Blackstone optimistic on Indian investments

New York-listed Blackstone has put more than $5 billion into India since entering the market in 2005, making it the country’s largest private investor by assets, with its holdings split roughly equally between its private equity and property divisions.

However its private equity portfolio had struggled, leading it in 2013 to move aside Akhil Gupta, previous head of its private equity division and mastermind of its aggressive expansion in the country.

But Mathew Cyriac, co-head of private equity, says the asset manager had learnt “important lessons” from its earlier missteps, and now planned to invest as much as $2.5 billion in private equity by 2020, while continuing to expand its property holdings.

“2015 was a big year for us, but there is no reason to think it was a one-off,” he told Financial Times. “There is clearly enough deal flow for us to invest $400m or $500m on an annual rate [in private equity] over the next four to five years.”

Blackstone’s private equity arm was hit as India’s economy slowed at the start of this decade, but it was particularly hurt by a series of poorly performing investments in sectors such as infrastructure, power and financial services.

Its property investments are understood to have performed more strongly, following a rapid push into commercial real estate which has seen it become India’s largest owner of office parks.

2015 proved a bumper period for private equity in India after years in the doldrums. Buoyed by optimism over the country’s improving economic outlook, funds invested $21bn according to data provider VCCEdge, beating the previous high of $18bn in 2007.

As part of its own recovery, Mr Cyriac said Blackstone had sharply narrowed the focus of its private equity investment to around half a dozen sectors, including pharmaceuticals, IT and consumer goods, but also logistics and building materials, notably cement.

The group also plans to increase the average size of its deals by targeting larger investments involving bigger companies, having invested $545m in private equity and $625m in real estate over the last year.

“We are trying for larger deals, deals with more control,” Cyriac said. “I think the velocity of these large deals is definitely going up.”

Despite this optimism, parts of Blackstone’s portfolio remain troubled, according to people familiar with the situation. So far the group has exited only five of the 21 private equity investments made over the last decade.

Prominent investment deals last year included its repurchase of Serco’s Indian business processing unit for £250m (Dh1.33 billion), a unit which Blackstone itself had sold to the UK-based group for £350m back in 2011.

Although the group declined to comment, Blackstone are understood to angling to buy the cement division of Indian billionaire Anil Ambani’s Reliance Infrastructure, which the tycoon put up for sale last October, in a deal expected later this month.

— Financial Times