Mumbai: The next few months we will see opportunities that somebody told me is seen once in several lifetimes. Most of us will never see this in our lifetime or in our careers again,” says Ramesh Venkat, chief executive officer of Reliance Equity Advisors, a Reliance-Anil Dhirubhai Ambani Group (R-Adag) company that is the latest entrant in the private equity (PE) business.
Venkat was earlier involved in raising funds abroad and in India for R-Adag. Between meetings at R-Adag’s group headquarters in Ballard Estate and a more modest setting in Nariman Point, Venkat says in an interview why entering the PE space now was the best thing that could have happened to the company. Edited excerpts:
Reliance Equity is not the only thing you are looking at in your current position?
I joined the group with a mandate to manage the finance and treasury activities of the group. I’ve been doing this for the past three-and-a-half years to four years
from the time the group was split and the Reliance-ADA Group was formed. A few months back, I was mandated to recruit the private equity team and fine tune the strategy. And that’s my current focus. Obviously, with the current financial crisis, I am again involved in the finance and treasury side, but this is temporary.
Strategic moves: Chief executive officer of Reliance Equity Advisors Ramesh Venkat says the company is open to the idea of investing in listed firms, but from a PE perspective and not from a short-term view. Ashesh Shah / Mint
It is touted as a $800 million-1 billion (Rs3,960-4,950 crore) fund? Is there a delay in floating the fund?
Those are numbers that we didn’t really talk about. We don’t have a definitive number in mind or fund targets. We want to place funds in two or three phases. A couple of months back, we initiated discussions with a closed group of potential investors known to this group (R-Adag) and who have some kind of prior relationship and have dealt with the group. So, we will raise money from this group somewhere in the January-March quarter of next year and then we will go out in the market. Yes, the timeline has shifted a bit, but not in a big way.
What is the profile of the group?
These are large institutional investors—couple of sovereign investors from the Middle East, some are from Europe and some the US. There is a universe of probably 1,000 investors. These are investors who have done business with us.
...and includes investors like George Soros?
Names of that kind, a very small set of people with whom we have initiated discussion about six-eight weeks back. But recent events that happened have kind of put this plan a bit on the slow burner. So, we are in the process of resuming these discussions. Realistically, I think we need to wait for relative stability in the market. A more realistic time frame looks like the first quarter of next calendar year
Why not sooner?
Investor psychology is such that (with) what happened in the last two weeks, it is difficult for any investor to quickly commit large amounts (of investment). We have to wait for sentiments to change a bit.
It is not just correcting the valuations down. Execution risk has dramatically changed. Financing risk has gone up dramatically.
The PE funding is only a small part of the total. All of that funding will have to be revisited (now), in every single case. In many cases timelines have to be reworked.
Therefore, while this is a dramatic never-before opportunity in recent times, it is not something to rush in(to).
How are the proprietary investments (such as yatra.com, and Gini and Joni Apparel) of R-Adag faring and will those be shifted to Reliance Equity Advisors?
From a business perspective, they are faring okay. We don’t see any major crisis in any of them. We have to revisit the exit plans because their plans to go public have also changed. They will not be physically shifted into this fund, but we will take over the management of those investments.
Will the R-Adag companies and promoters investing in this fund as well?
Yes, approximately 20%. Reliance-Adag will be the anchor investor.
Should PE funds invest in listed companies? Why do the investors need PE funds then?
We are absolutely open to the idea of investing in listed companies, but from a PE perspective and not from a short-term view.
This is for two reasons: Firstly, the universe of unlisted companies is not that large. We will like to look at listed space and that is a reinforced view because valuations have plummeted and they are realistic. Secondly, listed companies will not have access to public money for a long time.
A majority of investors who invest in PE firms do so because either they don’t have the time or expertise or manpower to invest in multiple markets.
Have expectations of promoters (companies seeking PE) become more realistic in the valuations they expect?
It takes time for private valuations to get aligned to public valuations. Clearly, expectations are lower but not necessarily to the extent that there is a meeting of minds.
Again, it depends on the sector and the strength of the player.