Mumbai: Having deployed over half the corpus of its second fund, Renuka Ramnath-led Multiples Alternate Asset Management Pvt. Ltd will begin work on raising its third fund next year, a senior company executive said.
“Our second fund is already 55% invested and over the course of this financial year, we expect to invest around another 20% of the corpus. We could start looking at raising our next fund sometime early next calendar year," said Prakash Nene, managing director and chief financial officer at Multiples.
Multiples, which raised its first fund of $405 million in 2011, last year achieved the final close of its second fund of $700 million (including a $150 million co-investment pool).
Through its second fund, the private equity investor has deployed capital in companies such as Arvind Fashions Ltd, the brands business of textile company Arvind Ltd; pharma firm Encube Ethicals Ltd; human resources technology and solutions company PeopleStrong HR Services Pvt. Ltd and fantasy sports platform Dream11 Fantasy Pvt. Ltd. It has also incorporated a housing finance company, Vastu Housing Finance Corp. Ltd.
As it plans its third fund, Multiples has made significant moves to institutionalize its systems, processes and investment thesis. The changes incorporated by the firm include building sector-focused teams and developing a proprietary framework for measuring an entrepreneur’s fit with the firm.
“The business environment today is very different from what it was when we raised our first fund and so the strategy of the firm too has changed. We raised the first fund in the post-Lehman environment, when the economic outlook was not too optimistic. In the first fund, the idea was to be micro-focused, deeply analysing companies, to search for so-called ‘jewels’, whichever sector they were in," said Nene.
With the second fund, Multiples has adopted a deep sector-focused approach, said Nene.
“We have developed deep sector expertise now and we have dedicated teams focusing on these sectors. The focus is on sectors such as financial services, consumer, technology and consumer internet and pharma. We have also carved out a team to cover the logistics sector. And we have added a new business line of stressed assets," said Nene.
The team is spending a lot of time on top-down research of sectors, on figuring out the best companies in these sectors and then proactively developing a thesis for those companies, added Nene.
“We are looking at very few banker-driven or auction deals now," said Nene, adding that Multiples had also tied up with external advisors to help it on sector research and identifying the top firms in sectors.
A major way in which the firm has changed its investment style is the focus on identifying the right entrepreneur to back. Multiples has developed a proprietary framework to assess entrepreneur fit.
“We had hired a consulting firm to help us develop a proprietary framework for assessment of entrepreneurs. Basically, we have shortlisted 10 essential attributes which an entrepreneur should have for an investor like us to succeed in a partnership with them. These include things like passion and people connect, among others," said Nene.
The entrepreneur assessment framework is not just a theoretical exercise for Multiples. In fact, it is the most important criterion based on which the firm takes an investment decision.
Multiples has also been focusing on exiting its first fund and has so far returned around 80% of the fund, said Nene.
In January, the firm sold a substantial part of its holding in listed multiplex chain PVR Ltd, when Warburg Pincus bought a 14% stake in the company for Rs820 crore.
In January, Mint reported that Multiples sold its stake in drilling equipment maker Sara Sae Pvt Ltd, when KKR & Co. Lp-owned oil and gas asset management services platform Joulon bought a majority stake in the company.
Private equity firms have focused on harvesting their investments as the exit environment gained momentum in the past two years.
Private equity exits in India rose 2% in value terms to $9.6 billion in 2016, according to Bain and Co.’s India Private Equity Report 2017. In 2015, there were exits worth $9.4 billion.
“Overall, the Indian markets are in good shape. With corporate tax cut expectations driving up positive sentiments in the US, and China being less favoured as a destination, the proportionate allocation for India will go up, driving more money to India, which will aid exits. IPO market too has been robust and that too is supporting exits," said Harish HV, partner at Grant Thornton India Llp.