With half a dozen deals this year, good exits fuel TPG's India aggression

TPG Capital, the alternative asset manager with $73-billion assets, has been investing in India since 2004, and has put its money in 12 companies, including four belonging to Chennai-based Shriram Group. In the last year itself, it has invested in five firms.

This year, the company has invested in six companies: It led $100-million rounds in Five Star Business Finance, BookMyShow, and co-invested $1.2 billion with Abu Dhabi Investment Authority in UPL, to fund its acquisition of Arysta.

In July, it picked up a minority stake in Sai Life Sciences, a drug discovery, development and manufacturing service provider. It invested $70 million in Fourth Partner Energy. It backed Manipal Hospitals’ aggressive bid for Fortis, and is now bidding for Jet Airways’ loyalty programme, Jet Privilege, and Abraaj’s health care business.  What has changed for it to get so aggressive? Exits.

The American PE firm has generated good exits from India. Shriram Transport Finance, Shriram City Union Finance, AGS Transact Technologies and Vishal Mega Mart. Kedara and Parnters Group bought Vishal from TPG Capital and Shriram Group for an undisclosed sum. 

‘‘They have managed to generate solid exits from India, which has encouraged their LPs to increase allocation to India,” said Siddharth Shah, partner, Khaitan & Co. ‘‘India is a proven PE market for them.” 

LPs are limited partners, who are big investors such as pension funds, endowments, big family offices. Encouraged by this, the PE firm held its global investor meet in Delhi in 2016, showcasing its India market. This showed a buy-in from its LPs, but TPG refused to comment. TPG is also a big player globally in stressed assets. 

‘‘The firm will find more opportunities, like Jet Airways, as it has the ability to get deals worth from $20-30 million to $100-200 million,” said an industry observer. 

It had recently re-organised itself in India. Earlier, it used to invest through two entities — TPG Capital and TPG Growth (for smaller deals). Now, it is only one company. This gives it bandwidth. Maturing of businesses also helps deploy capital.

Five years back, there were only a handful of businesses, such as Fortis in terms of size, scale or complexity. Now, there are multiple opportunities for investment. TPG has been investing in financial services and health care.

Exits have been its strength. Many PE firms who entered India early could not exit. Puneet Bhatia, managing director, partner, and country head, TPG Capital India, has followed a highly selective strategy.  Last year, it had a funnel of about 150 deals to start with. It did due diligence on 10, invested in a couple. TPG preferred to identify companies early (Shriram) and develop a partnership with them.

‘‘There are two models — one is you can be the highest bidder for deals that come for auctions. The other is you go for the hunt where you either identify a macro theme or a special situation ahead of time,” Bhatia said in an interview to the Mint. 

‘‘You then start positioning yourself ahead of the curve and wait patiently for things to break in your favour. We certainly have the choice of pulling the trigger on auctions and we certainly look at everything that’s interesting,” he added.