Mumbai: Vishal Nevatia, managing partner of homegrown private equity firm True North, talks about the firm’s plan to raise the $900 million sixth fund, and the impact of Reliance Jio Infocomm Ltd’s plan to enter the wired broadband business on its portfolio company Atria Convergence Technologies (ACT). Edited excerpts from an interview:
What is the status of your sixth fund? By when do you expect to wrap up the fund raising?
True North V got fully committed only last week. We have now started deploying True North VI. We plan to raise $900 million for the sixth fund, out of which we have already raised around $600 million. By December, we plan to wrap up the fundraising. In addition to $900 million, our key LPs are quite keen to co-invest with us on larger deals. This gives us the ability to do much larger deals. Alongside True North V, our key LPs co-invested almost $500 million. This took the total investment for True North V to around $1.2 billion.
We expect a similar situation with True North VI, and the total investment is likely to be around $1.5 billion. The new fund already has two investments—Fedfina (Fedbank Financial Services) and Integrace.
The latter is a collaboration with Glenmark, under which the orthopaedic and pain management business will be transferred to Integrace. Integrace will market the product portfolio in India and Nepal.
A bunch of Indian fund managers, including yourself, have targeted a fundraise of around a billion dollars. From a True North perspective, what is the rationale behind raising such a large fund?
We are all raising large funds because the overall deal sizes in India have materially gone up in the past 3-4 years. If you look at past three years, the number of deals above $100 million, especially in our focus sectors (i.e. healthcare and financial services), have increased three times. The deal sizes have increased, because today we are not only investing capital for growth, but also for buying secondary shares, providing exit to earlier round investors.
You had filed for the IPO of ACT in March. But since then, Reliance Jio has announced the launch of its GigaFibre broadband business. Are the IPO plans still on? What could be the impact on the business?
We filed for the IPO to have all approvals in place so that the company can do the IPO at the right time and a time of its choice. The IPO time will be decided by the company once all approvals are in place. ACT has an outstanding team and customer value proposition. We feel confident that they will be able to defend their market share and continue to grow. We have been supporting the company for 10 years and we will continue to support them for many more years.
Earlier you had said that you would like to invest in the technology sector. How are you building that vertical?
As far as building the technology vertical is concerned, it is a five-year journey for us. This involves finding the right partner, building conviction and track record. We started work 12 months ago. We hope to do our first investment within the next 12 to 18 months. Our focus is going to be on IT services and products and BPO-KPO businesses.
You have been chasing insurance deals. First it was Religare Health Insurance and now Royal Sundaram General Insurance. What is so attractive about the sector?
Life, general and health, all three are interesting and high potential verticals. In the last five years, we have done a lot of work to understand these businesses. Insurance business is all about earning customers’ trust and respect. Every customer must believe that when they make a claim it will be dealt with very fairly. We think that there is a very good opportunity to build one of the most respected brands in each of these verticals over the next 10 years, and create value for all stakeholders
How are things on the exit front for True North?
Since we are in our sixth fund cycle, every year we exit 3-4 businesses and we buy 3-4 business. Last year, we distributed $450 million to our LPs. We sold key stakes in Syngene and Manipal Hospitals. This year also we plan to distribute $300-400 million to our LPs.