This year, EQT Asia's Jean Salata hopes to wager around $5 billion on India in the areas of IT, pharma/healthcare, and finance

This year, EQT Asia's Jean Salata hopes to wager around $5 billion on India in the areas of IT, pharma/healthcare, and finance

To increase its presence in Asia, Sweden's EQT purchased Baring Private Equity Asia in 2022 for a sum of $7.5 billion.

For the last ten years, India's overall macroeconomic environment has been very favorable and good, according to Jean Salata, Chairperson of EQT Asia and Head of Private Capital Asia.

The buyout firm's current transaction pipeline in India, according to Jean Salata, Chairperson of EQT Asia and Head of Private Capital Asia, is the greatest he has ever seen.

EQT (formerly BPEA EQT), which manages assets worth over $250 billion, has invested over $8 billion in over 30 Indian enterprises. In EQT's previous incarnation, it made investments in IT/IT services, placing bets on Virtusa, Coforge, Citius Tech, Hexaware, and Coforge, and reaping healthy profits. But with the $7.5 billion merger of Sweden-based EQT with Baring Private Equity Asia in 2022, EQT has changed the way it makes investments in India.

Since then, EQT has made large investments in the financial services and healthcare industries. Examples of these investments include the $1.15 billion takeover of HDFC Credila and the $1.1 billion acquisition of the majority of Indira IVF.

Salata, a tennis lover, said in an interview that EQT is thinking of investing $5 billion in India this year across a variety of industries.

Revised passages:

Let us begin with a topic of great importance that has gained much attention in the last few days: the confrontation between Israel and Iran. Geopolitical tension has increased as a result of the circumstances, and these disputes affect other countries as well, particularly friends. What are your thoughts on this unanticipated crisis and its effects on the general investing climate as a prominent worldwide investor?

It's difficult to anticipate the future since the situation is so unstable, and it's probably too early to speculate on what may happen. It goes without saying that we are keeping an eye on it. This is a worrying trend. Ultimately, as investors, it's something that is entirely beyond our control. Thus, all we can really do at this point is observe. That's what I would say.

Back home, India's major national elections provide another unstable environment. Right now, the nation is in election mode. What is EQT's position about the potential effects of such a significant event on your plans to invest in India? Will everything continue as normal or will we have to wait and see? It is crucial for people like you to have continuity in policy, and elections are related to policy.

Indeed. I would argue that India's general investment laws and regulations for foreign investors have been fairly consistent and friendly under Prime Minister Modi. And it is something that appeals to us as investors because it fosters an atmosphere that is favorable for developing long-term perspectives. We invest for the long haul. Usually, we own assets for a minimum of five years, and sometimes longer. Therefore, we must be quite clear about the future prospects for both the nation and the sector in question before investing in a firm.

For the last ten years, India's overall macroeconomic environment has been very favorable and even positive. And we anticipate that to go on. Consequently, we think that investors would benefit if the existing policy continued, regardless of the election's result.

Jonathan Gray, the president and chief operational officer of Blackstone, and I recently met in Mumbai. According to his India team, Blackstone hopes to invest around $2 billion there each year. What lot of money is EQT hoping to invest in India over the next five years, and is there an annual investment goal that you have set aside for the country?

We have run some statistics on our past investments in relation to the sector. And based on our research and some data from other sources, our total investments in private equity over the last five years—roughly $10 billion—would place us at the top of the list for foreign direct investment into India. We have spent $2 billion in the healthcare industry in the past year alone via ventures like the recently closed Credila and the Indira IVF company. In fact, we now have the strongest pipeline in India. Five billion dollars' worth of investments are now undergoing the latter phases of evaluation, scrutiny, and approval.

For how long?

I'm not sure whether they will all shut, but if they do, it will all take place this year. Thus, the large number we are focusing on is this.

Maybe another $5 billion this year?

Possibly, indeed.

Which industries are we examining? EQT has previously examined consumer, healthcare, pharmaceutical, financial, and technological services. Will the new wagers fall into these categories, or will we be focusing on a few emerging markets that pique your interest?

