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“Trumpeting EBITDA is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid upfront, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service. In the following nine years, compensation would be a “non-cash” expense- a reduction of a pre paid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?”-wrote Warren Buffett

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PSU Banks Zindabad

Must be real bad when even the foreigners say NO to debt issues of Reliance Communications & Lodha builders. PSU Banks zindabad.

— R. Balakrishnan (@BalakrishnanR) December 3, 2014

Conferences

Notes from AVCJ Private Equity Conference – Day 2

Post author By Raoji
Post date December 3, 2014
5 Comments on 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

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