Indian companies are well positioned to attract private capital in the next year, despite global uncertainties and fears of a potential recession in the US, panelists at the Mint Indian Investment Summit said, as they discussed strategies for boosting private capital inflow.  

The panellists were Anjana Sasidharan, partner, head of India and Southeast Asia Growth Investments at L Catterton; Mukesh Mehta, senior managing director, Blackstone; Amit Soni, partner, head of India for CVC Capital; Utsav Baijal, partner, India head for Private Equity for Apollo Global Management; Nikhil Srivastava, partner and managing director, and head of India Private Equity at PAG; and Nithya Easwaran, managing director, Multiples PE.  How private capital could turbo-charge the Indian economy was the topic of the panel discussion.  

 “Nothing drives capital more than success. Indian private equity has delivered good results over the last 8-10 years. As long as India does relatively better than other countries, we will attract capital. Having said that, with liquidity getting squeezed out of the system, there  is going to be an impact," Apollo’s Baijal said. The impact would  most directly impact areas that commanded lofty valuations over the last few years, he said, including early stage startups or tech companies or some pockets of real estate.  

Blackstone's Mehta said recent years have seen an increase in deal sizes in the Indian private equity ecosystem, which is encouraging. “80% of the deals in India are now over $100 million in size. Of this, over 50% of the deals are buyout transactions. The industry has become more mature," Mehta said, adding that the next 6-12 months would prove to be an ideal investing vintage for private equity in India.  

Indian companies may find new opportunities in the global uncertainty, panelists said.  

" If we had the technology sector that absorbed the maximum amount of capital in 2021, this year it will be manufacturing," Multiples’ Easwaran said, who noted that the rise of domestic capital also provided companies with a robust alternative.  

Sasidharan of L Catterton also echoed the view on Indian manufacturing, noting that Indian consumption would protect the economy.  

 “The recessionary concerns globally are driving manufacturing to India because of geopolitics, and making India the back-office for the world, because we actually produce 25% of the world’s engineers. That will put more money into the hands of the consumer. We are the fastest growing economy,  70% of the GDP is driven by consumption. All of those are strong positive indicators long term," she added.  

Panelists also noted that the uncertainty could result in a cooling of valuations, which might influence deal activity.  

 “For me, the macro uncertainty will continue. Hopefully there is a convergence between the valuation expectations and what investors are willing to pay. Therefore, I think in the second half, we are going to see a lot more deal activity. There is likely to be limited processes and to some extent bilateral discussions leading to deals," PAG’s Srivastava said.  

CVC’s Soni also added that discipline and execution would be valuable in 2023. “Cash is king, business discipline will be valuable and get a premium. Businesses that invest or buy in this time, will have those non linear opportunities available to them in the next 9-12 months," Soni said.  

The value addition offered by the private equity would become crucial in 2023, Soni added. “What’s your value creation plan.  Eventually, it boils down to what can you do with the management, what the value creation plan  is and what are the degrees of freedom you can exploit," Soni said.  

Blackstone's Mehta also added that it was harder to buy low and sell high. "Today return multiples are created by the kind of value you build in the company," he said.

 

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Updated: 22 Mar 2023, 09:02 PM IST
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