Everstone Capital is Digging Deep in Indian Manufacturing to Find Opportunities for Investors: Vice Chairman Avnish Mehra

Singapore-based private equity (PE) firm Everstone Capital is looking to dig deeper into India’s manufacturing space for investment opportunities. Vice Chairman and Head of Everstone Capital Avnish Mehra says that the evolution of the country’s manufacturing story would present investors with several opportunities in the coming years.

Globally, Everstone Capital will deploy $300-400 million this year across different sectors like healthcare and technology. Talking about the year so far, Mehra says that the outlook for 2024 appears to be brighter. He says, “2023 was a challenging year for investment. However, it was good from the perspective of exits as capital markets did well. So far, this year has seen an improvement in the investment landscape while capital markets remain robust.”

Private Equity firms witnessed a great start to the year as the first quarter of 2024 saw a huge surge in exits. As per a report by analysts at global audit firm Mazars in India, Q1 2024 recorded a 354.5 per cent increase in PE exits compared to the same period in the previous year. The total value of exits reached $3.6 billion, a nearly five-fold year-on-year increase.

It is this momentum that is making Mehra confident about the firm’s bets in India. There were concerns that the elections could taper the confidence of investors, but Mehra says private equity is a long-term game. “We analyse the economy from a micro and macro perspective. In the last 30 years, India has delivered good annual GDP growth. We tell investors that India is one of the most stable global markets.”

In terms of exits, Everstone Capital has been able to deliver over $2 billion in returns to its investors in the last five years. Explaining the strategy of the company, Mehra says, “We look to gain a controlling stake in mid-market companies with EBITDA in the range of Rs 100-250 crore. After streamlining and growing the company, we look to exit after the firm’s EBITDA reaches Rs 400-500 crore level.”

With India's public and private markets surging, the space for exits for private equity firms continues to remain good. Benchmark Sensex index has surged by nearly seven per cent in 2024. Despite this buoyancy, Mehra says that the base case scenario for the firm remains a secondary deal exit.

He explains, “The firm can exit entirely in the private market. This doesn’t hold true for public markets as we must let go of shareholding gradually. In such a scenario, we only explore the public markets if we get a good premium over private markets.”

The last two funds of Everstone Capital deployed over $2 billion of capital in the market and the firm is now focusing on exits. Initial public offerings (IPOs) and deals in the secondary market might be on the horizon. A breakdown of the company’s sectoral play provides insights into the desirable sectors.

Mehra says that 70-80% of the company’s investments are in the healthcare and technology space. He says, “The demand for healthcare services is growing at a rapid pace. Government initiatives have helped in spurring up demand. Hospitals are trading at a discount in the private markets as compared to the public markets where the valuation multiples are high.”

For Mehra, the most exciting opportunity is in the medical devices manufacturing space. He says, “There is a policy push for import substitution, and we are seeing huge growth in the medical devices segment. Translumina, which makes cardiac stents, has posted good growth. Along with the domestic market, it’s also exporting to the world.” As the total addressable market remains huge, Mehra says that the sector will continue to attract attention.

For Everstone Capital, manufacturing seems to be a key focus area for now as India’s GDP growth continues to beat expectations. The company hopes that the buoyancy in the public and private markets continues to increase as it plans to gain momentum in the second half of the year to close deals.