Global investor Advent International, which has $54 billion of asset under management with $2 billion of it in India, is looking for more acquisitions in financial services and consumption sectors.
This year has been active for the PE firm which has committed $600 million in five Indian assets across sectors such as pharma, healthcare and consumption. After investments in AB Capital and DFM Foods, Advent’s most recent acquisition is Bharat Serums and Vaccines.
Nisha Poddar of CNBC-TV18 caught up with the top team of Advent, Chairman and Managing Partner David Mussafer, Managing Partner and Co-Chairman, Executive Committee James Brocklebank and Shweta Jalan, MD and India Head to discuss the road ahead for the firm.
The last few months have been extremely active for Advent International in India. You have made several acquisitions, what is so attractive about India when it comes to India being the investment destination for Advent? Mussafer: We have been here in India now for a decade, we are about to celebrate with our team, and over that time period we have been working to really deepen our relationships and our expertise. And of late we have really found some traction in some amazing new investments that are really spot-on in terms of our focus destinations.
But specifically, what we are really seeing, obviously the growth is the first and foremost. India has one of the fastest and largest GDP growth of any large industrialised economy. On top of that, with the reforms that have happened of late, we find increasingly attractive investment opportunities across a few different sectors.
Coming to you James on this macro data points, which an investor would look at, when it comes to foreign investor looking into India. Mussafer spoke about reforms but reforms always come with a period of pain. We have recently had many economic headwinds and on the other hand our GDP growth is also in bit of a question mark. At this point what makes you so bullish on India? Brocklebank: As Mussafer said, I still think growth is exceptionally interesting for us, the GDP growth. The other thing is you are seeing more developed exit market so you have more secondary buyout opportunities; so for us that is good. The third is you are seeing more Advent type deals, the type of deals we particularly like - control buyout but also minority positions where we have often a degree of governance influence as well. So for all those reasons despite the macro, we think it is an extremely interesting place to invest in. What’s the rationale for buying Bharat Serums? Jalan: What we really liked was that it is a fairly unique asset. It is not our classic, either domestic formulation or US generics business. It is fairly specialty pharma asset with both critical care and women’s health, which are far higher growth areas within the pharma industry today than the overall industry. From my previous conversations with your global team, what I have figured out is that you have a strong domain expertise when it comes to pharma space. How is that going to really help Bharat Serums in furthering its business and what is the strategy behind it? Mussafer: In particular, what we found are ways to more effectively grow this businesses, both from the development and focus with the pipeline of new drugs as well as finding synergistic add-on acquisitions. I expect we may have an opportunity for both of those type of things with our investment here. But it gives us a foothold in an amazing market, it also gives us access to tremendous amount of R&D talent. What do you think about the financial services space in the country because the last time we had that chat, the valuations were way higher and right now that particular sector is seeing a fair bit of trouble? You have made a small investment, but do you have appetite for more? Brocklebank: Yes indeed. The timing is interesting for sure right now, given what is going on and I think our investment in Aditya Birla Capital is a good example of our interest in doing this type of deal. We think there is a very interesting opportunity there and we will continue to do that. In fact, we have got more than one financial services investment here in India right now. You looked at other financial services institutes and even banks like Yes Bank in the past. Do you think you have a stomach for that much risk? Jalan: We would do things like Aditya Birla which is facing some pressure in terms of the price of the stock at this point of time whereas the underlying fundamentals story of that company is very strong. They don’t have any major issues in their lending book, their insurance business is really off to a nice start with new tie-ups that they have. Their asset management business again is market leading, among top 3-4 firms in the country right in that space. So we would look for those kind of opportunities I would say as opposed to heavily distressed kind of deals, which is really as I have always said, not our expertise. How do you see the consumption space, through probably Manjushree, you are trying to play a proxy role in the consumption space and you have made some meaningful investments when it comes to the inner ware segments as well and then you had made an investment in DFM Foods, so all these are linked to consumption, what are you readying your portfolio for? Jalan: As against the underlying theme of many of the companies that we are invested in is really the consumption growth in India and I continue to believe that the long-term story holds. The thing that we are telling our portfolio companies today is let us see how we can use this crisis, this opportunity to, one - enhance our market share through organic growth opportunities and two - more importantly, can we use this time to buy companies for our portfolio companies because there are many smaller companies which are now coming under distress and even if not under distress, they are not able to scale it up.
So we are using this time judiciously I would say to help our companies scale better and faster, when the smaller companies probably will be under more pressure given that many of our businesses are market leading.
Crompton Greaves Consumer Electricals business is an investment which has really lived a long life for a private equity fund. Now when is it that you would look at exiting that particular business? Jalan: Crompton yes, we have made very good progress but we do feel there is some good imminent opportunities the company is working on which will further propel the growth of the company from where it has, and like you rightly said, it has done well but I think there are many other innovations that they are capitalising on. So we want to see all that play out.