Old-world bankers have been joined by new-age private equity executives in funding the Indian corporate sector's growing fascination for overseas acquisitions, the head of one of the world's biggest private equity funds said on Sunday.
Talking to Hindustan Times on the sidelines of the India Economic Summit, Martin Halusa, chief executive officer of Apax Partners Worldwide, said private equity investors, who share risks with an eye on high returns, would play a constructive role in deal-making for Indian buyers in the US and European markets.
The acquisitions by Indian companies have so far been driven largely by cash accruals, debt or leveraged buyouts where assets of the acquisition target are used to raise loans. While Indian companies increasingly have industry knowledge and management capabilities, they still lack in many cases the risk appetite which can be shared by private equity firms.
"It is difficult to become a global leader through organic growth as you need a market, which can be done thorough acquisitions," Halusa said, adding that Indian management capabilities were strong in his own firm that manages $20 billion. Some 10 per cent of Apax's partners who drive business are Indians.
Halusa said Indian companies could do with an extra helping hand to become more acceptable to shareholders of target companies. "In fact there were instances where despite being aggressive and presenting a formidable case in auctions, some Indian companies lost the case," he said.
Apax is eyeing both buyout funding and standalone investments in telecommunications, information technology, retail, consumer goods, media, healthcare and financial services. Neeraj Bharadwaj, Apax's India head, said the average investment holding period of his firm was 3 to 7 years.
By and large, private equity firms have not yet taken part in Indian buyouts although they were keen brokers in a reverse merger involving Hyderabad-based Matrix Laboratories. "For us it (joining hands with Indian companies) is one of the key areas besides taking equity exposure in the Indian companies," Halusa said.
While refusing to disclose the average size of Apax's deals, Halusa said the firm is planning raise of 8.5 billion euros ($11 billion) in a fund that would target 30 to 40 firms worldwide. "We have currently a 4.3 billion euro fund, which has just been fullly invested in less than 20 companies," Halusa said.
On that yardstick, the average deal would be worth $275 million.
It is just the beginning for the private equity players in India, Halusa said. "Inida is witnessing an extraordinary growth and we are looking at participating in the growth period along with Indian promoters," he added.
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