Carlyle raises $2.6 bn, big chunk to flow into India

MUMBAI: US-based Carlyle group has raised $2.6 billion to invest in Asia, a third of which is likely to be invested in India. The fund is changing its investment focus in India. Instead of big-ticket deals, it
is now open to smaller deals with higher stakes in companies, said a senior fund executive.

Carlyle Asia Partners III is the third Asia-Pacific private equity fund in the buyout series managed by the group. It manages around $5 billion in three funds in the region.

Rajeev Gupta, MD, Carlyle Group, India, said: “We have so far done large investments in India. We will now look at more meaningful percentages in the range of $150-200 million. We will look at smaller investments, but higher percentage of ownership. We will look at stakes in the range of 45-60% and will look at both listed and unlisted companies.”

The fund will, however, not invest in liquor, tobacco, alcohol and real estate. Carlyle has invested around $950 million in India through its various funds. Other than the buyout fund, it also has a growth fund, which does small investments of $15-75 million in each company.

Compared to other large funds, the buyout fund has made only one large investment in the country. However, Mr Gupta says that the fund is focused on returns.

The first fund was of $750 million and the second was at $1.8 billion. In India, the buyout fund has invested $700 million in mortgage major HDFC out of the second fund.

Though many private equity funds have invested in the country, very few of them have been able to make any significant returns. “The investment rates have been going up. The second fund was invested in two-and-a-half years. The third fund we may invest faster,” adds Mr Gupta.

Fund-raising has been affected on the back of the financial crisis. According to Venture Intelligence, India-focused private equity funds had raised $3.8 billion in 2009, $5.49 billion in 2008 and $8.9 billion in 2007.
“We have made investments in China, Taiwan, India, Australia and Korea. Though a majority of the number of investments have been in China, India leads by the quantum of investments,” he pointed out. The first quarter of this year has seen a spate of investments by private equities in India.

According to Venture Intelligence, private equity firms have invested around $2 billion in the first quarter of 2010 in 56 deals against $620 million in 58 deals in the first quarter of
2009. There has been a feeling in some quarters that valuations have been stretched because of the sharp rise in the stock market.

However, Mr Gupta says, “We are comfortable with these valuations. The returns ratio is very good for Indian companies.”