Designation: Founder, Multiples Alternate Asset Management Pvt Ltd
Career: Crompton Greaves; ICICI Bank Ltd and ICICI Venture; Multiples Alternate Asset Management
Education: BE, Veermata Jijabai Technological Institute, Mumbai; MBA, University of Mumbai; Advanced Management Program, Harvard Business School
Interests: Home design and improvement, cooking, listening to music
Q. Where is private equity as an asset class headed?
Private equity will emerge as big and as vital as commercial banking in the country. For someone looking for long-term risk capital, the first thought will be to go to a PE investor and not to the capital markets. There is a reason for this shift. Twenty years ago, banks were providing risk capital. Today, they don’t offer a single rupee of risk capital. They are focussed on commercial banking and work selectively with long-term loans.
Further, the markets only offer debt products to corporates that are backed by good ratings as well as sound securitisation and documentation. Therefore, long-term risk capital will become the domain of PE investors and only significantly mature companies will go to the capital markets.
Also, the reliance on capital markets has reduced. And it’s not because promoters have started thinking differently; capital markets have simply shut their doors on mid-cap companies. This transition is making PE funds extremely crucial. You will see unlisted companies with revenues of as much as Rs 4,000 crore becoming available for PE investments.
Q. What led to the launch of your second fund—this year when limited partners (LP) were not bullish on India—amidst such dampened sentiments?
Waiting for the so-called right time is not in my DNA at all. In fact, when everything is confused and cluttered is the time I feel I should launch. Then, when things settle, I am ready. If I launch when everything has played out, I would have missed the bus. One has to be a little ahead [of others] in this industry.
We are tapping our existing investors for the new fund and we will broaden the investor base once we have commitments from them. Nothing will change in terms of our investment thesis: Our ticket size may increase to Rs 200-250 crore from an average of Rs 150 crore at present. I am hopeful that more companies will need capital for expansion, which will give us opportunities for more primary investments.
Q. How do you plan to convince your LPs when 65 percent of PE transactions in India have not yielded returns?
I don’t belong to the school which believes that in a portfolio of 12 investments, three or four will provide returns to the fund, three or four will become duds and three or four will be average. For me, it is important that almost all, if not all, investments do well.
Some of them may be stars: 10 to 20 percent of the portfolio could return five times the investment made in those companies. But all investments must give returns in the range of 18 to 30 percent. There could be a small portion that gives returns of 60 to 70 percent. This collectively gives a portfolio an average return of 23 to 30 percent. For me, that is a very well performing fund. If they have an approach that some investments will become lemons, they will take risks they don’t understand. Clearly our investors have not given us money to bet with their capital. We need to take informed decisions.
Q. Where are the next big avenues of opportunities and returns for PE investors?
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(This story appears in the 13 June, 2014 issue of Forbes India. To visit our Archives, click here.)
Wow!! she wants a business model like warburg pincus.. all across the board... Nice thought processon Jun 18, 2014