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June 30, 2009

Will Blackstone succeed with Gokaldas and Intelenet?

Forbes India has an article on the Blackstone Group's investments in India, especially its big bets on textiles firm Gokaldas Exports and BPO firm Intelenet.
Blackstone investments in India have been battered by the economic and markets meltdown. Its cumulative investments of $730 million are now worth only 30 percent of the original value. Gokaldas has lost 71 percent of its value since Blackstone’s $165-million deal. Intelenet is unlisted but if WNS and Genpact’s valuation declines are anything to go by, the investment has lost two-thirds of its value.

...Of the seven investments Gupta has made, his fate would rest most firmly on what he achieves at Gokaldas and Intelenet. One, both have brought management control and that means Blackstone must ensure entrepreneurial energy keeps flowing through the companies. Two, taken together, both investments account for half the total money that Blackstone has invested.

...“In the first six months, investors in a PE fund are willing to listen to your talk about long term vision, strategy, After 12 or 18 months, they look at the prices you have invested and the current price of those investments and then they ask ‘What’s your exit strategy?’ Gupta will have to explain this as his two big investments are that old,” says the India head of a $1.6 billion US-based PE fund.

...Despite all the challenges, Gupta insists Blackstone will achieve its goal, even if not in exactly five years. “We may perhaps achieve it in seven, considering the slow pace of India’s infrastructure development and labour regulations.” Industry peers and Blackstone’s investors are impatient to see results. Garment maker Premal Udani says the Blackstone experiment could help erase old fissures in Indian business. “In the current scenario, if Gokaldas can make large buyers to source from them, the industry could learn a much needed lesson or two.”

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at