Investing in India? See Blackstone losses

By Michael Flaherty and Narayanan Somasundaram

HONG KONG/MUMBAI (Reuters) - Blackstone Group (BX.N) has invested more than $730 million in India since arriving three years ago, only to see much of it wiped out by the country's weakening economy and stock market plunge.

Blackstone's tough start in India is a cautionary tale to other Western private equity firms such as Kohlberg Kravis Roberts & Co. and Permira that are opening offices in Mumbai.

If newcomers weren't already wary of India's foreign investing rules, which forbid borrowing and set a purchase price range, certainly Blackstone's performance so far may give them pause. Entrenched firms, too, are likely to wait before pouncing.

Blackstone is not the only private equity firm watching its Indian investments take a hit, as Warburg Pincus can attest.

But unlike Warburg and other private equity players, Blackstone is relatively new to India. It hasn't been there long enough to sell stakes to balance losses with gains.

What's worse, it appears to have done most of its eight Indian deals at the very top of the market.

Blackstone says it remains a long term investor in India.

"Short-term capital market volatility does not alter our investment thesis nor does it impact our commitment to an investee company," Blackstone India head Akhil Gupta said in an email reply to questions about the portfolio.