`Correction in Valuations of Indian Ecommerce Firms Inevitable’

Mumbai:
Trailblazer TPG Growth raises $3billion fund in just five months as it eyes investments in healthcare, financial services, technology and consumer business
TPG Growth, the middle market and growth equity investment platform of leverage buyout investment group TPG, and a backer of Silicon Valley trailblazers like Uber and Airbnb, has raised its third global fund with $3 billion in aggregate capital commitments, surpassing its fundraising target of $2.75 billion in five months. This fund is larger than its 2012 predecessor by a billion dollars.Ten-year-old TPG Growth was carved out of its $66 billion behemoth parent to specialise in smaller-sized transactions, typically in the $25-$100 million range. The mandate ranges from traditional “growth equity“ investments for control of companies to taking minority stakes and seats on corporate boards in businesses with significant prospects for growth.

So far, about half the fund’s corpus found its way into Asia and India, and even the new fund may take the same route. “We never allocate to a country or sector but India is becoming a far more exciting economic landscape and globally interconnected. Anybody looking at growth opportunities will find it hard to ignore,“ said William “Bill“ E McGlashan, Jr, founder & managing partner of TPG Growth, in an exclusive interview to ET from San Francisco, after the fund closure.

McGlashan, an avid Indophile, who actually moved bag, baggage and family to Mumbai for a year in 2013 to get a first-hand taste of the local market and be close to his own deal team, has been with the firm for over a decade and brought in rock stars Bono and the Edge of U2 as investors in guitar maker, Fender, another portfolio company . He himself became a PE founder after several stints as a venture capitalist and an entrepreneur who founded a health supplements company .

“We don’t want to look macho and start writing large cheques. We want to build companies along with their founders. Maybe we will ride a bigger cheque on our way out,“ adds Manish Chokhani, investment banking rainmaker-turned chairman of TPG Growth in India.“But we have flexibility to park the entire $3 billion in India, if we get the right deal and the right value.“

It’s already showing. The past year, TPG has been most active with five investments across its growth and larger investment platforms.TPG Growth alone has invested close to $60 million in two new and one follow-on deals. Sectors shortlisted too have been diversified -from branded eyewear to auto dealerships. ATM solutions provider and portfolio company AGS Technologies has also filed for an IPO. In the past six years, TPG Growth has made seven bets in India.

“The challenge in India remains valuation dynamics, not opportunity. Indians are increasingly looking at building global companies.Success begets success,“ says McGlashan. “This is in sync with sectors we like ­ healthcare, internet, telecom-media-tech, financial services and retail & consumer.“

TPG Growth is evaluating the Indian consumer internet startups quite actively, many of which are at an “interesting cusp in their evolution“. Till date, it has stayed away even though its global roster boasts of some of the hottest ventures like SurveyMonkey , Box Inc, Uber Technologies and AirBnB. “India has always been strong on tech outsourcing. Many of the internet ventures are still just beginning to take off. But internet and media is one those compelling sectors today . We are actively looking at a few companies.“

Commenting on the surge in valu ations of many of these start-ups, McGlashan says they are following a global trend. The fund invested its own money in Uber valuing the car ride service at $2.75 billion -far less than the roughly $40 billion valuation it now commands.

“In nine months, valuations touched $18 billion,“ he recalls. “Now, it’s more than three times that as well.“ Bill had also checked into Airbnb when the home-rental startup was valued just $10 billion, half of what it commands now. “Many of these valuations in India are typical to understand. There will certainly be a correction and we will have to see who will stay with their bathing suits on. But there are great companies getting built.They have to build a moat around it to stay compelling. We like these differentiated companies.“

Team TPG Growth also thinks that as a fund, they stand apart.“We’re part of this bigger ecosystem, so I have an unique tool-kit that operates in many different sectors,“ argues McGlashan. For example, unlike many of their global peers who have similar funds of their own, TPG has one committee to oversee all of the firm’s investments. That means letting TPG Growth leverage the firm’s resources, from industry deal teams to its varied advisers.

That comes handy when Indian investee firms like Sutures ­ into medical consumable ­ aspires to be the next Johnson & Johnson and TPG helps it to globalise with new product offerings or when Landmark tries to be the consolidator amongst Indian auto dealerships and scale up nationally .

Source: The Economic Times
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Author:

Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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