FT : Private Equity Big Boys Step Up India Play

Tuesday, August 24, 2010

Blackstone, the private equity group, said yesterday it expects to invest up to nearly $4bn in India over the next five years after it announced its biggest single transaction in the country so far, a $300m purchase of a stake in a local power generation company.  The deal shows how US private equity companies are ramping up their interest in the country, with rival Kohlberg Kravis Roberts also announcing two big deals this year.  V. Jayasankar, head of private equity at Kotak Investment Banking, estimates the total volume of private equity deals in India this year could top $8bn, or about two-thirds of the peak of two years ago.  Akhil Gupta, chairman and managing director of Blackstone Advisors India, said the group had already invested $1.25bn in India in equity commitments.

“If you look at our performance over the last five years and the fact that we’re a much bigger team now and much more experienced in India.  “We think that in the next five years we should be able to do two to three times what we’ve done in the last five years,” Mr Gupta said.  In Blackstone’s latest deal, the group is to invest $300m in exchange for a “significant” minority stake in Moser Baer Projects Private.  Last month, Blackstone took a small stake in Monnet Power, a subsidiary of listed Monnet Ispat and Energy, for about $59m.  Monnet’s core asset is a coal-fired plant in Orissa, on India’s east coast.  The deal is expected to close by the end of the year.  Moser Baer Projects has a diverse pipeline of thermal, solar and hydro power generation as well as coal mining operations.  Its parent, Moser Baer India, is a high-tech company but with a strong manufacturing base.  It is the world’s second-largest maker of optical storage devices such as CDs and DVDs.  Mr Gupta said he expected to invest up to $1bn in India’s power sector in the coming years but any deals would depend on whether the projects had acceptable execution risk.  Power is a difficult sector in India because of challenges obtaining coal and other fuel sources, land issues, government regulations and political risk.  Sushil Bhagat, chief financial officer of Moser Baer Projects, said it is planning to build 5,000 megawatts of power generation capacity by 2016, 80% consisting of coal-fired thermal plants.  This would require total investment of nearly $7bn for which the company had already secured about $1.1bn in debt.

Reference : Financial Times, Aug 19th 2010

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