Playing for keeps: The investment strategy of TPG Capital

In 2005, TPG Capital, one of the largest private equity (PE) firms in the world, decided to invest in financial services in India, a sector in which it had developed global expertise for over a decade. It had entered the country in 2004 with an investment in a pharmaceutical firm, but wanted a piece of the fast-growing financial services sector. But, first, it had to choose the right company, one with a sustainable business that could be scaled up quickly.

That was quite easily done.

From the beginning, the PE firm was clear about its interest in the Shriram Group. With its core business in commercial vehicle financing (through Shriram Transport Finance Company Ltd), the Chennai-headquartered conglomerate had a near monopoly in this under-served market. But R Thyagarajan, the founder-chairman of Shriram Group, was reluctant to take on an international investor. His primary concern: What could a US investor bring to the table for a local business like his?

“It took me six months to develop an equation with him (Thyagarajan). He was hesitant. He felt he had a special platform, one that American investors wouldn’t appreciate,” says 48-year-old Puneet Bhatia, managing director and country head of TPG Capital in India. But they persisted and, in February 2006, the firm invested a little less than $100 million in Shriram Transport. It was TPG’s first investment in an Indian financial services company and is symbolic of its long-term strategy in the country.

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