Betting on growth

Your fund will focus on India and Southeast Asia with more than 50 percent allocated to Indonesia. Why?

As we think about the next decade, I have been thinking hard about where one gets the opportunity to make fairly high returns for our investors. And as we analysed the market, one of the areas which was fairly obvious was Indonesia.

I think it’s a combination of the fact the GDP per capita is still very low [and] growth is starting to accelerate. Growth, for the longest time was in the 6 percent range. This year they are talking about 6.5 percent. We believe the potential for 6 to 7 percent growth for the next decade is very real. As a result of that, we felt this is where many of the new opportunities will arise. And of course, there is very little private equity activity there today. It’s very much like India eight years ago. 

Is it fair to say Indonesia is replacing India’s position as a destination for PE?

In India, a combination of factors is going to depress returns for the next decade. The macro story is under pressure. You have current account deficits that have been running for a long period of time. I think you are seeing a lot of political issues in India which are going to take a little while to resolve. The other thing is you have far too many investors in the market. There is a bit of a herd mentality. The success of India in the early 2000s resulted in too much capital coming in. And we believe it’s going to take about four or five years for this capital to normalise. Therefore, we don’t think the returns in India are going to be as exciting as some of the other developing markets.
One key challenge in Indonesia is finding someone to help navigate the business landscape, which is usually controlled by one of the large family conglomerates. How do you plan to traverse this landscape?

[Look at] the old India and then the new India that emerged after 2000. The new India was about new entrepreneurs who were building world class businesses and we launched at a time when that transition was happening and we were able to back many of the new successful entrepreneurs that emerged. We draw similar parallels to Indonesia, where there is the old Indonesia dominated by the traditional sectors, but there is also now the new Indonesia where you have many new generation entrepreneurs who [emerged after] the 1997 crisis. What we believe is that they are looking for professional partners with a long term horizon. We believe we fit that bill.