Investing in India? See Blackstone losses first
Blackstone Group () has invested more than $730 million in India since arriving three years ago, only to see much of it wiped out by the country’s weakening economy and stock market plunge.
Blackstone’s tough start in India is a cautionary tale to other Western private equity firms such as Kohlberg Kravis Roberts & Co. and Permira that are opening offices in Mumbai.
If newcomers weren’t already wary of India’s foreign investing rules, which forbid borrowing and set a purchase price range, certainly Blackstone’s performance so far may give them pause. Entrenched firms, too, are likely to wait before pouncing.
Blackstone is not the only private equity firm watching its Indian investments take a hit, as Warburg Pincus can attest.
But unlike Warburg and other private equity players, Blackstone is relatively new to India. It hasn’t been there long enough to sell stakes to balance losses with gains.
What’s worse, it appears to have done most of its eight Indian deals at the very top of the market.
Blackstone says it remains a long term investor in India.
“Short-term capital market volatility does not alter our investment thesis nor does it impact our commitment to an investee company,” Blackstone India head Akhil Gupta said in an email reply to questions about the portfolio payday advance.
“We are long term investors who are focused on adding value to portfolio companies over long periods of time.”
New York-based Blackstone, one of the largest private equity firms in the world, launched plans to expand in Asia in 2005, choosing India as its first destination after hiring Gupta from Reliance Industries () to run the Mumbai-based team.
India’s economy, despite a slowdown, is still growing significantly. Companies and infrastructure projects are hungry for foreign capital. Foreign money is attracted to future growth prospects and the ability to buy into assets on the cheap.
The broader Indian market fell 52 percent last year, its sharpest annual fall after a five-year bull run that saw the benchmark rise six fold.
How quickly the economic climate stabilizes is up for debate.
BLACKSTONE IN INDIA
Shares of Nagarjuna Construction () have fallen 71 percent since Blackstone agreed to invest $150 million in August 2007. Garment maker Gokaldas Exports () has also lost 71 percent of its value since Blackstone inked a deal that same month for $165 million.