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PE buyouts still nascent in India but global majors see improved pipeline

22 February, 2013

India is much behind other markets in the Asia-Pacific region in terms of private equity-led buyouts but the pipeline of such transactions looks better, according to the buyout specialists who spoke at the VCCircle India Limited Partners Summit 2013 in Mumbai on Thursday.

Moderating a session on Indian landscape for big ticket buyouts, Shashank Singh, managing director at Apax Partners India, pointed out that the majority of the private equity transactions in India comprise growth capital investments and while early-stage deals have picked up, buyouts remain an insignificant part of the deal volume.

In terms of deal value, buyouts form a relatively higher proportion of PE investments in India but are still lower compared to regional peers such as China, where they constitute 16 per cent of overall value, and Japan, where buyout value stands at 66 per cent, he said.

According to the panellists, there are few regulatory limitations in India for leveraged buyouts which are associated with PE firms in mature markets. But then, there are other hurdles, due to the reluctance of promoter-led companies to move on.

However, the prospects are now improving as in some of the family-owned enterprises, the next generation is not keen to pursue the business or the head of the family acknowledges that the firm would be better run by others.

Devinjit Singh, managing director of Carlyle, said that the percentage of buyouts would have been higher but for the business environment in India.

“Selling the family business at the time of succession is considered a taboo in India, whereas it is celebrated in other places,” he observed.

Singh also added that over the past five years, buyouts constituted only around 20 per cent of all the deals his team looked at and 80 per cent of the deals were for transactions with minority positions. “However, if I talk about our deal pipeline for the next 12 months, control transactions are expected to constitute almost half of all the deals,” he noted.

Carlyle does both growth capital and buyout deals in India.

According to Mathew Cyriac, senior managing director of Blackstone, the buyout trend looks positive. “In our 20 transactions in the last six years in India, we had four buyouts and we are opportunistic about it,” he said.

Referring to opportunities for buyouts of distressed assets, the panellists noted that 20 per cent of the total distressed asset spectrum can be looked at for further deal opportunities.

(Edited by Sanghamitra Mandal)


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PE buyouts still nascent in India but global majors see improved pipeline

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