Photographer: Dhiraj Singh/Bloomberg

Carlyle Seeks to Boost India Deals as Buyout Opportunities Rise

  • PE firms could benefit as Indian conglomerates divest assets
  • Carlyle scouts for investments in finance, health care

Carlyle Group LP is seeking to boost its dealmaking in India as buyout opportunities rise in the South Asian nation, where returns on investment are beating all major markets across the globe.

Opportunities for control transactions are picking up in India, and Carlyle is seeing many attractive potential investments in the country, Managing Director Neeraj Bharadwaj said in an interview in his Mumbai office last week. Buyout deals have increased to one-fifth of the total private equity investments in India during last 12 months, from about six percent five years back, according to data provided by Carlyle.

Carlyle is scouting for investments in Indian financial services, health care and industrial companies, as well as in telecommunications, media and technology, Bharadwaj said. Deals of around $150 million to $250 million remain the firm’s sweet spot, he said.

“We are very bullish on where India stands today,” said Bharadwaj, 48. “As in all good markets, competition for deals is going up here too.”

Canadian investment firm Brookfield Asset Management Inc. was earlier pursuing a takeover of Bharti Infratel Ltd. valuing the company at about $11 billion, people familiar with the matter said in December. A consortium led by Indian private equity firm True North agreed in April to acquire Religare Enterprises Ltd.’s health insurance business for 13 billion rupees ($204 million).

Taking Control

Carlyle, which set up an office in India in 2000, has invested about $750 million in Indian companies during the last three years. A 2015 investment in New Delhi-based mortgage lender PNB Housing Finance Ltd. is now Carlyle’s second-largest public position globally, with a market value of $1.4 billion. Its most recent deal was signed last month, when it agreed to purchase a stake in State Bank of India’s credit card business from GE Capital. 

Some multinational corporations are looking to sell operations in India, while the larger Indian business houses have begun to focus on their core businesses, according to Bharadwaj. Tata Group may sell some smaller units as it seeks to streamline its technology operations, while billionaire Anil Ambani’s Reliance Communications Ltd. is seeking a buyer for its undersea cable arm, people with knowledge of the matter have said.

“If Indian conglomerates exit there is definitely an opportunity -- they have scale and have built strong management teams and systems,” Bharadwaj said. “It would lead to a lucrative buyout opportunity for PE funds.”

Private equity transactions in Asia’s third-largest economy rose to $11 billion this year, from $6.8 billion during the same period in 2016, data compiled by Bloomberg show. India ranked as the most attractive emerging market for investment in 2017, according to a survey of private equity investors conducted this year by EMPEA, up from eighth place in 2014.

Attractive Returns

Carlyle has been looking for investments tied to domestic consumption in India, as it sees room for expansion of the country’s organized retail sector, according to Bharadwaj. It is also seeking deals benefiting from India’s export industries, such as information technology services and pharmaceuticals.

“Over time we will most probably do a deal in those segments,” he said. “Those companies tend to have a larger scale in India and also tend to have the best management teams as well.”

India boasts the world’s highest returns on capital thanks to its large supply of low-cost labor, abundance of technological talent and favorable demographics, Carlyle wrote in a report last year. Returns on incremental investment in India are expected to average 24.7 percent annually from 2016 to 2020, more than double the global average, according to the report, which cited data from the International Monetary Fund.

Carlyle is “very optimistic” about investments in India, thanks to a favorable economic backdrop due to a mix of government policies and lower oil prices, according to Bharadwaj. India has a majority party running the central government, foreign-exchange reserves have risen and the currency is appreciating, he said.

“The macro fundamentals have improved tremendously,” Bharadwaj said. “How much more can an investor ask for?” 

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