Our largest investment sector in the past has been in technology services. We have invested the most in that area. We have made 50 investments in Indian IT services firms; 12 of them are what we would refer to as platform investments, and the other 38 are bolt-on investments. That is, fifty investments spread throughout various segments of the value chain for IT services. And what a fantastic return these investments have generated. Our total return on those assets has been around three and a half times our initial investment.

Healthcare is one of the major industries in which we have started to invest. Furthermore, the healthcare industry is intriguing due of EQT's significant worldwide presence in this field. Furthermore, we have established a connection between our sector teams in Asia and the global sector teams after the merger of EQT and Baring Private Equity Asia.

As a result, our healthcare team in Asia now has access to all of the expertise, track record, and industrial advisor network that our healthcare teams in Europe and the US possess. Therefore, we're incorporating a lot of that knowledge into our deal origination thesis, due diligence, and investing process. We therefore have strong opinions on drugs, medical technology, and even healthcare today.

Furthermore, we recently declared the closure of our interest in Credila, a company that was formerly a part of HDFC. That is an NBFC, too. I believe that we are typically interested in financial services. Even though we've been considering it for a very long time, this is the first significant investment we've been able to complete. And we're overjoyed about it. We appreciate the visibility it provides to the education industry.

We like to work in fields like healthcare and education since they not only help the nation financially but also positively influence society and everyone in it in many other ways. Beyond that, as you start to see some of the government's production-linked incentives kick in, we are also actively looking more at consumers, manufacturing, and export manufacturing. Consequently, new forces are propelling expansion across a wide range of Indian economic sectors, as opposed to our earlier, more limited concentration on IT services alone.

You made several sector mentions. It's a $5 billion aim for this year and this calendar year. Is it reasonable to assume that the IT, pharmaceutical, and healthcare sectors will cover that amount?

We'll talk about IT, pharmaceuticals, healthcare, and financial services.

Proceeding forward. What more can the Indian government do to entice foreign investors to India? Many people think that India is the world economy's shining light right now. Is there anything India can contribute in terms of global best practices, policy, regulation, or any other aspect?

In my opinion, India is excelling in this area. In this case, consistency, clarity, and openness are crucial, in my opinion. You know, one of the things that gives trust to foreign investors is the existence of clear laws and regulations pertaining to investments. And you will get fair treatment in accordance with the regulations if you follow those guidelines and the law. And based on our experience, I believe that to be the case. Our communications with the authorities have been excellent. We've been able to contact them, have a conversation, and find solutions when there have been problems, queries, worries, or delays. I believe it's critical that this keeps up.

The true currency risk associated with foreign investment is this. In my opinion, the RBI has done an excellent job of reducing volatility. For the last several years, the rupee has been relatively steady due to the country's general economic policies. That's very different from what we've seen historically, which has seen the rupee progressively lose value over time. And greater confusion has resulted from it. It is my belief that maintaining this degree of stability in the currency and in the policies governing the economy will help to provide the type of level playing field that investors want and the fair treatment we get when we make investments in the nation.

Let's narrow our attention to the healthcare industry, where Indira IVF and AIG hospitals are located. The hospital industry has seen a flurry of mergers and acquisitions in recent years. With the simultaneous purchases of Care Hospitals and KIMS Kerala, your competitor Blackstone has increased its activity in this market. Other hospital assets, including as CVC-backed Healthcare Global and Aster DM Healthcare India, are also for sale. Which of these two goals piques the attention of your team?

Taking a broader view, the reason the healthcare industry is so fascinating is that it directly impacts the expansion of both the middle class in India and its purchasing patterns. Looking at the figures lately, we found that there are around 60 million individuals in India who earn more than $10,000 annually, which is the threshold for qualifying as middle class. It won't take long for that number to increase from 60 million to 100 million—probably within the next few years. That figure is rising quickly. When families find themselves with a little more cash, they usually want to spend it on better healthcare for themselves, their parents, and their kids.

And AIG demonstrates that. When I was recently in Hyderabad, we had around 45,000 outpatients coming in each month to have treatments and surgeries done. That is just amazing how active they are. Furthermore, if you look at Indira IVF, we have almost 125,000 families who would not have become parents if they had not had IVF treatments. Thus, a sizable population is making use of the services that are being offered to them. Thus, I believe that to be the draw.

