The Hindu Business Line : TA Associates looking to invest more in India

‘With aggressive pricing, high competition and lack of transparency, it takes a lot more time and effort in India than elsewhere to find a good investment opportunity’.

Sagar Bhadra

Mumbai, Sept. 22 “India is still exciting for us; the key is the price.” That seems to be the mood at TA Associates, one of the oldest and largest private equity firms in the world with over 300 portfolio companies across various sectors.

Equipped with a recently closed $4-billion fund, the group is looking to make significant investments in India. However, the firm has a conservative approach and has repeatedly been outbid by competitors.

The firm has invested in Idea Cellular and GlobeOp Financial Services, a specialist BPO company.

In a recent interaction with Business Line, Mr Naveen Wadhera, Director and India Head of TA Associates, discussed the private equity investment climate in India.

Excerpts:

How is TA Associates different from other private equity players?

We are a growth private equity fund, which essentially means our purpose is growth. We are not interested in excessively leveraged transactions, distressed asset purchases, venture investments and capital-intensive companies.

The partnership looks to invest in companies that have high growth, high degree of sustainability in margins and a lot of intellectual property.

Our transactions can be both majority and minority control — historically it has been on a 50-50 basis.

The group is agnostic on control and sector. Our investment tenure ranges between three and six years. Globally, our average investment size is $150 million. However, for India it ranges around $40 million.

What is your market outlook for PE investors in India?

Market enthusiasm seems to have picked up and we are seeing the public market giving competition to private companies with options such as QIP.

With the economic slowdown and the Sensex lows rebuffed as a rare event, PE investors are again seeing spiralling valuations which make private equity investments difficult.

We are still very bullish and optimistic on India which is the very reason why we decided to expand our presence in the country. However, there is a lot of capital chasing a small number of deals. With aggressive pricing, high competition and lack of transparency, it takes a lot more time and effort in India than elsewhere to find a good investment opportunity.

TA Associates recently closed a new fund. How much of it is meant for India?

We recently closed a $4-billion fund. As such, we do not allocate by geography. The goal for us at TA Associates is to invest in India as much as we can. However, we do not have a hard and fast number. We have one pool of capital and we have the same return criteria and investment threshold for every investment across the globe. In each of our investments, every partner participates along with the limited partners from whom we have raised money for the fund.

What is your investment focus currently in India?

We are particularly concentrating on healthcare and TMT (technology, media and telecom). In health care, we are not interested in mass market generic players like Dr Reddy. We prefer to look at niche companies whose operations are not easily replicable. For example, we like drug delivery companies, speciality therapeutic centres, diagnostic centres, pathological labs and CRO in healthcare.

In the TMT space, we are looking mostly at telecom and technology. We have investments in Idea Cellular and GlobeOp Financial Services (a specialist BPO catering to the hedge fund industry). In telecom, we are particularly interested in all the ancillary activities that support the sector – which includes devices, equipment, after-market sales and VAS players.

Keeping your three-to-six-year investment frame in mind, are you planning to exit Idea anytime soon?

We are still holders of Idea Cellular and do not have any plans to exit. The telecom space is of considerable interest to us and we believe in the growth story of the company despite anticipated competition in this segment in the near future. But any further investment in Idea is also not currently in the radar. We might look at investing in other telecom players. However, that would happen only after we exit Idea as otherwise it would be a conflict of interest.

Why has TA Associates been so quiet in the India deal scene?

We have looked at a lot of deals and got a bunch of term sheets deployed in the last two years. However we are conservative investors and disciplined in price. The group has submitted many bids in the past, but keeps getting consistently outbid on price. The story of India, when looked at from the top-down thesis, is extremely exciting. With a billion people (as the country’s population), any sector looks to be promising. Sectors such as power and infrastructure have great macro stories. However, the deals need to be sensible and with so much hype in the market, prices tend to get ahead of value in these investments.

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TA Associates looking to invest more in India