Capital Ideas transcript: Inside the rejig at Avendus, with Ranu Vohra
Avendus Capital has recently announced new roles for all its three founders. Co-founder and executive chairperson Ranu Vohra joins us on the Capital Ideas podcast to give us a behind-the-scenes look at what the firm is placing big bets on; read an edited interview transcript here
We have several other businesses that have become meaningful; our alternative asset management business is one, and now, we run the largest hedge fund in the country. Our wealth management business manages more than 1,200 families' monies, and with over Rs 30,000 crores in our credit business, we have been impactful in in our own way in the mid market ecosystem. And a lot of our clients have been associated with us across businesses, so it was time that we said how do we offer services as one Avendus to our clients? Likewise, for our leadership, how do we collaborate? We have demarcated clear responsibilities. Kaushal takes over as the CEO of the credit business and Gaurav has several areas to look at and he becomes responsible for investment banking and other businesses as the CEO.
It has taken us almost 15 years to get investment banking to a point where we can say it is a scaled up business. Similarly, in other businesses, things moved a lot faster, because we had capital, the right leadership, the right processes. It depends on what kind of vintage you have for the business. Are you fighting against the tailwind or a headwind? If it's a tailwind, have you been able to put all the levers in place for the business to grow and manage your risk? For example, if you've not done the risk management in an area like credit business—if you have been extra generous two years ago in doling out credit to the market, you would be in a different situation today. The biggest enemy of scaling up and compounding is if you have to take a step back. As it is, the markets and macro environment throws enough challenges at us.
I see a business as visible or relevant or dominant. Dominant is where we are among the first or the second in terms of mindshare. Relevant is when we are among the top five, and visible is where we exist in the business, but we don't have a real calling card in that manner. It's a journey for each of the businesses to get to that point of relevance and dominance, where then it can become interesting enough.
So, are the challenges different than what we saw earlier? No, as I said, these things were always the same. I think what has happened is that over the last 15 years, we've had varying macro environments. And it's not been easy. For instance, you recall the period from 2009 until 2014, which was without any tailwind. And then there was a period post 2017, where international investors had no liking for India. Whoever you would go to ask him for money for your funds would have a view on India, which was difficult to defend.
As an investor, I want to first look at public universe in an area, but you will find that in public markets there are certain bets you just can't make. You have to make them in the private space, and hence, the question of demand-supply. The commission will reflect that. For instance, education or health tech today are reasonably hot areas of the market. In most of the digital and tech businesses, there is a very sharp drop in value from the leader to the second to the third today. As a result, in certain industries, it is okay to be the 15th player, but in this case, God help you if you are not in the top three companies.
I would say public equities are also expensive, but for a different reason. What is a bubble today? Everything to me sounds a little virtual, a bit of a bubble, because there is so much liquidity thrown in there, it is impossible for us to see what is working and what's not. So effectively, you could see an enormous amount of volatility in the market next year. But overall, given the way things are, I think the market has been way too optimistic. If you if you were to very simply lay out the earnings growth and the corresponding valuations, it doesn't make sense.
In credit, we have gone back to the drawing board and said, this is the new world, which company is doing what now? How do we help companies within our portfolio currently? And what would we do with incremental lending? At the same time, we boosted our cash results. In a business where cash reserves are important, ours are substantial enough to ride any kind of volatility in the markets, or any moratoriums that might be extended. We have a portfolio with zero delinquencies; with all our lenders, we have been proactive in saying, we should give your money back.
In asset management, we have bolstered the core equity portfolio product, we've come up with an absolute return plan that has garnered a significant amount of investment already. We are experimenting all the time and it's been fun to see that disruption.