I believe that some assets and activities will remain highly sought for due to their scarcity. These include big, efficiently managed hospitals as well as service provider networks. However, I believe that value is also important. It is thus necessary to reach a certain level of market equilibrium.

So you're not discounting the possibility of further hospital M&A in India?

We're not discounting that, however.

Let's discuss the buoyancy and sustained buoyancy of the Indian public markets. Recently, the Sensex reached 75,000. A fresh group of up-and-coming businesses from fascinating industries are aiming to enter the Indian public markets in an attempt to take advantage of the valuations. Not to add, compared to prior times, there are now a lot more large-scale block trades. Is EQT considering listing any of the Indian firms in its portfolio in order to capitalize on the current situation? Furthermore, why has EQT often avoided the listed space in India and adhered instead to private targets? Is this an approach exclusive to India, or is it something you also like to use elsewhere?

Generally speaking, we favor investing in private businesses over public ones. That's our plan. It's amazing to note how much the public markets, or exit markets, have changed over the past ten or so years. The GDP of India was around 1.8 trillion ten years ago, and it is now approximately 3.5 or 3.7 trillion. Thus, it has doubled. Ten years ago, the market capitalization of the public markets was around $1 trillion; now, it is over $4.5 trillion. The market cap has increased by over five times in the last ten years. The liquidity pools that are accessible to investors in this market have significantly increased.

That, in my opinion, has made it possible for businesses like ours to go public. For instance, we were able to sell our investment in Coforge, a listed company, to domestic investors over time at a progressive cost of more than $2 billion. And it got a great reception. The stock is trading higher now than it was when we sold it, if you look at it. People have done well as a result, which fosters the ideal atmosphere. We want investors in the businesses we're selling to earn money, as well as those who complete monetization events. Thus, the Indian market has become more localized and deeper. And that, in my opinion, is a very good thing for the industry.

Any IPOs then?

Without a doubt, we'll be seeking to do further IPOs in India. I believe that this market is growing rather well. Additionally, it's a highly intriguing method for us to profit from our assets.

EQT has been a buyout fund historically. Would you think about changing your approach and taking a closer look at any minority stake prospects in India as well? A few other international bulge bracket private equity groups have begun to make inroads into minority share sales. Would you enter that area?

Actually, we would want to continue with control takeover investments. But we will also engage in what we refer to as "partnering deals," whereby we may collaborate with the promoters or the family, but in most cases, we would acquire the majority interest and they may roll. For instance, we purchased a 70% ownership in Indira IVF, and the family rolled into an existing 30% stake with us. Thus, even though we would own the majority interest, we would still be partners.

What comes next in the financial services sector after the massive purchase of HDFC Credila? As we speak, stock sales and company IPOs are taking place in the real estate finance space. There has to be more penetration in the financial services sector. What function is EQT expected to perform?

Indeed. One area of emphasis is financial services. We find the financing of housing to be quite intriguing. There is more we would want to do. Furthermore, I believe that there is a substantial need for credit in the economy overall. And we're working to make credit more accessible in certain sectors where we can really stand out as a supplier of high-quality services that customers can't afford to miss.

Throughout your lengthy career as a successful investor, you have seen several nations in different regions. What are some of the most important private equity themes you see developing in India via your global lens?

The rise of the buyout or control investment market, which was once the market for minority investments, is, in my opinion, the largest trend we've witnessed in India. As a consequence of the buyout market's growth and ability to draw in bigger capital pools, I believe our sector has matured and grown, and the acquired firms may potentially see more significant transformations. Looking at all buyout transactions, the annual total is certainly close to $10 billion. By 2030, that market may reach $50 billion, ranking among the largest in the whole area.

The amount of money invested in infrastructure, especially in renewable energy, is, in my opinion, another intriguing development that the world is seeing. We believe that the energy transition will be really fascinating. Furthermore, I believe that India has the chance to invest in this field and has a significant role to play. I believe that the country's investment in infrastructure is just now beginning to pick up steam. In the future, that opportunity will grow significantly.