India’s take-private norms a ‘mathematical impossibility’: Blackstone's Jon Gray

India’s take-private norms a ‘mathematical impossibility’: Blackstone’s Jon Gray

“The government has done a lot of incredibly positive things. I think one thing that could help unlock the market here is an ability to take companies private, to help improve them, then bring them back to the market, maybe with more scale,” Gray said during a media briefing in Mumbai on Wednesday.

Currently, more than 90% of the shareholders of a listed company need to vote in favour of a take-private, or privatization, motion, which Gray called a “mathematical impossibility” because of the difficulty in securing these votes. In the US, investors can take listed companies private with 51% of shareholder approval.

In November 2022, Blackstone acquired 52% of IT services business R Systems and attempted to take the company private through a subsequent delisting offer, which failed.  Shares of R Systems ended Wednesday’s trading down nearly 1% at 470 apiece on BSE, but the price is up from 245 per share when Blackstone invested in the company in 2022. 

Reducing the timeline to close deals would make the Indian market more attractive, Gray said. 

“Getting M&A done here often takes much longer than it does in other parts of the world, the process can take 18-24 months, as they move to streamline,” Gray said. 

Nevertheless, India is Blackstone’s third-most important market after the US and the UK, and the firm is pursuing opportunities in sectors that touch the rising middle class of India, he said. 

“India stacks up really well for us. On the equity side, No. 1  market for us is the United States, No. 2 is the United Kingdom, and No. 3 is India,” Gray said. 

Blackstone holds more than $200 billion of dry powder globally and is likely to heighten its pace of investments in India. The firm’s current assets under management in India stands at $30 billion.

“Building businesses that build India is the core theme at Blackstone,” Gray said. 

Blackstone invests across four themes under its private equity businesses—technology, financial services, consumer, and healthcare and pharma. The firm’s total assets under management in India since inception stands at $50 billion, with about $30 billion in private equity and $20 billion in real estate.

Blackstone continues to increase investments in India and sees an opportunity to increase the value of its private equity assets by $25 billion over time, including about $17 billion on new investments and $7.5 billion on value-creation across its current portfolio companies.

“The underlying growth of (India) creates a lot of opportunity. Traditionally, India’s been a country that’s been a bit capital-starved. And that’s created the opportunity to produce higher returns for our investors. Now, what I do think is changing is India is (that it is) clearly becoming a place more investors are enthusiastic about,” Gray said.

According to Gray, favourable demographics such as a young population and a high number of English speakers and engineers add to India’s strength. Coupled with that, the government’s support for bringing in reforms such as GST, bankruptcy laws and in the capital markets has worked for the country, he said.

Last year, Blackstone committed $1 billion for acquiring a controlling stake in Care Hospitals and subsequently acquiring Kims Hospitals to create a healthcare platform with 4,500 beds.  In recent years, Blackstone has invested around $2 billion in travel services firm VFS, around $250 million in edtech firm Simplilearn, and $300 million in Xpressbees. 

As for exits in India, Blackstone sold its stake in IBS Software to Apax Partners for $400 million. And in March last year, it completed a full exit from Sona Comstar, one of Blackstone’s best investments in India. 

“India has really been a leader for us in terms of performance. In fact, in private equity, our highest returns geographically have been in India. We’ve done incredibly well in real estate also,” Gray said.

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Published: 03 Apr 2024, 06:59 PM IST

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