Avendus Capital co-founders Kaushal Aggarwal (left), Ranu Vohra (centre) and Gaurav Deepak. The trio is now moulding the firm into a financial services outfit
Image: Aditi Tailang
It was a nippy September morning in 2004, when Ranu Vohra, on his way to the San Francisco airport to catch a flight home to Mumbai, broke into a cold sweat. It wasn’t how the investment banker had foreseen his day, and a call from Neeraj Gupta, CEO at Cymbal Corporation, left him baffled.
Vohra had parked himself at Cymbal’s headquarter at Fremont, California, for the previous three weeks, firming up the final contours of the company’s sale to Patni Computer Systems in India. By the time he finished work the previous evening, all the creases had been ironed out, or so he thought. It was a matter of time before the deal was inked and Avendus Capital, an investment bank Vohra, 46, had launched with Kaushal Aggarwal, 44, and Gaurav Deepak, 43, four years ago, would walk home with a generous fee.
The reverie was short-lived. On that call, Gupta told Vohra that the dynamics had changed, overnight. Patni now wanted 90 percent of Cymbal’s workforce to stay on after the acquisition, which the Cymbal management deemed a tough ask. “Instead of taking a peaceful flight home, I travelled with a question mark on my mind,” remembers Vohra of Avendus Capital’s big break, now sitting in the firm’s 6th-floor office at Mumbai’s Bandra-Kurla Complex.
The deal, which was brewing for six months, was crucial for Avendus.
In the 1990s, internet startups in the US had triggered a gold rush among venture capital (VC) firms. The dotcom bubble was growing bigger. In India, early birds such as MakeMyTrip, Contests2win, Indiaplaza and Firstandsecond had shown promise. Meanwhile, an Indian entrepreneur, Ashok Jain, sold his company IndiaWorld Communications Pvt Ltd to Satyam Infoway in 1999 for a whopping $125 million.
Vohra, Aggarwal and Gaurav, investment bankers with Communications Equity Associates, Kotak Mahindra and ICICI Bank respectively, were convinced that the startup wave would hit the Indian shores soon.
The trio launched Cool Startups, an online startup advisory firm modelled on Garage.com in the US, in January 2000, from a small office in Khar, Mumbai, after snaring about ₹2 crore in funding, led by Infinity Ventures.
“Here were three IITans [Vohra and Aggarwal were from IIT-Delhi, Gaurav from IIT-Kanpur] starting something. I think the money came because of that, our relationships and backgrounds. I don’t think there was anything extremely attractive about what we were doing,” admits Vohra. “The idea was to take it to a certain level and may be sell it to Garage.com or somebody else. It was crafted and planned to build and sell,” adds Aggarwal.
What they had not anticipated was that the bubble would burst so soon. It did, in March, leaving Cool Startups with little choice but to change tracks. In September, they morphed Cool Startups into Avendus Capital, an investment bank to advise software exporters and business process outsourcing companies.
Not that the pivot immediately helped. The firm was barely a blip on India’s investment banking radar dominated by homegrown giants such as Uday Kotak’s eponymous firm, Hemendra Kothari-led DSP Financial Consultants and Nimesh Kampani’s JM Financial. Then there were global heavyweights, such as Citi, Morgan Stanley, and Deutsche Bank. Until 2004, Avendus could muster only eight deals, the largest being worth $4 million.
The Cymbal deal, at $68 million, would not only shine a light on the firm’s ability to punch above its weight, but would also bring a financial breather.
Vohra eventually coerced Cymbal and Patni to make peace, although he does not disclose the final contours of the deal. “This deal gave us about two years’ runway. It was like light at the end of the tunnel,” he says.
On October 12, the day the deal was announced, the team at Avendus treated themselves to the first of many bottles of champagne they would pop in the years to come.
Over the next decade and a half, Avendus, which straddles sectors as diverse as digital, enterprise technology and services, consumer, financial services, health care, infrastructure and industrials, has evolved into a prolific mid-tier investment bank. The count stands at 138 mergers and acquisitions, with a cumulative deal value of $7.7 billion, and 164 private equity deals to the tune of $5.7 billion. Its offices in New York and London run global mandates in IT and BPO.
Some of its homegrown and global peers, with a finger on both private placements and capitals markets, have bigger numbers to boast. Avendus doesn’t deal in capital markets. Then, the firm is devoted to a different cause: Mid-market companies, which is a relatively uncontested sector, with smaller deal values and fees that don’t excite the bigwigs.
“We found that there was a big white space here. The mid-market companies of today could be the large-caps of tomorrow. The entrepreneurs needed advice, and there weren’t enough players offering quality advice. It presented an opportunity where we could deal with multiple clients rather than be dependent on industries where there were few participants, for example oil and gas, or banking,” says Vohra.
Kanwaljit Singh, managing partner at Fireside Ventures, says Avendus is good at spotting trends.
So, when VC firms started queuing up for Indian startups at the turn of the decade, Vohra, Aggarwal and Gaurav were among the first to spring into action, while some of the bigger names sat on the fence, watching.
“They started doing digital when it was not glamorous. They built relationships when it was hard to build relationships. And they have delivered. So, for a company, Avendus picking up a mandate is also a vote of confidence,” says Vinod Murali, managing partner at Alteria Capital.
Since 2011, the firm’s digital, media and technology vertical has cracked 59 fund raises and 11 mergers and acquisitions, worth about $3 billion. Among its clients are Quikr, Swiggy, Byju’s, BookMyShow, Firstcry and Lenskart. It is also credited with introducing investors such as Stripes Group, Valiant, Adveq, Chan Zuckerberg Initiative, TPG, Falcon Edge, Toutiao and Kinnevik to Indian startups.
“Buyers or sellers expect two things from investment banks—optimum value realisation and an assurance that the deal will succeed. Avendus has a closure rate of 70 percent, which is the highest in the country. We believe in adding value to the relationship,” says Gaurav.
Pranay Chulet, CEO of Quikr, agrees. “The thing that stands out about Avendus is its culture. It is more like a partner; things can go up or down, but it invests in relationships, keeping the best for its clients in mind. It has a practical world view. What matters in some of these transactions is speed, and it brings exactly that to the table.”
Today, the business spawns investment banking, wealth management, lending, and alternative asset management. A $250-million private equity fund under the Zodius Capital brand, which Avendus bought last November, is also in the works.
This firm is on course to close the current fiscal with “profits (before tax) in excess of ₹150 crore and revenues in excess of ₹500 crore.”
(This story appears in the 20 July, 2018 issue of Forbes India. To visit our Archives, click here.)