Mumbai: The four founding partners of Sequoia Capital India Advisors Pvt. Ltd, the venture capital (VC) and private equity (PE) firm that invested in companies such as SKS Microfinance Ltd and Paras Pharmaceuticals Ltd, will soon quit the firm and start a fund of their own to invest in publicly traded companies.
Sumir Chadha, K.P. Balaraj, S.K. Jain and Sandeep Singhal will remain on the board of the 20 portfolio companies of Sequoia till it exits these investments, Chadha said.
He added that while the four would benefit from any profit made in this period, they would, however, no longer manage the day-to-day affairs of the fund. Sequoia manages around $1.4 billion (Rs6,370 crore).
Chadha and Balaraj founded WestBridge Capital Partners in 2000. The company was acquired by Silicon Valley VC firm Sequoia Capital in 2006, when it entered the Indian market. Since then Sequoia has made VC investments, some other PE investments, and some investments in publicly-traded companies.
The four fund managers will now raise a fund for investing exclusively in publicly-listed companies, Chadha said. “There are very few quality investors in the public market. Also, there is a lot of opportunity in the small and mid-cap space; there are 9,000 listed companies in India,” he added.
Several PE firms operating in India have found it advantageous to invest in publicly-traded firms (through so-called PIPE deals, where PIPE stands for private investments in public equity), but there are few PE firms exclusively focused on public equity.
Among them are Nalanda Capital, founded by former Warburg Pincus India managing director Pulak Prasad and ChrysCapital Investment Advisors, which has evolved from a VC firm to a company that only invests in public equity.
Ashish Dhawan, founder of ChrysCapital, was in the same class at Harvard Business School as Chadha and Balaraj, and said the two are good at what they do. “Raising such a fund is appropriate for India because it gives much more flexibility to invest,” he added.
Chadha said it was unlikely that the new company would compete with Sequoia because 90% of the latter’s investments have been in the PE space.
The founder of a PE fund (he recently exited a global fund to start his own), who did not want to be identified, said Chadha and the others would find it easy to raise a fund because they have successfully raised several funds together and will be able to attract investors.
Sequoia’s funds will now be managed by Abhay Pandey, Shailendra Singh, Mohit Bhatnagar, V.T. Bharadwaj and G.V. Ravishankar.