The road to India

The appointment of Rajeev Gupta to head up Carlyle’s newly formed Mumbai office highlights the growing private equity interest in the world’s second most populous country. By Jonn Elledge.

The business pages’ obsession with the rise of China has rather overshadowed the other big Asian success story of the last few years. But the private equity industry has been paying attention: after five years of undertaking deals in India from offices located elsewhere in the world, last month The Carlyle Group became the latest global firm to establish a presence in the country, under the stewardship of managing director Rajeev Gupta.

Rajeev Gupta, managing director, The Carlyle Group


A combination of management experience in Indian industry and involvement in several major M&A deals in the country leave Gupta well placed to lead Carlyle’s business on the subcontinent. An Indian national, educated at IIT-Benaras Hindu University and the Indian Institute of Management Ahmedabad, his industrial experience includes a stint as the CEO who turned around the Delhi-based metals company Cosmo Ferrites Limited.


Gupta joins Carlyle from a period as head of the investment banking division at DSP Merrill Lynch, which he helped to set up in 1995. While in that role, he worked on several major Indian M&A transactions, including cement company Holcim’s acquisition of ACC, and the acquisition of Hughes Telecom by Tata Teleservices Ltd.


In his new role with Carlyle, Gupta heads a team of seven investment professionals in the firm’s new Mumbai office, and will be responsible for all Carlyle’s business in the country. Gupta himself will lead Carlyle’s three-man India buyout team, which will invest from the firm’s $750 million (€600 million) Asia Buyout Fund. The office will also house a four-strong India-focused growth capital team, overseen by managing director Shankar Narayanan, which will make early stage investments of up to $35 million.


Carlyle is not the only international buyout house to have increased its focus on India this year. In May, New York’s Blackstone Group announced the opening of a Mumbai office headed by Akhil Gupta, a former CEO of Indian corporation Reliance, and also earmarked $1 billion for investment in the country.

Two months earlier, 3i recruited Anil Ahuja, former head of JP Morgan’s investments in the country, as a managing director and head of the London-listed firm’s Indian business. The firm undertook its first deal in the country in August, investing $45 million in specialist media content provider Nimbus Communications.


This sudden flush of interest is not hard to understand. Since the early 1990s, the Indian government has been conducting a programme of economic reform, liberalising its foreign investment and exchange regimes, reducing tariffs and trade barriers, and modernising the financial sector. The result has been an impressive average GDP growth rate of 6.8 percent per year over the last decade.


Such growth presents significant investment opportunities for both buyout houses, as existing Indian companies begin to compete on an international footing, and venture firms, as entrepreneurs seek to benefit from the new prosperity.

There is a wall of money coming into India, but supply also creates demand

Dalip Pathak, managing director, Warburg Pincus

Those private equity firms that have been in the market for several years claim that, rather than being worried by the sudden increase in competition, they expect it to create further opportunities. “There is a wall of money coming into India,” admits Dalip Pathak, a managing director with Warburg Pincus, which has been operating in India since 1994. “But supply also creates demand, so we are happy to see the heightened interest in the country. If more finance is available at reasonable terms then vendors are less hesitant to bring deals to market.”