To invest over $1.5bn in India over 5 yrs: General Atlantic

General Atlantic will invest over USD 1.5 billion in India over five years, says Sandeep Naik, the company’s India MD. In an interview to CNBC-TV18's Kritika Saxena, he also spoke about how General Atlantic prefers only four key sectors to invest in India which includes healthcare, IT, financial services, retail and consumer.

The global growth equity investment firm has nine companies in its portfolios and is likely to exit three by next year. General Atlantic is open to exiting NSE via initial public offering (IPO) whenever promoters want to list it. The company is also planning to exit IndusInd Bank at the right time.

Below is the transcript of Sandeep Naik's interview with Kritika Saxena on CNBC-TV18.Q: Lot of talk about new government coming in, there is a lot of talk about things changing; India is at an influx point. India could be at the turnaround point; capital markets have shown the excitement. Not much on ground but its early days. What do you expect? Is this just noise or is it actively expects India to change in terms of being more accessible when it comes to capital and being more investment friendly so to speak?A: I have been an eternal bull on India ever since I came back almost eight years ago to the country. My optimism started deteriorating a bit a few years ago when we had all kinds of issues in terms of the investing climate, in terms of the on ground corruption issues that companies like us were dealing with even when we made investments or we were looking at making investments but today where we stand and with the new government in place we are absolutely at an inflection point. You hear a lot about what the new government is doing. We have met closed doors with a lot of the people in the ministries. You just hear the passion, the sentiment as well as the sincerity in which they are going to go about this but all that could be hear or say we have personally experienced what the government is also doing on the ground. We have an investment where we had to reach out the central government to ask for some help.

