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private Equity
Hoping For An Encore
As PE comes of age in India, experienced managers are venturing out independently. Backed by a reputation for delivering, they have raised a sizeable corpus in a tough market. Here is a preview of the second acts of these investors
private Equity
A number of private equity investors are stuck in the middle, struggling to find profitable exits
Kripa Mahalingam
private Equity
Is Private Equity the light at the end of the tunnel or the headlights of an oncoming train?
Srivatsa Krishna

Photograph by Soumik Kar

Ajay Relan
Founder & managing partner, CX Partners

  • Last assignment Managing director and India head of Citi Venture Capital International (CVCI)
  • Size of fund $515 million
  • Investee companies Monnet Ispat, Matrix Cellular, Thyrocare Technologies, KPIT Cummins and Sutures India

On September 15, 2008, Ajay Relan was in Hong Kong for a Monday morning meeting with a gentleman named Brock Williams. Nothing remarkable about this except that Williams was employed with a firm called Lehman Brothers. It was an awkward occasion, with Lehman having filed for Chapter 11 bankruptcy protection barely a few hours earlier. “He was quite surprised to see me at a time like this. We just looked at each other — it was not exactly the best moment for a meeting,” Relan recalls with a laugh. Finally, they decided to talk a little about the future of the team at Lehman.

At that time, Relan was meeting investors to raise capital ($500 million) for his debut fund soon after leaving his position as managing director of Citi Venture Capital International (CVCI) in India. His stint at CVCI had been a successful one. Under his watch, investments in companies like i-flex, Daksh eServices and Progeon yielded very healthy returns. By the time CVCI sold its 41% holding in i-flex to Oracle in 2005, its investment of barely $1 million had rocketed to $593 million. In Progeon, CVCI put in $20 million for a 20% holding, which was eventually sold to Infosys for $115 million. It is precisely this kind of track record that Relan looks to emulate at his firm CX Partners.

In the midst of the global financial crisis, he closed his fund with a corpus of $515 million and has invested in Monnet Ispat, Matrix Cellular, Thyrocare Technologies, KPIT Cummins and Sutures India. “We have deployed 60% of our corpus and, by July, we should be at 80%. This was quite inconceivable in 2008,” says Relan. He plans to raise a similar amount during the last quarter of 2013. “Our approach now is to acquire larger stakes for $30-50 million,” he says.

Photograph by Tushar Mane

Renuka Ramnath
Founder, MD & CEO, Multiples Alternate Asset Management

  • Last assignment MD & CEO, ICICI Venture
  • Size of fund $425 million
  • Investee companies Sara Sae, Indian Energy Exchange, Cholamandalam Investment & Finance, South Indian Bank, PVR Cinemas, Mogae Media

Posing for pictures in her office in central Mumbai, Renuka Ramnath appears cheerfully relaxed. “I can smile quite easily since I am not on the road raising funds,” she says with a laugh. After an impressive stint as managing director and CEO at ICICI Venture and now running her own PE fund, she can afford to. “When I entered the business in 2001, there were a lot of people in ICICI who were not completely convinced. They thought I would be better off at the bank,” she says.

As it turns out, she proved them wrong, and she’s at it again. Her firm, Multiples Alternate Asset Management, manages $425 million and has invested in Sara Sae, Indian Energy Exchange, Cholamandalam Investment & Finance and South Indian Bank. These include both PIPE (Private Investment in Public Equity) and non-PIPE deals. “Being a smaller entity allows us to look at businesses that are typically under the radar,” she says.

Ramnath set up Multiples (a name suggested by her guru Muralidhara Swamigal) soon after quitting ICICI Venture in April 2009. Her eight-year stint was marked by notable investments such as Air Deccan, InfoEdge India, Pantaloon Retail, Metropolis Healthcare, PVR Cinemas and VA Tech Wabag.

Shaking off that legacy and starting afresh posed its own challenges. “Today, my investors ask questions related to our ability in raising money, getting good people to join us and clinching a deal in the market. The critical thing in this business is to garner trust and credibility,” she explains. That she has her fair share can be inferred through the investors in her fund, which includes global investors such as Canada Pension Plan Investment Board and the Government of Kuwait’s Public Institution for Social Security, and Indian names like Andhra Bank, Punjab National Bank and Life Insurance Corporation. While she invested in PVR Cinemas during her ICICI Venture days when the multiplex chain had only two properties, Ramnath has again chosen to fund PVR’s buyout of Cinemax at Multiples. Proving a point, perhaps?

