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Goldman Sachs Asset Management sees long-term opportunities in India centred around businesses driven by domestic consumption, digital transformation, sustainability, and healthcare, as the pace of its investments in India accelerates.
Of the $7 billion invested in India since 2006, about $2 billion have come in the last two years alone.
Its notable investments in India in the last year include a B2B e-commerce platform ElasticRun and MoEngage, a customer engagement platform. Earlier this month, it was part of a $150-million funding for InsuranceDekho. It is also one of the PE funds backing the food delivery company Swiggy.
In an email interview with businessline, Rajat Sood, Head of Growth and Corporate Equity Investing at Goldman Sachs Asset Management in India, outlines Goldman Sachs’ investment philosophy and the opportunities in India.
Excerpts from the interview:
One of Goldman Sachs’ largest growth equity funds ‘West Street Global Growth Partners I’ recently closed with a corpus of $5.2 billion. Is this the only fund investing in India and Asia, or do you have other funds running in parallel?
We have a broad spectrum of funds across equity, real estate, and credit. Within equity, we have funds for growth and funds to invest in control-oriented buyouts. Our funds are global in nature and invest in India and across Asia. We also have funds dedicated to infrastructure, clean energy, and sustainability.
Under CEO David Solomon, we began transitioning towards raising more third-party capital and reducing our balance sheet investments. This implies that global institutional investors can now take part in opportunities that were previously proprietary to Goldman Sachs. That said the firm’s funds continue to have significant investments from Goldman Sachs and its employees, which align us with our LPs (limited partners).
Please give an overview of your investment philosophy and how you choose your investee companies? Do the criteria and the degree of your due diligence change with geographies and regions, or do you maintain the same metrics?
GS invests across all market conditions. The companies we invest in have proven business models, strong management teams and founders. Beyond absolute returns, we are a relative value investor and look to invest at a fair market price and build lasting relationships with entrepreneurs. This approach remains the same irrespective of the regions, globally.
In India, we have deployed over $7 billion since 2006, making us one of the largest private equity investors in the country.
In growth equity, we can invest across the growth spectrum of a business cycle that spans from early-stage growth to the pre-IPO stage. We tend to invest $20 -$150 million in each portfolio company over time and acquire a significant minority interest, but we also selectively invest in growth buyouts. Most of our investments are in ‘classic growth equity,’ where we help companies to scale and become enduring businesses. Additionally, we also invest in control-oriented buyouts through a separate fund where the average investment size is $250 million.
In the last two years alone, close to $2 billion has been invested in India across direct lending and hybrid, as well as private equity and growth equity strategies. We see our pace of investing in India accelerating.
India pharma has become a hotspot for global private equity firms - and they are investing in established companies with track records. How would GS assess that in general and the pharma sector in particular?
Pharma is a global sector, and we are constructive in this sector. We are seeing opportunities where Indian companies serve global clients and opportunities from the intersection of healthcare and technology within India.
What do you see as growth sectors in India currently and in the next five years? Are any themes that are in play here that are attractive to global investors?
We see exciting long-term opportunities centred around businesses driven by domestic consumption, digital transformation, sustainability, and healthcare in India. High-growth sectors include enterprise software, fintech, consumer, and healthcare, where consumer preferences are at the centre of the business model. We are also focused on investing in businesses that offer differentiated services from India to the world. This includes technology and technology-enabled services and outsourcing in the pharma sector.
Policies aimed at self-reliance to increase the domestic share of manufacturing, supported by favourable demographic fundamentals, rising income levels and the adoption of technology, is a theme with great value-proposition for investors.
Do you see more opportunities for GS with the growing number of startups in India?
Yes. In the last few years, we have seen a surge in startups with proven business models and strong founders in India. This has created a strong leap forward for the Indian economy with inherent advantages, such as a vast addressable local market and young demographics – not to mention the sizeable Indian network in Silicon Valley and elsewhere.
To scale further, these startups need growth capital and deep global expertise. Goldman Sachs will play a key role in addressing both needs through our unique, global vantage point and vast network that enables us to identify and help foster disruptive forces and trends early.
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