Mumbai US private equity firm Advent International on Tuesday said it has completed fundraising for its flagship fund Advent International GPE X, reaching its hard cap of $25 billion in commitments within six months. Shweta Jalan, Managing Partner, Advent International, said in an interview that the fund expects to continue its investment momentum in India despite the current macro headwinds. While the PE fund will focus more on defensive sectors such as healthcare and consumer, it will also explore select opportunities in IT and BFSI. Advent had invested $1.8 billion in India from its previous fund, with a corpus of $17 billion. Edited excerpt:
With a new, larger fund, can we expect Advent to infuse more capital in India going forward?
We have so far invested $4 billion in India, with most of the investment coming in the last six-seven years. From the last fund, which was a $17 billion fund, we have invested over $1.8 billion.
The way Advent approaches investments, we don’t see allocations in particular geographies. But $25 billion of capital is available to invest in all geographies, so it will be about where we find the right opportunities. If given the opportunity, capital will not become a hindrance. In the last fund, we found ample opportunities in India, and we invested a little bit and hopefully, we will be able to continue that trajectory in this fund as well.
Asia as a whole is a very important focus geography for Advent, and within that, India is a very important market from Advent’s perspective.
With a huge corpus, would you now look at more large purchases in India?
I would say without a doubt, if we get big opportunities. We did Anchora last year which was over a billion dollars. So, from our point of view, we are very committed to doing big transactions if we find them in India, but we are flexible. On the lower end, we can write checks for $100 million and on the upper end, we have a lot of flexibility. We would like to do larger transactions, but we will be flexible in terms of the market.
Which areas are you going to focus on in the current macro environment?
Our main focus areas are industries like consumer, healthcare, IT and financial services and select sectors. In the current environment, we will see more defensive sectors like consumer and healthcare, but having said that, we will continue to see IT and financial services as well.
Financial services as a sector has not received as much revaluation over the years as some other sectors, and with the exception of a few companies, many valuations in that sector remain attractive. In IT, the valuations were showing a mess in the last few years, but the sector is now at an interesting position from the valuation point of view.
Having said that, our approach is from the bottom up. So, when we take a regional perspective, our investment will really be a function of the specific company, what is the unique value proposition, deal design, valuation etc.
How do you see the current macro headwinds impacting PE dealmaking?
It’s going to be a tough environment and how long it will last is nobody’s guess. From a portfolio perspective, you need to do portfolio level preparation to overcome all these challenges and that is something we continue to focus on. From an investment perspective, you need to take into account the impact of these challenges on the company you are investing in. If you are looking at IT, you need to take into account wage inflation; If you’re looking at consumer/industrial deals, you need to take raw material costs into account in that context.
The slightly positive side is that public market valuation reform should be expected to reflect in private market valuations. So, while there are unfavorable conditions due to inflation, interest rates etc., you expect there should be some counter-equilibrium from valuation point of view and this will help you with investment opportunities. This will be an interesting time for investment, but you have to be cautious.
Do you see a challenge when you step out in this environment?
If it is a good company that has strong infrastructure in defensive areas, you will find buyers. This would be very region-specific; There are some sectors that are doing more damage than others. But depending on the property, you may still find an exit window. Is this the best exhaust environment? it. The last two years were very pleasant but today’s atmosphere is not the same. The exit window will now be for very select companies.