Photograph by Bhupinder Singh

Subbu Subramaniam
Founder & managing partner, M Cap Fund Advisors

  • Last assignment Partner, Barings Private Equity Partners
  • Size of fund $60 million
  • Investee companies Jyothy Laboratories, City Union Bank, Regen Powertech (as a co-investor)

It has been a challenging journey for Subbu Subramaniam, and he makes no bones about it. “We were initially looking to raise $200-250 million,” he says, referring to the time he started M Cap Fund Advisors in March 2010. To date, he has raised $60 million of which $25 million has been deployed.

Subramaniam, who spent over 12 years at Baring Private Equity, is candid about his early days at M Cap. “There was a higher perceived risk about being a first-time fund when we started in March 2010. It was a difficult situation to be in,” he recalls. He quickly adjusted to his new role, though, and jocularly points to what a big difference it is now. “Earlier, having invested in controlling stakes in companies, I would conduct shareholder meetings. Today, with significant minority stakes, I attend these meetings as a shareholder,” says Subramaniam, who was vice-chairman and member of the board at Mphasis, a Baring investee company, which eventually yielded the PE firm a multi-bagger return.

Sectors like financial services (City Union Bank), clean energy (a co-investment with IDFC in Regen Powertech) and IT/ITES find favour with Subramaniam. “We will not invest in areas like education and healthcare since we do not understand them,” he says. Subramaniam is upbeat about M Cap’s investment in Jyothy Laboratories made in May 2011. “The company will see serious growth after the Henkel acquisition,” he says. Interestingly, Baring had invested in Jyothy under his stewardship in early 2000, exiting two-and-a-half years later with more than a two-fold return.

The investment landscape for private equity has changed considerably, he admits. “Between 1997 and 2002, all of us had a home run with returns of 10X and 20X. Today, the day of reckoning has come as far as returns are concerned,” he says. “It needs to be understood that private equity is illiquid, long-term and part of an alternate asset class.”

So, what does M Cap really mean? “It is short for management capabilities. We believe in participating to convert that into market cap,” says Subramaniam.

File Photo

Jayanta Banerjee
Managing partner, ASK Pravi Capital Advisors

  • Last assignment President, ICICI Venture
  • Size of fund $40 million
  • Investee companies Investments in consumer and healthcare sectors expected to be announced

Jayanta Banerjee quit ICICI Venture in April 2010 after an eight-year stint to start Pravi Capital with former colleagues Anand Vyas and Sunay Mathure. In September the following year, Pravi (meaning “pure” in Bosnian) formed a joint venture with the ASK group. Banerjee is now managing partner at the new entity, ASK Pravi Capital Advisors.

The firm plans to raise Rs 900 crore from domestic and global investors. To date, it has managed to raise half of its targeted quota for the domestic fund — Rs 225 crore — and aims to raise the other half later this year with another $75-80 million from overseas investors. “We plan to do about 12 deals in four years. These will be in the range of Rs 25 crore to Rs 75 crore and would involve companies having a turnover of Rs 50-100 crore,” says Banerjee.

Quite clearly, he knows the limitations of being a small fund. “We are obviously not in competition with large funds like Warburg Pincus and TPG. Our aim is to build our investee companies for a potential stake sale to larger players,” he points out. His past experience at ICICI Venture where he was involved in transactions in sectors like textiles, construction, aviation, infrastructure and logistics, will no doubt come in handy. Besides, he was closely involved in fund raising for the $810 million India Advantage Fund Series 2, which had a focus on buyouts and late-stage growth capital.

Banerjee is clear about picking up at least 26% in investee companies. “More than a legal filter, we believe this is a psychological filter. It allows us to choose entrepreneurs who are seeking a partner and not a mere investor,” he says, adding that many of those companies will be ready to go public only after 10 years. There have been more than a few hard lessons learnt in fund raising. “In retrospect, we should have realised that just because international LPs [Limited Partners] say good things about you does not mean they will back their words with cheques. Fund raising can become a chicken and egg situation where one LP waits for another to take the lead,” Banerjee sums up.

private Equity
A number of private equity investors are stuck in the middle, struggling to find profitable exits
Kripa Mahalingam
private Equity
Is Private Equity the light at the end of the tunnel or the headlights of an oncoming train?
Srivatsa Krishna
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