Global private equity firm SAIF Partners has investments worth $1 billion in India. With a strong presence in e-commerce, it is eyeing other sectors. Managing director Deepak Gaur talks to Reghu Balakrishnan about the investment strategy. Edited excerpts:
How has SAIF Partners’ journey been in India so far?
SAIF has been active in India for more than 10 years now. The initial investment focus was in technology and technology-enabled businesses, which was diversified later to include a range of sectors such as consumer products and services, media, telecom, financial services, healthcare, travel and tourism, and manufacturing. With over 30 investments, SAIF has become one of the active funds in the country with investments ranging from $2 million to $50 million across early- and growth-stage companies.
SAIF has investments in Speciality Restaurants, Ammi’s Biryani and Taj Hotels. What is the potential in the hotels and restaurant space?
The revenues of players operating in the restaurant industry in 2010 amounted to Rs 43,000 crore, with an annual growth rate of five-six per cent. A large market size, coupled with the fact that it is expected to remain one of the fastest growing sectors, makes the restaurant sector very exciting. While the sector in India today is fragmented, we see a big opportunity in this space for companies that can maintain high levels of hygiene, quality and standardisation across restaurants. Similarly, hospitality is a large industry that is growing rapidly as the tourism and business travel segments in India are rising. We see the potential for long-term growth. We are always open to more deals in these spaces, as long as they don’t compete with an existing portfolio company.
SAIF Partners-backed MakeMyTrip has made a number of buyouts in the past couple of years, including that of iXIGO. What was the strategy?
MakeMyTrip is focused on continuing to increase its market share in the online travel market in India, via organic and inorganic growth. SAIF co-invested in iXIGO with MakeMyTrip, and is working with the company to make it the largest destination for travel content in India.
Most of SAIF’s investments in India are in e-commerce or online retail. What is the rationale behind this, as e-commerce is at a very nascent in India as far as PE is concerned?
There are over 50 e-commerce companies that have been funded in India. We expect this number will shrink significantly in the next 12-24 months. When the dust does finally settle, we expect there will be a handful of very large companies that will likely go public and demand strong valuations, given their leadership positions.
Healthcare is one of the areas where SAIF is keen. But why have there not been many deals in this space?
Healthcare is a strong area of interest for SAIF, and we have made one investment in the pharmaceutical sector. We plan to do more deals in the sector in businesses with scaleable and capital efficient business models.
SAIF made an investment in Blue Star through an open market transaction. What is your view on PIPE (private investment in public equity) or investments in listed entities?
Typically, we make such investments when we believe the listed opportunity provides a better risk-reward ratio than an unlisted company in the same sector. However, we take a similar long-term view in the case of unlisted companies, and back high-quality businesses, which are available at reasonable valuation.
What is your investments strategy? Can you divulge your fund details?
SAIF currently invests out of an India-dedicated fund of $350 million. The investment strategy will continue to be the same, of focusing on a strong management team, a large and growing market and reasonable valuation.
How many exits have you made in India so far and what has been the return rate?
While the return rates are not publicly disclosed, SAIF has exited multiple companies, some of them being Intelligroup, Sify, IL&FS Investsmart, Thermax and Havells.
How many investments is SAIF Partners looking at in 2013?
SAIF is actively working on new investments both in early- and growth-stage companies. However, we do not plan around doing a fixed number of transactions in a year.