Norwest bets on India’s value-added manufacturing with $4-billion fund | Company News
US-based Norwest, a multi-stage investment firm, is betting big on “value-added manufacturing” in India. This came even as the firm announced the closure of a new $4 billion fund — its largest ever, covering India, the US and Israel, on Thursday.
Speaking on its investment strategy in India, Niren Shah, managing director (MD) and head of Norwest India, said: “Within India, we do a fair amount of growth capital with investment of $30-150 million. And, the sweet spot is around $75 million. We have been looking at which area will outperform — and one such area we have identified is value-added manufacturing and manufacturing services to support it.”
Shah says historically a lot of people came to India for cost and routine manufacturing but that is changing toward making quality products.
“Indian products have come of age and the country is making world-class products,” he says.
Shah adds that supply chains do not want to be only with China. “Right now, we are seeing Indian companies striking long-term agreements of five to eight years with global companies who say we will be procuring from India because of quality.”
Another factor that helped manufacturing is government policy support, such as goods and services tax (GST) cuts.
“In areas, for instance, of precision components or engineering, companies are offering high return on capital employed (RoCE) and earnings before interest taxes, depreciation and amortisation (Ebitda) margins on businesses which have been built over time but they are now hitting critical mass.”
Shah says many of these family businesses have taken a decade moving slowly from making one component to another.
“This has helped them in getting comfortable handling multiple original equipment manufacturers (OEMs), but they are still in the early stages. They now want to expand business faster, bring in new talent, build new manufacturing facilities and also ask for help to talk to potential OEMs in the US,” says Shah.
Norwest’s second big bet is heathcare. Shah says that currently hospitals built are not even 20-30 per cent of the overall requirements as India ages. “And, artificial intelligence (AI) has no impact on this business as human beings have taken care of it,” he says.
As much as 50 per cent of Norwest’s investments are in companies run by families where multiple members are involved and it comes in when it is already profitable.
“They want $40 million to $100 million, and in four years, they want help in taking their company public. And, that is where we are strong” says Shah.
Norwest starts looking at an exit after five to seven years where they have put in growth capital.
But is Shah making big bets in AI? On investing in large language model (LLM) companies in the country, which are in the forefront, Shah says while he is not avoiding it, there doesn’t seem to be an appropriate opportunity.
But it has invested in companies like Resolve.ai — an AI-based debt collection platform. And, it is looking at companies in this space from the venture capital perspective, which means smaller cheques. “The focus on AI and deeptech for Norwest will be through venture capital,” he says. And, in this space, Norwest invests from $1 million to even $25 million.
Source: www.business-standard.com