‘Classic leverage buyouts must be allowed in India’
Global PE player Advent International recently raised $25 billion — its largest fundraise — which will also support its expansion in India. With over $2.9 billion already invested in India in over 13 companies, SHWETA JALAN, managing partner, talks to Surajeet Das Gupta about its plans. Edited excerpts:
What does this fundraise mean for Advent’s plans for India?
This fundraise is 40 per cent larger than our previous global PE fund which raised $17.5 billion in 2019 and helped the firm reach the $100-billion milestone. It will support our expansion in India and allow us to tap into attractive opportunities. Asia is an important region for us and it shows with the volume of our investments, particularly in the last 6-7 years where we have demonstrated a very active investing focus, particularly in India.
What ticket size are you looking at in India while you invest?
We have a size-agnostic approach to investing. The big advantage of this is it allows us to occasionally underwrite large and small transactions while retaining the flexibility to invest based on sector, geography, and deal type. From the new fund, we will have the flexibility to deploy capital with equity investments from $100 million to $2 billion. Or even more.
What areas you are looking at and has there been a change in strategy?
We have not changed our strategy, nor our underwriting standards and we would continue to look for investment avenues which have upside potential. We continue to see attractive opportunities in our target sectors, which are essentially healthcare, consumer, technology, financial services, and industrials. If opportunities arise, we will look at other sectors as well. We believe our strategy is well-suited to navigating various market conditions and cycles. Advent so far has not invested in start-ups in India.
But many start-ups now command large valuations of over $4-5 billion and are as big as many companies Advent has invested in. So will you look at such companies? We will look at companies which are mature and established business models and are profit-making and cash-flow generating. What we will certainly not do is look at younger companies where the cheque size threshold is met just because the valuation is high.
What is your strategy on distressed assets?
Distressed is in two buckets: one which requires big debt restructuring and rebuild and there is no profitability left. Those will be harder for us to do. But the other bucket that we could look at is where there are transformation opportunities. These could be companies which have strong brands, good distribution networks, and solid underlying fundamentals but which have not been managed as well as they should have.
What is your time period for exits as there is a debate that PES should stay invested for a longer time to get upsides?
The typical time period for a deal is 4-5 years. If the value creation has happened faster, we could exit faster. We can also stay longer, if we feel our investment is taking more time for the company to deliver to our plan. Most of our exits have been done in 4-5 years. In our portfolio we have done 4 full exits.
What are the key issues from a regulatory perspective that need to be resolved to give a bigger push to PE funds?
One regulation would be to allow banks to give leverage for acquisitions. The classic leverage buyout in India is not possible. This was a rule set a long time back for a different reason. Allowing domestic banks to provide leverage acquisitions would really propel LBOS in India further.