 "Going slow is not a deliberate decision: Shweta Jalan")
Advent International has raised $37 billion and invested in more than 280 buyout transactions in 36 countries. Shweta Jalan, managing director, who joined as a director in 2009 after her stint with ICICI Venture and Ernst & Young, speaks to Reghu Balakrishnan on the firm’s strategy for India. Excerpts:
How did Advent build up the base for India operations?
We started India office effectively in September 2009 and we spent the first six-12 months building the team and operating partners/sector advisor network. The second thing we did was sector mapping, and sector studies to understand which sectors and sub-sectors we want to focus on.
Most of the initial time was spent on that and, as a result of which, we have put together a very good network of operating partners/industry advisors across our focus sectors. We have people like G N Bajpai (ex-LIC and Sebi chairman), P S Jaikumar (Ex-Citibank), A K Jain (ex-ACC executive director), Arun Nanda (Mahindra & Mahindra), and Ramni Narula (ICICI Bank) on board as senior advisors. This has strengthened our position in terms of being able to source transactions in India and developed deal angles for various transactions.
Advent has made only a couple of investments in India. Is going slow a deliberate decision?
I wouldn’t say that going slow was a deliberate decision. But it was a combination of building a solid franchise, which took a fair bit of time initially and it is not easy, especially when you want to do large-ticket size transactions. There are not many transactions that are available in India, which would fit the Advent style.
When I say Advent style, I mean ticket-size of about $75 million and above, where we get a meaningful stake in the company as well as some associated rights, enabling us to add value during our investment horizon. In addition, we have been a part of several processes in India. Unfortunately, while we have been able to close one transaction, we have lost several others.
Is it difficult to target deals in your ticket size of $75-300 million range?
When we started off, for the first 12-18 months, transactions of this size range were few. Having said that, in the last 12-18 months, there have been traction in larger deal size segment. While one can say there is not enough deal activity overall, there has been a lot more deal flow in our deal segment where we would look at transactions from $75-300 million range. We are seeing a fair number of larger deal size, quite encouraging.
After the deal with Care Hospitals, how optimistic Advent is on Indian healthcare space?
When we came to India, healthcare was one of the first sectors we picked up for sector mapping. We believe it is a good sector to invest in, given growth drivers like rising income, greater insurance penetration, urbanisation, and increase in lifestyle diseases.
All of this has resulted in a demand-supply gap for quality beds in India, resulting in organised healthcare seeing very healthy growth rates. We are highly optimistic on the healthcare space in India. Are we looking for more deals in this sector?
I would say yes, we are currently looking at various healthcare opportunities. But as of now, we have a good platform for investment in healthcare in Care Hospitals. So, ideally, we would like to do an acquisition for Care or integration with Care as opposed to independent deal unless it is in a completely non-conflicting geography.
According to you, are regulatory hurdles in India real concerns? How can you handle the situation?
I wouldn’t say regulatory hurdles in India, per se, are a real concern. For example, in healthcare, there are no issues in terms of the regulations. There are small pieces in healthcare also where there is regulatory interference, but largely, there are no regulatory hurdles.
There are certain other sectors like financial services where there are a fair bit of regulatory hurdles. For investments in banks, one can get five% stake and that is quite limited for PE players like us, who would ideally like to take meaningful stake in companies to add value to the company.
Also, sectors like power, ports and airports, where there are fair amount of regulatory changes that are ongoing, are sectors where we have to understand the impact of regulatory issues.
Are you exploring the scope for secondary transactions in India?
We are quite open to secondary transactions. In fact, we have spent a fair bit of time in secondary deals in the last three-four years. For us, what is important is to take significant minority-controlling stake and do transactions in sectors that we like and with management team that we like more than it being secondary or primary deal.
Which are the potential areas for deals in 2013?
