MUMBAI
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Boston-based private equity firm Bain Capital, which has over $160 billion of assets under management, may spend more time looking at late-stage tech deals next year in India, as the opportunities in the segment widen for traditional private equity firms, a top executive said.
The PE firm closed a $7.1 billion fifth Asian fund last week, up from $4.5 billion which it raised for its fourth Asia fund. It expects to widen the scope of its investments in India over the next few years, including in newer sectors.
A lot of startups have historically been backed by venture capital firms in India and globally. But private equity firms may find opportunities in this segment in India, going forward, Pavninder Singh, a partner said.
“Many of them (technology startups) are now further along in their business model evolution. Some of them do have a need for primary capital. Many of them have a need for a capital structure realignment, where early investors need exits. I think all of that has created some interesting opportunities. We are spending time selectively in that (startup/tech) area. A lot of those deals were going to a set of investors that didn’t look like traditional PE, a year or two ago—I think some of those deals could be relevant for us and our peer set in 2024,” Singh said.
Specifically, Bain Capital would be greatly interested in tech and tech enabled segments, product and software services companies, in addition to fintech companies, Singh said.
“That market actually will be quite interesting and not just in the near term because there’s a dislocation. If I look over the next 10 years, just as we saw a lot of activity in the tech enabled service sector, I think SaaS and product companies from India will be the next wave. We are spending time in this segment,” Singh said.
Software products and Software-as-a Service (SaaS) companies—which mostly cater to overseas clients—have seen a dip in their revenues because of cost cutting in the US and the European markets over fears of global recession.
Separately, Bain Capital has invested significantly in the payments sector globally and expects to look more deeply in that segment in India as well, he added.
The PE firm will invest in scaled up businesses. “I think companies where unit economics are still unproven are a harder fit for late stage private equity,” he said.
The firm expects to invest more in India after deploying $3 billion over the last 18 months across all asset classes, Singh said.
Of the $3 billion, around $1.5 billion was specifically deployed in private equity deals across deals such as Citius Tech, IIFL Wealth (now 360 One Asset Management Ltd), Porus Labs, and Adani Capital.
Bain Capital is also looking to deploy more in consumer retail, a segment where it has historically been less focussed in India, besides investing in other favoured segments such as industrials, financial services and IT services, he said.
In private equity, the firm has historically made large investments in financial services, industrials and IT services. “I think those (segments) will continue to be active. And of those three, I would say the one that we see a lot of activity in, and focus is industrials,” Singh said.
“The other sector, which historically has been less active for us in India, but is a big focus right now is consumer retail. It’s one of our top three verticals globally,” Singh said, adding that the firm was putting in a lot of effort to secure deals in this segment.
About a quarter of the capital that it has raised for Asia has been deployed in India.
“There are opportunities to raise that percentage (of investment) for India,” Singh said. While deal activity has been down globally, including in India, in 2023, the firm expects it to be better in 2024.
In 2023, the firm invested in other asset classes through the firm’s special situations fund, and credit vehicles. Earlier in June, Bain Capital’s special situations fund invested in Embassy REIT—its first such investment in this segment in India.