TPG’s Bonderman says Modi euphoria makes Indian companies overvalued

David Bonderman, founding partner at global private equity major TPG (formerly Texas Pacific Group) has said the euphoria surrounding the election of Narendra Modi as the new Prime Minister of India, which has buoyed stock market valuations to new highs, has made India overpriced.

“There are times when places like India are cheap. That isn't the case now; so we have to be cautious," Bonderman said at the annual SuperReturn private equity conference in Hong Kong on Wednesday, according to Reuters.

According to Bonderman, there will be a period of disenchantment as people realise Modi's limitation on what he can fix.

"Most of what ails India can't be fixed by one man and a federal system," he said.

According to Bonderman, the run up in the valuations has affected deal making in the private equity space.

TPG, which had struck two deals last year, is now sealing its first new transaction in the country by investing in BPO firm Sutherland Global.

TPG has two separate teams operating in India. TPG Capital, through its Asia and global buyout funds, looks at large buyouts and strategic transactions. The other unit is under TPG Growth.

The firm's investments in India include buyout of retailer Vishal Megamart (along with Shriram Group), Sutures, Flexituff International, ASG Transact and real estate development company Shriram Properties.

“In India, the public markets are ahead of themselves, as they often are in India. It tends to be the case that prices follow the public markets in India, and they get out of control as they are at the moment, due in part to Modi euphoria,” Bonderman said, while pointing out that power sector of the country is one of the problems the country is facing.

"So India is way underpowered and they can't get their act together to figure out how much they're charging for coal and how much they're charging for natural gas, and definitely you can't get anybody building power plants...Mr Modi can't fix that overnight. Maybe over a decade," he said.

(Edited by Joby Puthuparampil Johnson)

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