We are quite opportunistic. Currently, we are spending a fair bit of time in payment processing, ports, cement, healthcare, IT services, pharmaceuticals and NBFCs. So, it’s fairly broad-based. While we are spending more time on these sectors, we are also opportunistically evaluating deals across sectors except real estate.
How did Advent build up the base for India operations?
We started India office effectively in September 2009 and we spent the first six-12 months building the team and operating partners/sector advisor network. The second thing we did was sector mapping, and sector studies to understand which sectors and sub-sectors we want to focus on.
Most of the initial time was spent on that and, as a result of which, we have put together a very good network of operating partners/industry advisors across our focus sectors. We have people like G N Bajpai (ex-LIC and Sebi chairman), P S Jaikumar (Ex-Citibank), A K Jain (ex-ACC executive director), Arun Nanda (Mahindra & Mahindra), and Ramni Narula (ICICI Bank) on board as senior advisors. This has strengthened our position in terms of being able to source transactions in India and developed deal angles for various transactions.
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Advent has made only a couple of investments in India. Is going slow a deliberate decision?
I wouldn’t say that going slow was a deliberate decision. But it was a combination of building a solid franchise, which took a fair bit of time initially and it is not easy, especially when you want to do large-ticket size transactions. There are not many transactions that are available in India, which would fit the Advent style.
When I say Advent style, I mean ticket-size of about $75 million and above, where we get a meaningful stake in the company as well as some associated rights, enabling us to add value during our investment horizon. In addition, we have been a part of several processes in India. Unfortunately, while we have been able to close one transaction, we have lost several others.
Is it difficult to target deals in your ticket size of $75-300 million range?
When we started off, for the first 12-18 months, transactions of this size range were few. Having said that, in the last 12-18 months, there have been traction in larger deal size segment. While one can say there is not enough deal activity overall, there has been a lot more deal flow in our deal segment where we would look at transactions from $75-300 million range. We are seeing a fair number of larger deal size, quite encouraging.
After the deal with Care Hospitals, how optimistic Advent is on Indian healthcare space?
When we came to India, healthcare was one of the first sectors we picked up for sector mapping. We believe it is a good sector to invest in, given growth drivers like rising income, greater insurance penetration, urbanisation, and increase in lifestyle diseases.
All of this has resulted in a demand-supply gap for quality beds in India, resulting in organised healthcare seeing very healthy growth rates. We are highly optimistic on the healthcare space in India. Are we looking for more deals in this sector?
I would say yes, we are currently looking at various healthcare opportunities. But as of now, we have a good platform for investment in healthcare in Care Hospitals. So, ideally, we would like to do an acquisition for Care or integration with Care as opposed to independent deal unless it is in a completely non-conflicting geography.
According to you, are regulatory hurdles in India real concerns? How can you handle the situation?
I wouldn’t say regulatory hurdles in India, per se, are a real concern. For example, in healthcare, there are no issues in terms of the regulations. There are small pieces in healthcare also where there is regulatory interference, but largely, there are no regulatory hurdles.
There are certain other sectors like financial services where there are a fair bit of regulatory hurdles. For investments in banks, one can get five% stake and that is quite limited for PE players like us, who would ideally like to take meaningful stake in companies to add value to the company.
Also, sectors like power, ports and airports, where there are fair amount of regulatory changes that are ongoing, are sectors where we have to understand the impact of regulatory issues.
Are you exploring the scope for secondary transactions in India?
We are quite open to secondary transactions. In fact, we have spent a fair bit of time in secondary deals in the last three-four years. For us, what is important is to take significant minority-controlling stake and do transactions in sectors that we like and with management team that we like more than it being secondary or primary deal.
Which are the potential areas for deals in 2013?
We are quite opportunistic. Currently, we are spending a fair bit of time in payment processing, ports, cement, healthcare, IT services, pharmaceuticals and NBFCs. So, it’s fairly broad-based. While we are spending more time on these sectors, we are also opportunistically evaluating deals across sectors except real estate.