The Indian private equity (PE) market is too competitive to have a sustainable strategy around buying low and selling high, said Amit Dixit, Head of Asia, Private Equity, Blackstone.
“(Instead) what's really sustainable is you buy what you can build or rather, do not buy what you cannot build, and for building you have to employ multiple strategies,” said Dixit, while delivering a key note address at VCCircle Limited Partners Summit 2022.
Dixit explained that to build, Blackstone looks at investing in companies that have a very strong management team that can align operations and grow revenue through multiple strategies, either organically or inorganically.
"If you get the management right, if you get the alignment right, you are off to a very good start. It is probably the single biggest intervention a private equity firm can make," Dixit said.
Blackstone has hired over 50 directors for multiple C-suite positions across its portfolio companies, he said.
The PE firm has also done 20 acquisitions over the last three years across its portfolio in Asia, he added.
Dixit underlined that the Indian private equity industry is maturing and it is a very exciting market to harvest investments as opposed to five years ago when a Limited Partner (LP) would say that the biggest issue with private equity in Asia was to take out money from the region.
Dixit highlighted that as private equity investors, having multiple exit options such as strategic sales, sponsor sale, dividend recapitalization, IPO (initial public offering), and secondary market is important. But he noted that these options may not always last for long, especially in Asia, where IPO markets tend be sometimes be shallow.
"The window can be very short. So, it important to be very strategic around your exit optionality and I think that is something we have done quite well across our Asian portfolio and across our Indian portfolio,” added Dixit.
Blackstone’s first Asia fund -- which invested in the likes of Sona BLW Precision Forgings Ltd (Sona Comstar), TaskUs Inc, Mphasis Ltd and Aadhar Housing Finance Ltd -- multiplied its invested capital by 3.9 times, VCCircle reported in October. The PE firm had also sold its over 30% stake in Aakash Educational Services Ltd in India to Byju’s operated by Think and Learn Pvt Ltd, in April last year, in a deal that had valued Aakash at almost $1 billion.
Dixit added that the Asian PE market has potential to deliver outsized returns for the next coming years despite the macroeconomic volatility, with persistent high inflation across economies and hardening interest rates.
"Overall, you are seeing an environment which is very different from 2021. We think it's a very exciting environment for investing. Because this kind of volatility presents opportunities," said Dixit.
Talking about Blackstone’s investment themes in Asia, Dixit said that the private equity firm has already, and will be investing in sectors like healthcare and life sciences, cloud migration and enterprise automation, travel, digital consumer and energy transition.
He noted that the theme around technology transformation is important to the private equity firm.
"If I was having this conversation with you, let's say three years back, or five years back, this would not have been on the agenda because we ourselves had not realized the power of technology. Technology is no longer a vertical technology is a horizontal, it impacts each and every business. And that is something we have tried to understand and create a repeatable model across our companies," he added.
Dixit also said that the PE firm has undertaken initiatives in areas like decarbonization, governance, and diversity to help its portfolio companies become better in terms of ESG (environmental, social governance) standards.
