Jonathan Gray, president and chief operating officer of Blackstone, visited Mumbai recently and as part of a closed round-table session discussed the private equity company's operations in India, long-term plans and what he thinks could be improved to accelerate FDI inflows into India.
Blackstone is one of the largest global investors in India with around $50 billion in total value across real estate and private equity. Their themes have been IT, consumption and B2B2B which include Mphasis, VFS, TaskUs, IBS Software, Xpressbees, Simplilearn, and Aakash education that it sold to Byju's. Their big plays in real estate have been across - commercial, retail, warehousing and now data centres.
"But at its core, it's about delivering value for the customers. What's important to us is our culture, building a place where we attract great talent, where we operate according to values that are really important to us and our customers, that we really try to be a force for good in deploying capital. So, the huge push for us is around decarbonisation, always through a fiduciary lens," Gray added.
Does he see the present time as volatile?
"I would say it's obviously a tougher time to deploy capital. If you think about what's really happened since COVID, we went through three phases. The first phase was the boom period, where central banks and governments around the world put huge fiscal stimulus and monetary stimulus into the economies, there was tons of spending, lots of asset appreciation, and then a lot of inflation, as you know. That was something we became quite focused on early on," Gray said. "The second phase, was the 2022 period where central banks led by the Fed raised rates and assets that are interest rate sensitive, namely stocks and bonds, got badly hit, for sale housing, some capital goods related items started to really go down sharply, and then the economy began to slow, although much less than I think most people anticipated."
Now, the third phase is where inflation has begun to turn down. "Certainly in the United States and in Europe, the question is, and we'll find out more here today with the latest CPI number, how quickly inflation will come down," he said. "Certainly in the US, nearing the end of its interest rate increases, but I think it is likely to hold rates at a high level for an extended period of time. And that will make this year challenging economically, because we'll continue to see a slowdown in the global economy. I don't think it's going to be as dramatic as some had anticipated. Because there is a lot of forward momentum, there seems to be much more resilience."
In reference to whether the India story is slowing down or recent disruptions in corporate India have derailed their outlook he disagreed, saying "Picture abhi baaki hai".
He added "I don't think at the end of the day, there is going to be a long-term impediment to what's going to happen in India, if anything, when these things happen, it just raises the bar for everybody, and forces people to operate at a certain standard. And so, over time, India will continue to make progress in this area. And as it does, it makes it easier for the capital to come. Just like building infrastructure makes it easier for people to engage in commerce. Putting in place best practices and corporate governance and transparency makes it easier for capital to show up. And so I believe India is on that path. But there will obviously be some bumps in the road."
Even so, what factors can the country look at in order to further accelerate incoming streams of FDI funds?
"When it comes to tax policy, and, you know, sometimes the changes are quicker than one would hope and sometimes makes it hard for participants to understand. Because if you think about investing capital, what you want to understand is the framework. So more certainty around the tax framework, and then I would say, a lot of the regulations, particularly in the public markets, have rules that make listings difficult, that make privatisations of companies difficult, all things that impede the flow of capital. So if... what I want is the largest number of investors to come into public companies," Gray said. "All that said, this government has done a terrific job in making it much, much easier over the time period we've been investing."
So far Blackstone has had a good run in India as an investor. "We're the largest foreign owner of real estate in the country. We are the largest private equity player in the country as well. We have companies with about 200,000 employees, 100,000 of which are in India. And just to give you a sense of India's importance to Blackstone, outside of the United States, if you look at our equity businesses, private equity, real estate and so forth, the number one country would be the UK. Number two will be India, which tells you these folks at Blackstone believe a lot in India," Gray said, adding that Blackstone appreciates the fact that there's less competition here on a relative basis than in some other markets in the world.
Gray went on to add that "India is not the easiest place at times to do business. But we have developed capabilities, and dedicated teams on the ground, and then a bunch of platforms in sectors we like, that give us a real competitive advantage. So in private equity, our highest returns in the world have been in India, we've had extraordinarily strong returns in real estate as well. And so when you have success in an area, you tend to double down."
The focus will continue on the new avenues where the group plans to deploy funds. "We now have $187 billion dollars of fresh capital (worldwide) to invest, including our Asia fund which is $11 billion and which has barely started deploying," Gray said. "So the capital is all there. It's all about the right opportunities where we find that right opportunity to build."
Leave a Comment
Your email address will not be published. Required field are marked*