Mumbai: Private equity (PE) investor India Value Fund Advisors Pvt. Ltd, formerly GW Capital Pvt. Ltd, specializes in “growth buyouts”. The Mumbai-based mid-sized firm prefers a majority stake in most of its investee companies—people familiar with the company’s holdings say it owns 51% or more in these, but the exact numbers could not be confirmed. It typically invests in small and medium-sized enterprises. The firm’s CEO Vishal Nevatia says majority ownership is necessary because such firms require “significant?help” after investment.
As a strategy, this is not unusual in mature PE markets, such as the US and Europe, but in India, it is fairly novel. UK-based Actis Capital Llp. and India Value Fund are among the first to have used this strategy here. New York-headquartered Blackstone Group Lp. has also executed deals along similar lines recently, notably those involving Intelenet Global Services Pvt. Ltd and Gokaldas Exports Ltd.
India Value Fund is backed by Gary Wendt, former chairman and CEO of General Electric Capital Corp., Indian mortgage major Housing Development Finance Corp. Ltd and Mumbai-based Ambit Corporate Finance Pvt. Ltd. It is currently investing from a $400 million (Rs1,572 crore) fund, its third so far. Current portfolio companies include Music Broadcast Pvt. Ltd (Radio City FM) and Centurion Bank of Punjab; past investments include Shringar Cinemas Ltd and Biocon India Ltd. Nevatia spoke to Mint about why the company is big on growth buyouts. Edited excerpts:
How many investments have you made so far from Fund III? What’s the status of Fund I and II?
We started investing from Fund III in January. V-Link Travel Solutions, which runs a private taxi service in Mumbai under the brand name Meru, is one of the investments. Fund I, which had a Rs150 crore corpus, has been fully exited. We completely invested Fund II, (with a) $175 million corpus, last December. Across our three funds, we have invested in 14 companies.
Has anything changed operationally since you renamed the company as India Value Fund?
The fund was always called India Value Fund. GW Capital was the name of the fund management firm. Gary Wendt remains our chairman and an investor. The strategy remains the same as put down in 1999, when we started: to invest in companies where we can contribute in bringing about business transformation.
Transforming businesses: India Value Fund CEO Vishal Nevatia.
What’s the typical target investee company for you?
Usually, companies that are already turning in annual revenues of Rs100-300 crore and want to scale up to Rs1,000 crore-plus. We are probably one of two-three PE investors in this market today who have the ability to engage very deeply with investee companies. Partners work full-time alongside the management of most of our companies.
How do you allocate resources internally to enable this?
The firm’s core team of 14 professionals is split evenly between an investment team and a business management team. The seven on the investment team are responsible only for sourcing, negotiating, closing and exiting deals. The seven on the business management side take over after the investment has been made. These people have prior operating experience in various industries and help the company transition from medium to large size.
How long does it take you to close a deal?
Anywhere between four weeks to a year. One deal took four years to close. When we started out in 1999, it was tougher. The average time it took was one to two years. Now it is much less.
How many of your deals are sourced through investment bankers?
The majority of the deal-flow we see is through investment bankers. However, in terms of conversion rates, the majority of deals closed have been sourced through proprietary channels.