Airtel DTH exit a blip in Warburg Pincus' blockbuster India story

US-based private equity (PE) house Warburg Pincus’ exit from Bharti Airtel’s DTH arm marks one of its shortest stints in the companies it has invested in, and of all its exits, this has been the one with the lowest returns.
 
Warburg, which bought 20 per cent in the DTH business of Airtel in 2017, has quit with 0.4 times returns.
 
Analysts tracking the company said Bharti bought it back for its unified digital play.
 
The fund, which has invested over $5 billion in the country since 1995, has some of best exits in its PE investment.
 
Its exit from the parent Bharti Airtel was a blockbuster one in the history of Indian private equity.
 
Warburg, which invested $292 million in Airtel between 1999 and 2001, made $1.83 billion when it left in 2004 and 2005, thus earning 5.5 times on its investment.
 
But Warburg’s biggest exit in terms of returns came when it sold shares of AU Finance Bank in two tranches for Rs 1,790 crore with a return of over 15 times. It had invested in the company in 2014.
 
Take, for instance, its investment in Lemon Tree Hotels. In 2018, Warburg sold its 12 per cent stake in Lemon Tree Hotels with a return of 2.5 times during the company’s initial public offering and the remaining 12.4 per cent at 3.2 per cent returns a year later.

 
In 2011, it started exiting Kotak Mahindra Bank, in which it made Rs 3,400 crore by offloading its 9.28 per cent stake. “Warburg, Carlyle, and Temasek have survived many economic cycles and churn in teams and continue to stay invested in India. It speaks volumes about their belief in the Indian story. That would not have been possible without the good returns they made,” said Arun Natarajan, founder of Venture Intelligence.
 
Natarajan said they had invested in many large listed stocks and since the markets had done well, Warburg's investments had also done well. “They normally give patient growth capital and like to exit through IPOs,” said Vishal Srivastava, president, Anarock Capital.
 
While in Lemon Tree it stayed invested for 13 years, in Kotak Mahindra Bank it stayed put for over seven years, and in the case of AU Small Finance Bank, it was six years.
 
While compared to US-based fund managers such as Blackstone, Warburg is more diversified, private equity watchers say. It specialises in over six sectors — from financial services to technology to energy.
 
While Blackstone has focused more on real estate and invested over $8 billion in properties in the country, Warburg has done only three entity-level investments with the likes of Embassy group, Piramal, and Runwal group.
 
“They are a better-run PE house with a clear focus. They have a keen eye on businesses that will grow and clear idea when to exit,” said Vimal Bhandari, vice-chairman, Arka Fincap.