Global private equity advisory firm Liberty Global Partners has helped raise over $5 billion for emerging markets. But macro-economic uncertainties in emerging markets including China is making investors cautious, says Bryan Stewart, director of Asia-Pacific emerging markets at the firm. Stewart, who will be a speaker at VCCircle’s flagship VCCircle India Limited Partners Summit 2016, shares his views about India as an investment destination and the challenges investors and PE funds face in the country.
How do foreign investors view India as an investment destination?
As compared to other emerging markets like China, Latin America and Africa, India has faced a period of extended difficulty. A lack of exits and strong returns has kept international sentiment tepid, resulting in only a limited amount of capital that has been allotted by LPs to India. But this appears to now be changing given increased interest in India due in part to reforms by the government, the financial markets, and an improving GDP growth rate. There is a lot more energy and excitement about India than what we have seen in a good number of years. Whether this will translate into more capital coming to India, we will have to wait and see. However, we are having more conversations at the macro level.
What challenges do LPs and PE funds see when it comes to investment in India?
It can be very challenging to raise money for India. India is a very entrepreneurial environment and lots of Indians are setting up private equity funds. Hence, one challenge is differentiation. How does a PE fund manager differentiate oneself from other managers? Exhibiting a good track record is also challenging for fund managers in India, especially new managers. Attributing track record from a previous firm can be difficult, not to mention many fund managers have had a tough time exiting companies and returning capital back to LPs.
Do you see new LPs and PE funds showing interest in India?
Yes, there are many LPs who have looked at India in the past but are now looking at it more closely. It is still a difficult market and one not very well understood. So, I think it is still a battle for Indian PE funds to get attention from global LPs. However, India is on an uptrend in terms of perception. That said, the mood about emerging markets more generally is quite negative. There is a pretty strong headwind blowing against India due to macro-economic uncertainties in China and other EMs, slowing growth rates, depreciating currencies, and stock markets across emerging markets not performing very well.
How is India viewed globally in terms of China and other emerging markets?
The future is looking brighter for India. It is very difficult to compare India and China given how different their economies and institutions are. The level of capital flows to China and India are also quite different. It is hard to expect that a dip in capital into China will translate into an increase in investments in India. I do not think there is a simple comparison.
What are your expectations from the VCCircle LP Summit?
As a foreigner who visits India periodically, I find VCCircle events as great venues to learn the latest regulatory developments, meet new PE fund managers and catch up with more established firms, and see the investment trends and challenges the sector is experiencing.