‘It’s Time to be a Little More Bullish on India’

What has happened in the past few months is very positive for India, says TPG Capital's Bonderman     If real life were a Hollywood movie, David Bonderman, founder of TPG Capital, one of the world's largest private equity firms, would have played a key role as one of its heroes. Not the all-muscles, AK-47-toting superhero with killer looks but as his tough-as-nails, no-nonsense boss who commands, orders and controls the situation sitting far away.  In his more than two decades of experience in managing and investing other people's money, Bonderman has had more successes than he can possibly count. Continental Airlines was salvaged in 1993 and became a remarkable turnaround story, prompting the buyers Bonderman and James Coulter to create TPG; Korea First became a highly successful retail lender after TPG took control in South Korea's first case of a foreign takeover of a bank in 2000 and MI Energy, which became one of China's successful energy companies, after being taken over in 2009.  Unfortunately however, real life is not Hollywood and heroes don't always win in the end. Success can create its own set of enemies as private equity's growing problems and the backlash against it has shown.  During the past few years, TPG's investments in several large buyouts have stumbled badly. And that's not counting Washington Mutual, which collapsed and had to be sold to JP Morgan in a distress sale in 2008. The Economist recently said TPG is one of worst performers with seven out of the 20 large buyouts it participated in doing badly, Freescale Semiconductor, Ceasars and TXU. Investor and activist wrath over excess profit and low taxes for the private equity industry is mounting while the Obama campaign's scathing attacks over private equity due to Mitt Romney's Bain Capital experience is not helping matters.  All this makes Asia immensely important to TPG. With two of the world's biggest economies still doing strongly, and opportunities continuing to rise, Asia can act as a strong antidote to the travails of its US investments. The firm is in the process of raising a $4 billion pan-Asian fund of which $1 billion has already been committed. It hopes to invest in its favourite sectors of consumer, retail, and finance across the continent. "I think based on the current government and the current economic cycle, it's time to be a little more bullish on India," said Bonderman, admitting that his perception about India has changed recently due to the change of guard at the finance ministry. "What has happened in the past few months is very positive for India. The comments I made before was in the context of a different FM who was doing a lot of lousy things and the general consensus was, it didn't make a lot of sense," he added. But he cautions that India is underinvested in infrastructure and will always be less efficient than China and does things in its own Indian way. "You can't fix the runway here as 20,000 people live next to it. So forget about a plan as long as you get the votes. India is under invested in infrastructure, has had umpteen governments, policies change not just because of a change in regimes but because of finance ministers!" he adds. China, he adds, will continue to experience faster growth due to its more vigorous form of government.  Bluntness comes naturally to Bonderman. It has gotten him into trouble in the past, especially in 2007 when he soundly abused the Japanese at a gathering in Hong Kong, saying that demographics means that there will be fewer of them soon. "They hate us but that is okay, because we hate them too," he added, even before his appalled hosts could muster the courage to shut him down. A staunch Democrat, he is a trenchant critic of former President George W Bush comparing him once to the deeply unpopular 19th century president Millard Fillmore and wondering whether the dead man would feel insulted.  Private equity's travails notwithstanding, Bonderman is hopeful about the future dismissing all criticism as old news and a result of misunderstanding. "Nobody is perfect. But there has been a lot of success. Many bankrupt companies have been turned around and people have recognised that." He admits that the industry is a bit disorganised and has not made much effort to explain what it does. His reaction to the Obama campaign's criticism of Republican candidate Mitt Romney's private equity experience is dismissive. "It is just politics as usual. You shouldn't get too upset about that." He is happy with his investments in India, saying that Vishal Retail is doing well and that this is an example of how PE funds can turnaround indebted companies. Shriram Transport (the other TPG company) is also doing well. TPG is not very well known to Indians and Bonderman would like to change that.  But back in the US, warning signals are flashing on TXU, now called Energy Future Holdings. It was bought by TPG, KKR and Goldman Sachs in the largest ever leveraged buyout (LBO) of $45 billion in a deal criticised by almost everybody, including Warren Buffett. Today, the company is groaning under debt, its cash flows are squeezed and whispers of bankruptcy are growing louder. Warren Buffett may or may not comment about TPG's Indian investments. But for Indian investors, and public and regulators a possible collapse of the biggest LBO in the US, led by three of the biggest private equity players will be something to keep in mind when doing a private equity deal even if it is not an LBO. TPG must hope that Vishal Retail and Shriram are remembered more easily than the problems of a faraway energy company.  arijit.barman@timesgroup.com