PE, venture capital firms on hiring drive

PE, venture capital firms on hiring drive

New Delhi: The investment banking business in the country will take a hit after the collapse of two storied Wall Street firms Lehman Brothers Holdings Inc. and Merrill Lynch and Co., but experts and analysts say private equity (PE) and venture capital (VC) firms will hire more people for their India operations because the prospects for both businesses look good.

Such firms have already intensified hiring activities over the past six months, even as global and Indian financial markets have been hit by an ongoing credit crisis.

“We see a significant slowdown in fund-raising from IPOs (initial public offerings) and the capital market; debt is more expensive and given (that) many companies continue with their expansion plans or acquisitions, PE stands out as one of the key routes for funding in the current scenario," said Pankaj Karna, partner and head, mergers and acquisitions, Grant Thornton India.

Many stock markets have also seen a significant fall in the market value of firms, making them much more attractive for PE investors.

UK-based PE firm Actis has, in the past six months, hired around five senior executives in its real estate and infrastructure funds, according to Charul Madan, partner, Executive Access India Pvt. Ltd, an executive search firm. Those hired include Darshan Gangolli from American International Group Inc. and Sanjiv Aggarwal from Citibank. J.M. Trivedi, head of Actis’ India operations, could not be reached for comment.

Boston-based Bain Capital Llc., a new entrant to the Indian market, appointed investment banker-turned-PE investor Amit Chandra as country head and managing director in May. It has also hired three-four more people in its India team, said an executive at a search firm who did not wish to be named. Chandra did not respond to repeated calls to his mobile phone.

In August, Jardine Rothschild Private Equity hired Sridhar Narayan as director, while Apollo Management LP said its UK head, Mintoo Bhandari, would move to India and run its operations in the country. In the same month, UK-based buyout firm Candover Investments Plc. picked Harsha Raghavan, head of principal investments area at Goldman Sachs, to look after the India business, and another UK firm, Englefield Capital, hired Dinesh Vaswani, managing director of Temasek Holdings Pte Ltd in India, as partner and joint head. Candover is in the process of adding almost five employees to its team to be based in Mumbai, said Madan.

Earlier, in April, Australian firm Babcock and Brown hired eight executives from ABN Amro India, including Manikkan Sangameswaran, for its India operations. Sangameswaran, managing director of Babcock and Brown, did not respond to a telephone message left for him.

The spate of hires by PE firms comes in the background of fewer IPOs—down from 59 in the first six months of 2007 to 29 in the first six months of this year—and a declining stock market. Till 15 September, the Bombay Stock Exchange’s benchmark Sensex index has lost 33.5%.

“A number of PE companies in India have been sitting on investable funds. There is a fair amount of appetite in these firms to invest," said Karna. “With the valuations (of firms) coming down, the investment scenario is more attractive compared to last year."

PE investments in India have witnessed significant growth in 2008.

The first six months of the year saw 186 deals, aggregating $7.1 billion (Rs32,589 crore) and with an average investment of $38.17 million. In the same period in 2006, there were 128 deals, involving a total investment of $3.8 billion and an average ticket size of $30 million.

Hiring activity has been fuelled by the swelling funds of PE players such as ICICI Ventures, ChrysCapital, Sequoia Capital, New Silk Route Advisors," said Madan. Executive Access claims to have placed around 14 executives, including managing directors, principals and associates, in the PE and VC space in the past eight months, compared with seven in the same period a year ago.

“There were a lot of firms that wanted to enter India but stayed away through 2007 because valuations were too high," said Sunit Mehra, managing partner, Hunt Partners, an executive search firm. “With market correction in 2008, the Indian equity market looks very attractive and, therefore, one can see a slew of firms coming into India."

Hunt Partners has a specialist PE practice across the Asia-Pacific region, and Mehra said business has almost doubled this year.

“You need people to manage increasing investments, source deals, flesh out deal opportunities, and undertake due diligence," said Sanjiv Kaul, managing director, ChrysCapital Investment Advisors which, over the past four years, has grown from a $500 million fund to a $2.5 billion one.

Increased hiring activity by PE and VC firms hasn’t gone unnoticed on business school campuses where investment banks have traditionally been preferred by students.

Hyderabad-based Indian School of Business organized a PE conference on 6 September for students to explore career opportunities with such firms.

Neha Rastogi, a final-year master’s in business administration student specializing in finance and a member of the placement cell at Faculty of Management Studies, said that like most of her batchmates, she is looking at an opportunity to work with PE firms.

“Our earlier batches focused heavily on investment banking but, given the present scenario, we are looking at other financial players such as PE, VC firms and banking services companies," Rastogi said.