In March, when the international private equity firm Warburg Pincus sold a $560 million stake in Bharti Tele-Ventures, India's largest publicly traded mobile telephony company, it created a sensation both in that country and among private-equity investors around the world. The transaction, on the Bombay Stock Exchange, was the largest block trade ever on the Indian market. It was also consummated in a breathtaking 28 minutes, prompting stock market observers in India to remark on the unexpected depth and maturity of their equity markets.
Private equity investors marveled at the profitability of the investment -- in a market that was in its infancy barely a decade ago. Money from U.S. private equity investors was going to Asia back then, but it was to destinations such as Indonesia and Thailand. India did not figure in most investors' definitions of "Asia" -- or at least not in any major way. The March transaction was the largest of a series of retrenchments, over several months, that saw Warburg reduce its 18.5% stake in Bharti to about 6%.
Warburg, which invested nearly $300 million in Bharti between 1999 and 2001, walked away with a profit of $800 million from selling two-thirds of its holdings. At Bharti's current share prices, Warburg's remaining 6% stake in the company is worth some $700 million, or more than twice what it originally invested. Bharti, which trails privately held Reliance Infocomm, had a sallow $100 million market capitalization when Warburg entered the scene. It now has a market capitalization of $15 billion. In 1999, Bharti had 104,000 subscribers. It now has 14 million.
So is the Bharti deal the tip of the iceberg or, alas, the entire iceberg? Two Warburg veterans at the center of the firm's activities in India from its inception in 1994 are emphatic that the Indian story is no one-deal wonder.
India has done well by Warburg, generating returns in "the mid-30s over 10 years," the firm's co-president, Charles R.
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