We saw the minister in charge of that particular sector spent 11 hours with us over two-day period to address our issues. It has never happened before at least in the investing period that I have been involved in India and that to me is real, its on the ground, its what we see firsthand and that makes me believe that we are absolutely at an inflection point where the private sector and the public sector working together to make this thing happen. So I am super bullish on this one. I think the government is doing all the right things at the right time.Q: As a global investor, is the way you see India different with the new government in place and is there a timeline that you can give me as to when you can expect India see foreign investment returning in full furrow to India?A: Foreign investment never left India.Q: But it was sluggish for some time?A: It was sluggish for a while and that is because of the environment. If you look around the world, India stands tall today and if this is not the right destination now, I do not know what it could be and so we believe that foreign investment is going to come back in a big way. In terms of what the new government can do. You can do a lot of sweeping reforms that gives you the positive sentiment that India is back but I believe what the new government is doing and the way they are going about it, which is working on the nuts and bolts of the issues, dealing with the smaller things within the system which needs to be de-clogged so that the system works more efficiently and once that happens you go ahead and do the big reforms that will then make sure that percolates through the system becomes all the more important. So what the new government is doing to the extent that I am aware, which is fixing the nuts and bolts of a system is the right thing to do and we will start seeing the new reforms hopefully during the next Budget year to see some sweeping reforms coming through and just one or two of that be enough for the foreign investment to come back in a big way because that shows you the intent and the capacity to execute around that intent, which is much more important.Q: Despite being a dolphin in a sea of sharks you are a bull on India. Where does India stack up in GA’s global expansion plan?A: Very high up because at GA we have over 50 percent of our investments outside of US. For us the emerging markets India, China, Brazil are actually the key driving engines of our fund and as a result India is very important. It has always been very important.We have been here for 12 years, more than most of the funds. We have deployed over USD 1.5 billion in India in equities. We have exited only half our position. We have returned over USD 1.7 billion and that is an exceptional track record for any private equity fund in the industry. We have done that consistently. We never had a start and stop because we consistently believed in the story. Q: USD 1.5 billion so far, going forward, how much are you looking at investing?A: In a five-year period I don’t see any reason why we can’t replicate the same quantum.Q: Not double given that we are at a turnaround point?A: Investing is a discipline. You cannot just be betting on cycles, it is not a macro bet you take. Private equity is really bottom up, it is not top down. Consistency in terms of capital deployment and picking the right companies, high quality entrepreneurs and helping them scale up is what we do. In a good cycle we may make incrementally more investments than a bad cycle but given it’s a bottom up game, there are great investment destinations irrespective of where the market is. So we believe in systematic deployment, we believe in discipline investing and we believe in bottom up investing. Q: Roughly, from the conversations you have had with prospective portfolio companies, prospective entrepreneurs say in the next one year how many companies would you be open to investing in, what is the kind of capital deployment you are looking at?A: We do not work around targets because it all depends on the kind of opportunities that you see in the market. I would be surprised and I would give you a three-year period. Therefore, over the next three-year period we don’t put at least half a billion to work or more than north of that to work in very good, solid companies backing great entrepreneurs and we would have in excess of that from liquidity that we will get out of the companies that we have already invested and that is reasonably conservative target.Q: As we were talking earlier GA has done investment in India differently because most PE players have a global fund which has a certain amount of India exposure or Asia exposure and they tap into that. Has that been a constraint for you at anywhere and as you were saying that is worked for you. Going ahead how does it give you an edge when you actively look at bidding for individual portfolio companies against your immediate peers?A: We are very different and every private equity funds tell you that they are different, everyone does and I hear that constantly from the entrepreneurs saying the other guys that was in this room also said that we are very unique. However the one thing that no other PE fund operational here in India can claim is that at GA we have a perpetual fund structure. Which is the money that we have is evergreen. We do not raise funds every five years which is how typically the private equity industry is set up where you raise funds every five years you use that money to deploy and than with in 3-5 years you start looking at exits in those companies because based on those exits you can subsequently raise the next one.Even General Atlantic money is primarily we manage ultra high network family money and they have given us their money for generation of wealth management. Our funds are evergreen so we do not raise funds every 5 years, 7 years or 10 years. We use that capital that is given to us to manage that capital in perpetuity. As a result when I meet entrepreneurs and when we talk about the GA’s story it is a very compelling story because we can invest in a company and stay invested much longer because we have no constraints on exit in terms of timing. Q: Despite being a minority player are there any instances or sectors that you would be open to actively looking at buyout or the valuations could benefit a buyout?A: The sectors we invest in are healthcare, technology, financial services and retail consumer. We do not understand anything outside of these sectors. However we pride ourselves on understanding these sectors exceptionally well. So when we look at a company in this sector we bring a lot of differential input to the entrepreneur and to that company. So within these sectors we love to deals which are minority in nature because the GA IP is helping entrepreneur scale companies. We have taken over 50 companies from a couple USD 100 million to a billion dollars globally and that is what we are pride on ourselves on. Would we do buyouts, rarely do we do buyouts, are we equipped to do buyouts we indeed are. Q: From the conversation that you had so far within these sectors and deals that are close to the finish line? Any deals that we can expect being announced soon?A: There is few in the pipeline which is always the case no matter which fund you talk to. Probability of getting those deals done is something that is not 100 percent in your control. So at any given time, right now the team is working on 2 or 3 such transactions. We hope one of them will get out of the finish line in next three months. Q: Why have you stayed away and is not just GA for that matter most PE players have stayed away from the risk averse sectors, the risk sectors be it a real estate, be it infrastructure or power where there is larger government control regulatory scrutiny, aviation, telecom. Would you at all change your mind going ahead when it comes to these sectors and why have you stayed away so far?A: Those are great sectors to invest in because you can put significant amount of capital to work. If you look at were the country is the country needs investment in those sectors. You have a new government in place is going to be very supportive of foreign money flowing into those sectors to help create the supply that has been constraint in those sectors. So if I look at it as an individual and as somebody that would look at this sector those are very exciting sectors to be in.As an institution as GA those are sectors we globally do not invest in. Because as I mentioned there are four sectors we invest. We are very deep in terms of a domain expertise in these sectors. For us to put capital in this sectors becomes much more easier than trying to move our focus to sector that traditionally over the last 30 years we have not focused. I believe these are great sectors to invest in. It is just not GS sectors that we look at so great investible sectors not for GA.