India is our best PE market: Blackstone’s Gray

MUMBAI: The world’s largest alternative asset manager

Blackstone

said India has emerged as its top performing market for private equity investing, while the upcoming listing of the group’s real estate investment trust (

REIT

) will be a big moment for the county’s property sector. The New York-headquartered firm’s president and COO Jonathan Gray credited the Narendra Modi government for opening up FDI regulations and putting in place a dispute-resolution mechanism for improving regulatory and legal frameworks in the fastest growing major economy.


“We believe India is in the early stages of a long-term, sustainable economic growth. It has always had the demographic, middle class and a large pool of English-speaking people, but faced fiscal and monetary constraints. India generally needs more capital for growth,” Gray, 49, who is considered a potential successor to CEO and co-founder Steve Schwarzman, told TOI in an interview. He is in the country to attend the ET Global Business Summit (GBS).

Blackstone has deployed more than $10 billion — equally split between private equity and real estate investments — in India since 2006.

Blackstone manages assets worth over $470 billion globally, including $120 billion in real estate. Gray — who joined the investment firm as a fresher from the University of Pennsylvania 26 years ago, and with a personal net worth of about $3 billion now — is seen as one of the most influential alternative asset investors. He built Blackstone’s vaunted real estate portfolio, making bold bets after the financial crisis a decade ago, and scripted the most profitable private equity deal in acquiring and selling Hilton Hotels Worldwide, which alone netted the firm $14 billion.

“We were slow when we started, but the light switch went on here eight years ago, initially with real estate investments followed by private equity buyouts. India is the highest returning market for our private equity investing and is certainly top of the pack in real estate too,” Gray said. He added that the performance was driven by growth in the country and not financial engineering, typical of private equity investments in the west. Blackstone’s private equity investments are growing 30% year-on-year and it was being bolstered by the firm’s operating expertise and governance norms.

Blackstone’s private equity investing, mostly though buyouts, tracks five sectors — IT services, consumer, financial services, healthcare and industrials. It made concentrated bets on Indian IT exports industry with acquisitions of Intelenet and Mphasis, before stepping into the consumer economy with deals like the recent buyout of

Aadhar Housing Finance

.

Gray said Blackstone, which has built the largest portfolio of leased office buildings in India by snapping up IT parks, is in the process of listing the assets through the country’s first-ever REIT. Media reports have said Blackstone, through Embassy Office Parks, is reportedly finalising at least $700-million REIT listing, which has received all regulatory approvals. “This will be a big moment for Indian real estate sector, and the broader economy. The government here has done a lot of work to allow public ownership of these properties, considering that 10 years ago most of it wasn’t opened up to FDI and pension funds,” he said. Gray opined that REIT opened up liquid investment options in a largely illiquid sector. “Ultimately, real estate needs a home. And India needs quality workspaces for its economic growth,” he added.

The Blackstone COO said the current year could be a hectic one for the firm in India, given the ongoing liquidity squeeze due to NBFC defaults. This might trigger a new avenue for buyout deals, which till date were largely due to factors like lack of family succession planning and divestments as part of corporate restructuring. “But we usually take a longer-term view with the intent of deploying capital thoughtfully,” Gray said, even as he added that the firm was slowly building a credit-financing business as well.


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