India Value Fund Advisors eyes services, technology deals

India Value Fund Advisors has a dry powder of $500 million from its latest fund and an additional $500 million of co-investment commitments from limited partners


India Value Fund Advisors founder Vishal Nevatia says the firm sees opportunities in mid-sized IT firms, start-ups and other digital businesses.
India Value Fund Advisors founder Vishal Nevatia says the firm sees opportunities in mid-sized IT firms, start-ups and other digital businesses.

Mumbai: Private equity (PE) firm India Value Fund Advisors (IVFA) is looking to move beyond the healthcare, financial services and consumer sectors and will add technology and services companies to its investment portfolio, said a top executive.

IVFA is currently investing from its fifth fund, Indium V, which was raised in July 2015 with a corpus of $700 million; the fund’s investments include deGustibus Hospitality Pvt. Ltd, which owns and operates restaurant brands Indigo and Indigo Deli, non-banking finance company Magma Fincorp Ltd, and seed company SeedWorks International Pvt. Ltd. The fund also invested in Atria Convergence, in which IVFA had invested previously.

The firm currently has a dry powder of $500 million from the latest fund and an additional $500 million of co-investment commitments from its limited partners. Investors in a private equity (PE) fund are called limited partners.

“If you look at the numbers, you will see that there are three-to-four sectors which have done well for PE in India. They are financial services, healthcare, consumer and IT/ITes (information technology-enabled services) or technology,” said Vishal Nevatia, founder and managing partner at IVFA.

According to data from Grant Thornton India Llp, in the 10-year period from 2005-2014, IT/ITeS was the biggest recipient of private equity funding, with $13 billion across 905 transactions.

“If you look at India’s export basket, it is now dominated by IT services and BPO (business process outsourcing). The sector has in the past 10 years grown significantly and it is only natural that investors would want to back an industry that is growing rapidly,” said Harish H.V., partner at Grant Thornton India.

The most represented sector in IVFA’s current portfolio is healthcare; the firm has invested in five firms from the sector. In December, it invested $60 million in Cloudnine Hospitals, a maternity and infant care-focused hospital chain. IVFA’s other healthcare investments are contract research and manufacturing services firm Syngene International Ltd, hospital chains Manipal Hospitals and Aster DM Healthcare, and medical equipment manufacturer Trivitron Healthcare.

Nevatia said the fund had missed out on investing in IT/ITeS.

“All these investments were happening between 2000 and 2005. Most of these companies needed business development support internationally. They were ideally looking for investors who could open doors for them with clients in US or Europe. And we didn’t have that capability as we were a domestic fund,” Nevatia said.

Funds which had the ability to help firms win customers globally were able to get those deals, and build a track record in the sector. This resulted in such funds becoming preferred partners for firms when new deals came up, he added.

However, IVFA is now training its sights on the sector. “We think it’s time we tried and built capability in this sector. The kind of firms that are there in the industry are not necessarily looking for business development support. Even if they are servicing international markets, they have a business development team, they are mature businesses. The kind of value-add these companies need, we can provide,” said Nevatia.

He said IVFA is looking to build a team that will focus on technology products and services. “We are looking to invite a senior person to join the firm as partner.” he said.

IVFA sees opportunities in mid-sized IT firms, start-ups and other digital businesses, and companies operating in hi-tech areas such as cloud computing and analytics.

“We think there is opportunity in mid-sized IT firms, where either there are some management challenges or where there could be some consolidation opportunity. There could also be a lot of opportunity in the KPO (knowledge process outsourcing) space.”

In the two-to-four year horizon, the firm sees the business models of e-commerce and digital businesses stabilizing, making them attractive to PE investors. “Everyone is trying to build a sustainable P&L. Some of them will be able to figure it out, some of them will not. Those that do will become the right opportunity for us,” Nevatia said. New-age businesses such as cloud computing and big data, too, will become mature in that time frame, he added.

Sponsored Links by Revcontent