Notes from AVCJ Private Equity Conference – Day 2

Attended the AVCJ Private Equity Conference today as well

Here were the key takeaways:

Rajesh Srivastava,Chairman & MD Rabo Equity Advisors

  • Can vouch things are changing for the better in government
  • Earlier, has to answer “Why India” to foreign investors.Now this Q is no longer being asked

Srinath Srinivasan,CEO,Oman India Joint Investment Fund

  • Investee companies still to benefit from change in government
  • Benefits will trickle down in 18-24 months
  • Can confidently say that the heart of the government is in the right place

Mohit Ralhan,Managing Partner,TIW Private Equity

  • 2 fundamental changes in India
    • Real interest rates in India are now positive
    • Cash is balance sheets of large companies are greater than that in 2007
  • This can act as a spur to savings and capex cycle
  • Promoters don’t give illiquidity discount in India
  • Prefer share repurchases as an exit option

Ruby Arya,Vice-Chairman & Director,Milestone Capital Advisors

  • Real estate can give 2x returns not multibaggers
  • On the flip side, unlikely investors will lose money in real estate unlike equity
  • 14 Billion US $ has come in real estate via PE
  • Easier to exit in Real Estate

Sanjay Kukreja,MD,ChrysCapital

  • 47 exits since inception
  • Exits possible only in a few sectors where liquidity exists
    • Financial Services
    • Pharma
    • Business Services etc
  • Exits v difficult in other sectors such as
    • Power
    • Infra
    • Manufacturing etc

Ameera Shah,MD & CEO,Metropolis Healthcare

  • Most PE firms can’t add value in terms of business growth and profit margins
  • Can add value in
    • Corporate Governance
    • Data Analytics
  • Dislike the following about PE firms
    • Unable to state clearly how they are different from others
    • Unable to state clearly if their returns are coming at entrepreneur’s cost
    • Unwilling to put in the same effort/time for their smaller ticket investments as compared to their bigger investments

Pramod Bhasin,Founder & Vice-Chairman Genpact

  • PE firms can help in the following areas:
    • Board Formation
    • Compensation Practices
    • Strategy
    • Connecting with potential clients
  • Advice for PE firms
    • Get operational expertise
    • Stay in for the long term-don’t exit early

Sanjay Aga,Director,Mahindra Logistics

  • PE firms in India have little operational expertise
  • Hence unable to identify which companies/sectors can do well
  • Hence indulge in “herd like” momentum investiing

Nupur Garg,Regional Lead-PE Funds,IFC

  • Performance of Indian PE has been poor as compared to China
  • As per Cambridge Associates.
    • Over 10 year period,Indian PE funds have returned 12% Gross IRR while China returned 24% Gross IRR
    • Over 5 year period,Indian PE funds have returned 5% Gross IRR while China returned 25.5% Gross IRR
    • Over 3 year period,Indian PE funds have returned -2.9% Gross IRR while China returned 14% Gross IRR

Notes from AVCJ Private Equity Conference – Day 1

Attended the AVCJ Private Equity Conference yesterday

Here were the key takeaways:

Dr.Samiran Chakraborty,MD,Global Research,Standard Chartered

  • Rupee is undervalued by at least 10%
  • Growth recovery in India is 6-12 months away
  • Inflation will be lower next year-expect a 50-100 bps rate cut next year
  • Three stabilities-Macro,Economic and Currency-are coming together for India
  • 2015 is a year for India to lose-turnaround year for India

Sanjay Nayar,CEO,KKR India

  • 30$-40$ Billion of exits are pending in India
  • Reasons why PE in India are struggling
    • Poor Macro-Political uncertainty,currency volatility etc
    • Poor Micro-Management etc
    • Overpaid for assets
    • Much lesser influence on management
    • Lack of exits

Shankar Narayanan,MD,The Carlyle Group

  • In India, What you see is not what you get
  • Don’t invest in turnarounds as don’t believe toads can become princes
  • Two attributes to watch in an entreprenur
    • Drive/Hunger to succeed
    • Integrity
      • With respect to how he treats you as a partner
      • With respect to laws etc

Gopal Jain,Managing Partner,Gaja Capital

  • Dislike politicians.Don’t rely on them for doing the right thing
  • Focus on defensive demand, not discretionary demand
  • 90% of capital in PE in India is from global investors
  • Obsession with promoters is going away
  • Good promoters are in short supply and they know that

Renuka Ramnath,Founder & CEO,Multiples Alternate Asset Management

  • By 2020,India will be a $ 4 Trillion economy
  • The PE industry will be around 100 Billion $
  • Expect reverse flow of capital from listed to unlisted via delisting/demerger and M&A
  • Expect more of secondaries going forward

Peter Casey,Executive Chairman,Claddagh Resources

  • Commandments for Entrepreneurs
    • Get your loved ones on board
    • Listen to your inner voice and the messages the Universe is sending you
    • Don’t fear failure
    • Get a Mentor
    • Prepare to fail, because there is a good chance you will.Leave a little fuel in your tank
    • Do the right thing,don’t take shortcuts
  • Discipline is the horse that you have to ride

Niren Shah,MD,Norwest Venture Partners

  • Betting on Internet and Mobile in India
  • For an online classifieds investment,70% of ads now come from Mobile
  • Never sell anybody a lemon because they will not do business with you again

Pradeep Tagare,Director,Intel Capital India

  • Indian startup ecosystem is still evolving
  • Exits are almost non-existent
  • It takes luck to be a good VC in India