Warburg dealmaker spots opportunities on Jakarta roadside

From Warbug Pincus homepage

Warburg Pincus’s investment in the first billion-dollar Indonesian tech startup began with an American executive noticing green motorcycle helmets on the roads of Jakarta.

Jeffrey Perlman, the buyout firm’s Southeast Asia head, had been traveling regularly to the Indonesian capital to oversee the firm’s joint venture with mall operator PT Nirvana Development when he started to see more and more motorbike riders wearing green headgear emblazoned with the Go-Jek logo. He soon set up a meeting with Nadiem Makarim, a co-founder of the on-demand ride provider, and in August last year his firm participated in Go-Jek’s $550 million financing round.

The path to the Go-Jek investment — the largest-ever funding round for an Indonesian startup — reflects Warburg Pincus’s broader strategy in Asia. After more than two decades of dealmaking in China and India, the U.S. private equity firm, which closed a $13.4 billion global fund in 2015, has turned its attention to Southeast Asia with an initial focus on entrepreneurs in Indonesia, Vietnam and Singapore.

“We have seen how the businesses have evolved in China and India, and want to use that experience and knowledge as we see a lot of commonality in the growth of the companies in Southeast Asia,” Perlman said in an interview in Singapore last week. “Capital is a commodity these days, which is why it’s so important to be able to demonstrate the value we can bring to entrepreneurs.”

Warburg Pincus has invested more than $60 billion across more than 40 countries, according to its website.

Lessons Learned

The New York-based firm had few investments in Southeast Asia before 2013. Since then, it has embarked on a flurry of activity, and in July it opened a Singapore office to further grow across the region. Warburg now has six investment professionals based in Singapore, with local consultants on the ground in other Southeast Asian countries.

With Asia increasingly becoming a big part of the firm’s global strategy, accounting for about 35 percent of total new investment activity, Perlman said he wants to apply lessons learned investing in China and India to Southeast Asia as the firm starts to expand its attention to Malaysia, Thailand and the Philippines.

Warburg’s investment in Chinese e-commerce operator 58.com illustrates how the firm has used experience in one place to find and execute deals in another, he said. With the firm invested in the so-called “Craigslist of China,” 58.com further developed its website of jobs and rentals offerings, and in 2013 it listed in New York. Working with the Chinese company gave Warburg the expertise to source its 2012 investment in Quikr India Pvt, which has a similar business model, he said.

In addition, before Warburg Pincus bought a stake in Go-Jek, it invested in Ucar Inc., one of China’s largest chauffeured car services.

Warburg Pincus also sees investment opportunities in the health-care and energy sectors in the region, he said. It favors industries like consumer retail, property, financial technology, according to Perlman, who joined the firm in 2006 in New York before relocating to Asia.

The firm’s first deal in Vietnam was in 2013, when it agreed to invest as much as $325 million in the country’s biggest shopping mall owner, Vingroup JSC, and its retail property arm. In November, it formed a hospitality joint venture with Vietnamese fund manager VinaCapital Group Ltd. and led a group that agreed to buy ARA Asset Management Ltd. in a deal valuing the Singapore company at S$1.78 billion ($1.3 billion).

Asia Logistics

Warburg Pincus, which manages more than $40 billion of assets, closed a $2 billion China fund in 2016, its website shows. In the world’s second-biggest economy, it has invested in companies including ANE Logistics, E-Shang Redwood and ZTO Express Cayman Inc. In India, it owns stakes in companies including Ecom Express, which provides logistics services to local e-commerce firms, as well as property developer Piramal Realty Pvt.

For Warburg Pincus, founded in 1966, logistics will remain a key focus, Perlman said.

The firm has invested across the entire logistics chain, from warehouses to parcel delivery, and sees the sector underpinning growth in all other industries. Warburg Pincus is also among shortlisted bidders for Singapore-based warehouse owner Global Logistic Properties Ltd., people with knowledge of the matter said last month.

“Logistics isn’t sexy — nobody really likes to talk about it,” said Perlman, who declined to comment on any interest in GLP. “We think it is one of the most attractive sectors.”

Also Read: Warburg Pincus, VinaCapital in $300m hospitality JV, targeting SE Asia

SEA’s attractiveness for private equity is on the rise: Jeffrey Perlman, Warburg Pincus