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Anil Sasi
Preeti Mehra

New Delhi, July 1 The preference shown by private equity firms to invest in growth capital in India Inc could see a distinct shift towards higher number of buyout deals going forward.

Actis, which is part of the CDC Group, is looking at a higher proportion earmarked for buyouts in its next fund.

While large-scale buyout deals, on the lines of those in the US and other developed markets, are more difficult to execute in India given Government limits on access to foreign leverage and the reluctance of family-controlled businesses to cede control, trends in the PE market show that players are warming up to the emergence of a nascent buyouts market, according to Bain & Company.

“As a practice, we invest in companies that seek value addition. Till now Actis has invested two-thirds in growth capital and one-third in buyouts,” said Mr J.M. Trivedi, Managing Director, Actis Advisors Pvt Ltd.

“But in our next fund, buyouts will increase. They can make a tremendous contribution to the economy by tapping the entrepreneurial energy of the professional managers to build value. The idea is to acquire a company and grow it to the next level.”

Paras Pharmaceuticals and Veeda are recent examples of Actis’ growth capital deals, while Pheonix Lamps, where the PE major bought out the promoters, and Nitrex from ICI, are among the buyouts done by the firm.

Broadly, PE firms invest in growth capital deals as well as buyouts, as and when opportunities arise.

In growth capital deals, the funds target minority stakes in fast-growing companies and back the promoters, while extending inputs on leveraging opportunities.

In case of buyouts, PE firms acquire non-core assets from corporate groups or from families that want to shed a part of their business or do not have a succession in place.

The Carlyle Group is among the early birds that established a buyout team in India in mid-2005.

More Stories on : Mergers & Acquisitions | Venture Capital | Foreign Institutional Investors

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