Alpha Ideas

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

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