Private equity group Warburg Pincus may invest $8 billion in India over the next 10 years — twice of what it did in two decades — as the New York-headquartered firm extends its long-term bet on one of its “most important markets in the world”.
Warburg, which has deployed $3.8 billion in 51companies as diverse as Kotak Mahindra Bank, Alliance Tire, Ambuja Cement and Laurus Labs in India since 1997, is looking to deepen its involvement, Co-Chief Executives Charles R Kaye and Joseph P Landy told ET in an interview.
“We never believe in numerical targets and do not set investment allocations by region. But frankly, if we couldn’t deploy more than double that amount within half the time, I would say, all of us will be disappointed.
India is at an interesting inflection point and is a very compelling investment destination for us,” Kaye said.
“This is one of the most prolific regions for us. Warburg Pincus has represented approximately 4% of PE-type money in India over the last 20 years and 10% of returns, making India an extremely successful market for us,” Landy said. As mavericks instrumental in establishing the PE cult in India in the 1990s, Kaye and Landy are modest.
Their big paydays, including a sixfold return on Bharti Airtel, helped spark a global PE rush to India.
And both are still as keen on discovering the next Sunil Mittal as they were in 1999, when their India associate brought to them a compelling story of a fast-growing mobile telecom company with a footprint in six circles and under 300,000 subscribers but which had the ambition to become the No 1.
“The next generation of entrepreneurs are much more talented and limitless in terms of what is possible. It is fascinating for us to see the broad base of entrepreneurs in India,” Landy said.
“Their capability to navigate difficult situations is what differentiates them,” added Kaye, fellow Indophile and Landy’s colleague for almost three decades.
As a fund, Warburg Pincus has put its money where its mouth is, backing more emerging unicorns like Quikr, CarTrade and ECom Express among others than most of its pedigreed Wall Street peers.
Investments are expected to pick up as opportunities open up aided by financial inclusion, the digital economy, migration from unorganised to branded products and services and development of logistics and infrastructure.
Energy, both renewable and traditional, are also expected to throw up new champions. Travelling across the country last week to celebrate 20th year of operations in India and also the 50th anniversary of the fund, the co-heads soaked in what they said was “the reenergised excitement” under Prime Minister Narendra Modi. Accompanying them were the entire senior management team, paralleling a similar visit three years ago.
“Perfect markets are not necessarily the ideal markets where you can get fantastic returns. By working through the challenges, we have found and will continue to find great opportunities,” said Landy, downplaying the legacy challenges of land and labour that most global investors blame for hobbling growth potential.
“Our history goes back to the very origins of PE in India and we have benefitted from a frontrow seat position as the market has evolved,” said Kaye. Having navigated business cycles, Kaye explained the fund has always believed in “partnership models” to deliver growth and help build sustainable businesses.
And even though the entrepreneurial ecosystem has evolved substantially, the fundamental investment thesis remains the same.
Warburg has always remained the outlier. With about $40 billion in PE assets under management, it’s overshadowed by giants like Blackstone, TPG Group, KKR, Carlyle and Apollo. It is still private. But what it lacks in heft is compensated for by the track record of profitable exits.
While most have expanded service offerings—from junk bonds to mezzanine debt—Landy and Kaye have stuck to their growth equity knitting, sometimes buying into smaller, unproven companies like prescient venture capital firms and consciously staying away from mega leveraged buyouts.
“Growth is in our DNA. We are agnostic to as to whether we do startups, minority or majority investments or buyouts,” said Kaye. “It would be wrong to classify us as a leveraged buyout or controlling transactions-oriented PE firm as we are very flexible.” Landy broke it down further: “As deal sizes and leverage increases, we will still invest but it will continue to be growth focussed.”