LVMH-backed private equity fund house L Catterton believes India’s growth story remains intact and plans to double down on the country despite the ongoing conflict in West Asia and related uncertainties. The fund house has deployed $440 million currently across its portfolio companies so far.
“..It sounds so logical that one of the largest investment vehicles in the world, focused on consumers, is focusing on India, for the simple reason that India is going to be the largest consumer story for many years to come ,” said Sanjiv Mehta, executive chairman-India, L Catterton at a media round table in Mumbai on Tuesday.
Mehta, the former managing director at FMCG major Hindustan Unilever, has a partnership with L Catterton. Vikram Kumaraswamy, partner at the fund house, said it is mindful of the West Asia tension, but is here for a long term.
What did Kumaraswamy say?
“The India macro story is strong and intact, and that is why we are back in sector after sector. The consumption story has not even started. About 65% of our population is under the age of 35, we are a unique cohort in human history where you have a large population that’s young, getting richer and fully digital.,” Kumaraswamy said.
“There is going to be investment opportunities across every category, investment model,” he added. The fund manager is in the midst of raising a $400-milion India-focused PE fund and has raised half of it so far and looking to raise the entire amount by next year.
It has deployed about $100 million out of the amount raised. In the past one year, the fund house has invested in three companies : Farmley, Healing Hands Clinic and, Haldiram’s. On the growth of the luxury segment in the country, Mehta said with the way India is signing free trade pacts, it will facilitate sale of luxury products.
“Like the way China has become the biggest luxury market in the country, in the next 10-15 years, India will set it foot firmly in the luxury market,” he said. Kumaraswamy said they have secured the deals at lower valuations than similar deals in the market. “In the past three deals have, on average, been at 20- 40% discount to comparable transactions,” he said.
“Most of our investments are therefore proprietary deals, either from the onset or from a relatively early stage of a formal company-led or intermediary-brokered fundraising process, This also enables us to secure deals on favorable terms with like-minded founders and management teams,” he said.
On average, the revenue of its India portfolio companies’ increased by around 25% and their Ebitda margin expanded by around 600 bps over the past year, he said. On their deal pipeline, he said: “None of it is impacted by the West Asia conflict.”
He added that the India fund can do 7-9 deals with ticket size of $50 million. “If it (ticket size) goes higher, we will co-invest,” he said.