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Carlyle Group merges growth, buyout verticals in India

LiveMint logoLiveMint 16-08-2017 Reghu Balakrishnan

Mumbai: Carlyle Group, a global alternative asset manager with $170 billion of assets under management, is streamlining its operations in India by merging its growth and buyout investment departments as part of an effort to focus on more buyout transactions, according to two people aware of the development.

Contrary to the previous working model, the eight-members of Carlyle India’s senior management team will look at both growth and buyout opportunities in India, one of the two added, asking not to be identified.

“This unified investment team enables Carlyle to originate opportunities more effectively,” the second person said on condition of anonymity.

The Carlyle Group has invested more than $1.5 billion of equity in over 30 transactions in India across all Carlyle funds as of 30 June. Carlyle is in the process of raising its fifth Asia buyout fund worth $5 billion and another $1 billion under its new Asian growth fund that will largely focus on investing in India and China. Carlyle’s latest buyout fund is much larger than its previous fund, Asia Partners IV ($3.9 billion) while new growth fund’s size is pretty much the same as the last one’s.

In Asia, Carlyle has been reducing its exposure to growth investments. In the past three years, Carlyle had closed only two deals in India and one deal in China from its Asia Growth Fund; its Asia buyout fund had closed nine deals in China and three deals in India since 2014.

A Carlyle spokesperson declined to comment for the story. “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 with Bloomberg last week.

Deals of around $150 million to $250 million remain the firm’s sweet spot, the report added.

Carlyle’s India team is headed by Devinjit Singh and Neeraj Bharadwaj who are both managing directors. Devinjit Singh, a former managing director and head of M&A at Citigroup in India, spearheaded Carlyle’s investments in Housing Development Finance Corp. Ltd, India Infoline and PNB Housing Finance Ltd. The Asia Buyout Fund has also invested in Delhivery Logistics Pvt. Ltd, Global Health Pvt. Ltd and Metropolis Healthcare Ltd.

Carlyle’s Asia Growth Fund has some profitable exits to show in India. In 2014, sold its minority stake in Tirumala Milk Products Pvt. Ltd to Groupe Lactalis SA (Lactalis), the world’s largest dairy player, almost tripling the Rs100-crore investment it made in May 2010. The same year, it exited the Chennai-based Repco Home Finance Ltd in 2014, selling its 49% stake for a return of around five times. In 2015, Carlyle had exited its nine-year-old investment in pharmaceutical firm Claris Lifesciences Ltd, making double its investment, the second person added. Carlyle’s current growth investments in India include VBHC Value Homes Pvt. Ltd, South Indian Bank Ltd, Edelweiss Financial Services Ltd, Dee Development Engineers Ltd and Cyient Ltd.

“Buyout deals are picking up in India. Compared to three years ago when buyouts were mere 6-8% of private equity deals in India, now 28% deals by value are in the buyout category,” said Amith Karan, managing director, Private Equity Performance Improvement (PEPI) practice, Alvarez & Marsal India. Buyout opportunities in India have increased as businesses are being sold or non-core verticals are hived off by conglomerates and other business houses.

Besides Carlyle, other global funds are actively pursuing buyout opportunities in India with their latest Asia funds. In June, global alternative investment management firm KKR & Co. raised $9.3 billion for its investments in private equity transactions across the Asia Pacific region, under KKR Asian Fund III. The fund surpasses KKR’s $6 billion Asian Fund II to become one of the largest private equity funds dedicated to the region, according to financial data research firm Preqin. Another US-based private equity firm TPG is raising $4.5 billion for its seventh Asia Fund.

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