“We Never Cross The Line Between Being An Investor & A Manager"

Amit Dixit, Senior Managing Director, Blackstone India speaks with BW’s Munnish Puri and Clifford Alvares about Blackstone’s keen focus on India

How much does Blackstone manage globally and what is your growth strategy in India?
Blackstone manages $360 billion globally. We operate in four verticals worldwide — PE, real estate, fund of funds, and credit — and in two (PE and real estate) in India. We typically invest a minimum of $100 million and pick up at least a 26 per cent equity stake in an investee company.

Today, Blackstone is the largest PE investor in India, with over $6 billion investments. The firm has also created hard assets of about $10 billion in India through investments in various industries, roads and infrastructure.

We are the only global PE firm with a substantial real estate business. We own 50 million sq feet of office parks and commercial spaces in India.

Of the annual PE/VC investments of about $18 billion in India, more than 95 per cent is dollar capital. Very little rupee capital is coming in now.

Our focus is on five key verticals: IT, healthcare, financial services, consumer and industrials. We have seen the Indian markets, really mature, especially over the last five years. We are seeing control-oriented transactions in our chosen sectors, so we can now make large investments, which was not the case ten years ago.

From an investment strategy standpoint, what is your philosophy in working with the promoters and management teams of investee companies?
We have always been management friendly. We figure out early if a management team can and should be backed. But what we don’t do is ‘second-guess’ the management after investing in it. Our strategy is to never cross the line between being an investor and a manager.

Prior to investing, we draw a detailed five-year strategic plan, and also identify five large initiatives that must be driven by the investee company’s management. We also do a monthly MIS review with the key management team to see if we are on course to achieve our plan. This way, it is easier for us to spot bad news early.

What is Blackstone’s value creation proposition?
Our aspiration is to make effective changes in a company. So that when we exit, the management can say that partnering with Blackstone was the best decision it made. We believe in sharing our equity and wealth through ESOPs with the core management teams. Our philosophy is that the behaviour of core management teams changes when they get to act like owners.

What is the investment return that Blackstone has generated for its investors?
Over the past 30 years, Blackstone’s net dollar internal rate of return (IRR) to investors has been about 20 per cent globally. In India, our gross IRR in the past five years has been 26 per cent, and around 23 per cent in US dollar terms.

What is the philosophy behind Blackstone’s investment decisions?
Blackstone’s global investment committee — comprising a small group of people from across the globe — makes all the investment decisions. Deal partners like us make investment proposals to this committee. In fact, the decision-making process at the top has enabled us to function rigorously and also enabled us to generate superior returns.