Blackstone India sees steep fall in investment value

Written by Shruti Ambavat | Mumbai | Updated: Dec 21 2013, 21:21pm hrs
With vintage private equity funds reeling under losses amid a slowing economy, corporate governance issues and lack of exits, one of the marquee PE funds, Blackstone Group, has suffered a steep fall in its key market investments in India leading to the restructuring of top management in the country.

Some of the public market investments by the private equity arm of Blackstone, include Allcargo Logistics, Financial Technologies, Multi-Commodity Exchange (MCX), engineering and construction firm Nagarjuna Construction Company (NCC) and Gokaldas Exports.

The PE firm has had at least five portfolio firms, which are deep in the red since its time of investment. As a long -term investor, short-term cyclical headwinds in the stock markets are not major concerns. Blackstone is committed to its investee companies to help scale up their operations and grow exponentially by leveraging synergies within the firm. In fact, both the exits weve made so far, Intelenet and Emcure, represent some of our most successful PE exits, delivering an excellent return for our investors as we expect to in the future. We typically take a long-term view in terms of value creation and can wait for our investments to mature, a Blackstone spokesperson told FE in an email reply, when asked about their views and strategy on these companies.

Blackstone invested $158.7 million in garments exporter Gokaldas Exports in August 2007 at a price of R275 per share for a stake of 68.27%. Currently, the share price of the company has plunged to R61.4 a piece scrapping 78% off the investors value.

Similarly, its investment in NCC fell by 85% since the investment in September 2007. Blackstone had invested R617 crore in NCC for a stake of 20.14% through a mix of warrants and equity shares. The investment was between 202.5 and 225 per share. Currently, the shares are trading at R30.1 a piece.

The PE firm invested in Financial Technologies in August 2012 at a share price of R679.9 for 7.02% stake. The stock is currently trading at R173 a piece.

Blackstone invested $50 million, or R230 crore, in Monnet Ispat & Energy in 2011 for a stake of 7.12% at a share price of R500. Currently, the stock is trading at R138 a piece, eroding 72.4% of Blackstones investment value per share.

In February 2008, Blackstones investment of R242 crore in Allcargo Global Logistics for a stake of 10.4% was valued at R934 a piece. The investor did a second round of funding in 2009 with $23 million or approximately R110.4 crore through warrants. The warrants were supposed to get converted at a share price of not less than R934 per piece. The current share price of the company has fallen to R108 a piece eroding the investment value by almost eight times.

Blackstone reshuffled its top management posting Akhil Gupta as the non-executive chairman of Blackstone India. Amit Dixit and Mathew Cyriac have been appointed as the co-heads in India.

Industry experts blame falling investment value of the companys portfolio as a major reason for this rejig. The performance of the fund in India had been terrible and a number of their key investments did not do well. Ultimately, Akhil fell out of favour with the top bosses in New York, a senior fund manager of a PE firm said.

Post restructuring, the firm is aggressively pursuing some of its old investments. The firm has pursued talks with a number of large PE firms for exit in CMS Infosystems. The firm had invested $40 million in the firm in February 2009.

Blackstone has managed some marquee exits, including Intelenet Global Services in 2011 and Emcure Pharmaceuticals being the recent one which gave the PE firm a 100% return of $105 million for its seven-year old investment.