Business will continue to use the brand names: Shweta Jalan

Interview with MD, Advent International India

 

US-based private equity major Advent International, which owns $33 billion in assets under management, has been investing in India since 2007 and opened Mumbai office in 2009. After its first investment in Computer Age Management Services, a business process outsourcing firm, Advent established its presence through the buyout of CARE Hospitals, a multi-speciality hospital chain in south and central India. The latest deal to acquire Crompton Greaves Consumer Electricals Limited’s consumer durables business underlines Advent’s aggression towards large buyout transactions in India. Shweta Jalan, managing director, Advent International India, spoke to Reghu Balakrishnan. Excerpts:

What was the rationale for investment in Crompton Greaves Consumer Electricals Limited (CGCEL)’s consumer durables business?

CGCEL has an asset-light model, resulting in attractive return on equity and return on capital employed. Advent and Crompton Greaves’ boards believe that separating CGCEL from CG will create a more flexible capital structure and sharper strategic focus for each entity and enable each to pursue aggressive growth independently.

After the acquisition, will Advent have to pay for using the brand name? What is the agreement?

The business will continue to use the brand names associated with it. We would not like to comment on the specifics of the brand agreement.

The latest acquisition costs about Rs 2,000 crore. Will additional money be pumped into the company? Will Advent bring more investors into the company?

The company will not require any funds to be pumped into it. Once the de-merger of CGCEL from CG has received all approvals and CGCEL has listed on the BSE and the National Stock Exchange, Advent and Temasek will launch an open offer for additional shares of CGCEL, according to the Securities and Exchange Board of India’s guidelines. We do not expect to bring in any more investors.

This is the second-largest transaction of Advent after CARE Hospitals. Is it a deliberate decision to do large buyout deals in India? How has India grown as a buyout market?

Advent has been investing in India since 2007. Its local team has extensive investment experience both in India and globally across the firm’s core sectors. The Mumbai team also works with Advent professionals worldwide on international investments with Indian expansion opportunities and works with the firm’s existing global portfolio companies on growth strategies and acquisitions in the Indian market. Examples include Skillsoft’s acquisition of e-learning business Element K in 2011 and TransUnion’s acquisition of a controlling stake in credit information company CIBIL in 2013.

Advent has immediate plans to exit CARE Hospitals?

Advent can’t comment on specific plans. As Advent does with all of its investments, the firm will look to realise its position in the business when its deal team and the management team and other shareholders believe they have achieved the value creation plan established at the time of the original investment.