Advent can deploy $1.7 bn in India in 3-5 years: Chairman

Deploying close to $900 million in six months, Advent International has emerged as one of the most aggressive PEs in India this year. A decade after starting its local office, Advent’s chairman David Mussafer and co-chair James Brocklebank told Indulal PM and Arijit Barman that with improved reforms, better tax rates and the potential for larger deals, the firm will continue its momentum as interesting prospects from homegrown payments to pharma companies and consumer brands emerge. Edited excerpts:


How has the overall PE landscape changed in India in the last 10 years?

David Mussafer: We have experienced improved reforms of late and more advantageous tax rates for business but the important changes that we have seen have actually been the increase in the number of $100 million plus transactions that we typically target. We also see an improvement in the exit market in terms of secondaries and strategic sales. Overall, India has been increasingly a more attractive environment for investments and I think that has reflected in the fact that we’ve made more than $875 million (in investments) in the last six months.

James Brocklebank: We are also seeing an increasing number of control type transactions as well. We have also invested in people, relationships, and that has helped us with domain knowledge here and gain comfort and credibility locally.

Is the slowdown in India temporary or long-term and structural?

David Mussafer: One of the things that really differentiates us in private equity is that we have the ability and luxury to think in longer economic terms unlike public market investors who are thinking next three to six months.

‘Capital will Always Flow to Areas that Provide Best Returns’


David Mussafer: The challenge for us is to consider if the business that we have just purchased is going to be better positioned after our ownership period five or six years from now. We certainly believe India broadly is an attractive market place or else we wouldn’t be investing actively in the way that we are today.

How are you coping with the ongoing slowdown as it impacts most consumption-led themes?

James Brocklebank: If I think about the things we’ve been doing in consumer and financial services, they present interesting opportunities to grow notwithstanding the current onslaught. I think we would always back these categories of opportunities and sometimes slowdown, correction in market valuations, etc., can actually be the perfect entry point for us and you have seen us take these opportunities.

David Mussafer: If you look back across our global funds, some of our best funds and best investments have been at times of economic distress. For example, our 2008 fund is one of our very best funds and it was invested during that time period which saw significant turmoil till about 2010.

You have deployed over $2 billion so far in India. How does that stack up against other large emerging markets?

James Brocklebank: It’s more than what we have invested in China but we also have a separate Latin American business which is quite active. But we don’t have a specific allocation to regions. We deploy the capital where we think the opportunities are best. Just so happens that actually we think that in India the opportunities have been very strong recently.

We don’t see our investments as just capital, but it is capital along with engagement and better governance to drive alpha.

-James Brocklebank

Is there some sort of estimate of how much you will invest in India over the next three years to five years?

David Mussafer: We have a $17.5 billion global fund. We don’t have a target as to how much we should deploy but we could easily deploy up to 10% of the fund here. So, given the right opportunity, we could do as much as $1.7 billion. But I reiterate it’s not a sacrosanct figure.

Are you focusing more on buyouts or control transactions?

David Mussafer: We try to take somewhat of an agnostic approach when we think about a great investment idea. And obviously where we have control, we don’t have to spend much time thinking about the governance in order to effect change. In minority positions, we are also working on trying to help our companies in many cases but there is more work that needs to be done — often to build alignment with the other shareholders and through the governance provisions that you have to work through in order to make those influences.

What about Indian valuations? Most will complain that they are very rich.

David Mussafer: Growth comes at a premium and India is the very definition of growth. You have one of the highest GDP (growth rates) in the industrialised world and Indian companies historically have very attractive growth rates given long-term positive trends. So typically, high prices are a healthy sign for an economy. And that is no different in India, which has some of the highest prices. So, if you are investing in India, you’ve got to have a stomach for these high valuations.

How do you see the structured credit market?

James Brocklebank: If you look at our history over the last 15-20 years, we have actually spent a lot of time focusing our efforts. And many of our peers have spent that same time diversifying. It’s paid big dividends for us and we don’t have any plans to really lean in and change.

What is your view on emerging companies and tech-based startups and unicorns, which are grabbing the headlines in India?

James Brocklebank: Technology is critically important. So let’s make sure that we don’t conflate the idea that we don’t like technology focused investments. But when you think about large, cash-consumptive consumer business models, we have certainly been more wary about leaning into some of those. And it’s not just here in India, but globally.

Payments has been one of your focus areas of late with big bets in Italy and the US. How do you see that space evolve in India, especially with the government targeting the cash economy?

James Brocklebank: Payments remains an extremely interesting area globally. You know, it’s become a very strategic sector because it basically helps merchants get paid. In India, we’ve looked at a number of interesting local payment businesses but as yet we haven’t actually acquired one. But it’s something that we continue to look at.

For a buyout fund, isn’t it hard to take a company private in India or raise leverage onshore?

David Mussafer: It’s never easy to take a company private. Every market has very specific rules and regulations around public shareholders. So I don’t think India is alone in that challenge. Most markets obviously want to make sure that you protect the public shareholders. And in doing so, often it creates a more complicated path to do a public-toprivate (transition).

Do you think the boom in fund raising could impact performance of funds as an asset class?

David Mussafer: Capital will always flow to areas that provide the best returns. Yes, it does make competitive levels higher and things more difficult. The flexibility that we have in terms of capital allocation and time horizons is a big plus.

James Brocklebank: I think that we’re very optimistic about the future because, essentially, PE is fundamentally about a more effective governance model. We don’t see our investments as just capital, but it is capital along with engagement and better governance to drive alpha.