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Counter-intuitive approach reaps dividends for Mandhana

Counter-intuitive approach reaps dividends for Mandhana
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First Published: Thu, Jul 07 2011. 01 23 AM IST

Varied career: Mandhana’s stint with private equity (PE) began in 1997, as a director of the British government’s development finance institution, CDC Group.
Varied career: Mandhana’s stint with private equity (PE) began in 1997, as a director of the British government’s development finance institution, CDC Group.
Updated: Thu, Jul 07 2011. 01 23 AM IST
Mumbai:Satish Mandhana looks like the unassuming guy from next door, someone with a fairly humdrum job at that. What he is though is a high-power money manager, willing to back his hunches, unafraid to change course mid-stream, and ensure that errant companies are brought to heel in the interests of protecting the money that investors have chosen to entrust with him.
At 50, IDFC Private Equity Co. Ltd’s managing director has had a more varied career than most, which probably makes him ideally suited to manage as much as $1.3 billion (Rs5,785 crore) of clients’ money across a portfolio of about 30 companies, with interests in infrastructure, education and healthcare.
Varied career: Mandhana’s stint with private equity (PE) began in 1997, as a director of the British government’s development finance institution, CDC Group.
Born in Rajasthan and brought up in Delhi and Ranchi, this graduate of the Indian Institute of Technology (IIT), Roorkee, began his three-decade career on the shop floor of Eicher Motors Ltd in the national capital, supervising the assembly of light trucks in 1982. Mandhana’s propensity to make counter-intuitive shifts, which has led him to the top post at the country’s largest infrastructure private equity fund, was apparent in college.
“He changed from electrical to industrial engineering in the second year, which at that time was a very unusual move considering electrical engineering was ‘the thing’ to do 26 years ago,” says Ajay Bharadwaj, his classmate from IIT Roorkee and now managing director of Areva T&D India Ltd.
One of his IIT professors relates an anecdote that reflects an ability to see advantage where others saw adversity. In order to shield junior students from ragging, G.L. Asawa would let them spend the night at his home on campus. “I told Satish that he can come over, too, but he was like ‘No sir, I enjoy their company… they get me snacks, too’.”
He moved out of manufacturing when he left Eicher for SRF Finance Ltd, a non-banking financial company (NBFC), in 1992.
“Job-hopping was not that easy from a shop floor to managing tonnes of money,” recalls Mandhana. He had to cut his teeth on the job at a time when depositors, caught in the bull-run frenzy sparked by the late Harshad Mehta in 1991-92, overwhelmingly preferred the high returns from stocks to interest payouts from NBFCs. Mandhana’s primary task was to bring clients back to SRF Finance.
Armed with a finance management degree from the Faculty of Management Studies, Delhi, that he’d picked up by attending night classes, Mandhana designed a secured product, which he dubbed the Trust Money Scheme. Unlike earlier plans, this one assured depositors that there would be no withdrawal restrictions on their money. There was no restriction on the term either, unlike with deposits, which can’t be for shorter than six months.
“I went to the CEO and showed the product. He looked at me and said, ‘don’t waste my time, get a lawyer’s opinion’,” says Mandhana.
Mandhana went to Shardul Shroff, managing partner at law firm Amarchand and Mangaldas and Suresh A. Shroff and Co. with his blueprint. It got the green signal from no less a legal luminary than justice P.N. Bhagwati, who had just retired as the chief justice of India.
Amarchand Mangaldas was the first depositor. The scheme was a runaway success, picking up Rs45 crore in just one month in 1993.
“When one looks at the current law, one can see how visionary the whole process was in hindsight,” says Shroff, who’s known Mandhana for 15 years now. “He thought through the whole thing and we were ahead of the regulation even without a formal law for securitization.”
Mandhana’s stint with private equity (PE) began in 1997, as a director of the British government’s development finance institution, CDC Group. Early on, he learnt an important lesson—when to walk away from a deal.
CDC had agreed to invest in Owens Corning India, a joint venture between US-based Owens Corning Inc. and Mahindra and Mahindra Ltd. There was every compulsion to go through with the deal—it was the year-end and PE funds such as CDC needed to show investments that had been made.
“I didn’t disburse the money despite having the board’s approval because there was a last-minute change in the condition set out by me,” he said. Mandhana took a break from the hectic fund investment business in 2003 to join a paper maker. But his reputation as a tough fund manager meant that in 2006, he was fielding various job offers.
One was from Luis Miranda, then head of IDFC PE, in which his former fund CDC had invested. He picked that job over the standing offer from distressed asset investor Wilbur Ross to head its India fund.
The hiring took place in the space of four days, during which Mandhana had intense discussions with top IDFC executives ranging from chairman Rajiv Lall to managing director Vikram Limaye. At the end of this, Miranda hand-delivered the letter appointing him executive vice-president at his home in Delhi. When Miranda stepped down in November, Mandhana smoothly assumed leadership of the fund.
He also quit the boards of seven companies “to minimize travel time and provide more time to the core areas”.
At IDFC PE, Mandhana has been trying to give his people autonomy—letting go and giving others a chance is something Mandhana learnt during his stint at SRF Finance. But once a week, it’s mandatory for his team to meet and discuss every deal so that everybody knows what their colleagues are working on.
These meetings offer the chance of a fresh perspective on things and make for an office environment in which fear doesn’t stifle creativity. It’s important that a two-year-old associate gets to question a partner with 25 years of experience, he says. “People work fearlessly when a junior guy takes a view on a certain argument.”
Deals India, published jointly by Mint, Dow Jones Newswires and The Wall Street Journal, is a one stop destination for investment professionals following deal flow, deals news, private equity and venture capital activity in India.
shraddha.n@livemint.com
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First Published: Thu, Jul 07 2011. 01 23 AM IST