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Can the elephant outpace the dragon in attracting private equity?

13 April, 2016

The past few months have seen the Chinese economy slowing down, while India has reported stable growth. Against this backdrop, can India attract more global investments? This was one of the questions raised by panellists at the VCCircle Limited Partners Summit 2016.  

“China has clearly outpaced India in overall investments in private equity in the last 15 years. India has done well but the difference in scale is massive. Our view is that the pie is large enough and there is enough for China and India to attract from global markets. It is not a question of how much but who is able to attract this investment. And the questions revolve around issues of governance and valuation,” said Tarun Bhatia, managing director of Kroll, while addressing the summit.

In addition to Bhatia, who was the moderator, the panellists at the summit included a mix of general partners (GPs), a legal representative and an expert on the limited partner-general partner (LP-GP) market in Asia.

Amit Chandra, managing director, Bain Capital Advisors, said despite periods of volatility, Asia fared well in the past 10 years. “If you step back and look at the big picture, it has been a period in which a lot of capital has come to Asia. The Asian private equity industry is now broadly 20-25 per cent of total dollars invested globally,” he explained.

Chandra said over the last six to seven years, returns across the three major continents – Europe, the US and Asia – have been in line with one another.

Manish Kejriwal, managing partner at Kedaara Capital Advisors LLP, said India has seen hiccups despite the change of government. He said historically, India has not delivered enough returns, which is why the number of GPs has reduced from 250-300 to 60-70. “There has been a consolidation, which is much healthier. Valuations are not as high, and each one of us is taking a different tack,” Kejriwal said.

He said GPs shouldn’t worry about other countries like China or Pakistan but should focus on delivering what was promised to LPs.

Bryan Stewart, director of the emerging markets division at Liberty Global Partners, said his firm’s India fund has seen more interest than the one for China. However, he cautioned that while there may be more interest in India, that does not necessarily translate into more capital entering the country. “What they (LPs) are looking for is a manager who will outperform regardless of what market they are in. So we advise our clients to not compare themselves with their competitors within their particular strategy, and instead compare themselves against global benchmarks because ultimately that is what LPs are going to invest in,” he explained.

“On the regulatory front, private equity houses in both India and China have had mixed experiences,” said Nishant Parikh, Partner at Trilegal. “If you look at the Chinese regulator and how it has behaved with the stock market, you can say the reaction has not been very mature. Likewise in India, most PE houses have faced issues with enforceability of various rights,” he said. However, he is optimistic about the government and hopes to see more clarity in policy making.


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Can the elephant outpace the dragon in attracting private equity?

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