Back‘Great time to create long term portfolio’
Abhishek Sharman, founder and managing director, Carpediem Capital, a homegrown private equity firm, says in an interview, that global economic uncertainties notwithstanding this is a good time for private equity firms to create long term value.
PremiumMUMBAI : Global economic uncertainties notwithstanding this is a good time for private equity firms to create long term value, said Abhishek Sharman, founder and managing director, Carpediem Capital, a homegrown private equity firm, which is in the process of raising its consumer business focussed second fund. Edited excerpts from an interview:
With global uncertainties and fear of inflation on the rise, how do you see PE funding shaping up in the near future?
I believe that private equity funding will increase—there is a fair amount of liquidity which is sitting in PE funds who have raised capital and will be looking to deploy for the medium to long term. An environment like the present is a great time for portfolio construction, especially for PE firms who have access to capital with horizon. This will be in contrast to late-stage VCs who will need to understand the new normal in terms of valuations and realign portfolios to factor in markdowns in existing portfolios before figuring out appetite to invest. VCs were much more active in the last 18-24 months, but I see PE being more aggressive now. Sustainable and cash flow generating businesses will be at a premium and will set a new benchmark on underwriting deals. We will witness more discerning investing with a lot more diligence on companies.
Which set of investors are showing interest in Fund II?
Carpediem Fund I was largely raised through domestic investors— HNIs/ family offices as well as institutions. For Fund II, we continue to see strong interest from our existing investors with over two-thirds of the capital commitment, which for us is a great performance showcase. Over 20% of the capital commitment has been through overseas investors. We are also seeing interest from select international institutions and overseas family offices that are expected to convert soon.
What are the segments expected to flourish in the next five years?
We believe that discretionary consumption focused brands and services are some of the most compelling businesses to invest in India. Disposable income in India is increasing for a large part of the market—necessities such as food, education, and housing, are either forming a smaller percentage of overall expenditure or remaining unchanged. As a result of this, many new consumption categories are getting created. Today, consumers have a strong preference for branded products or organized services. As a result of these factors, there is significant potential in Indian companies that can create a strong brand and become leaders in their individual sectors in India. Companies like Jubilant Foodworks, Page Industries, Quess Corp/Teamlease have become cash flow generating unicorns over the last decade and many such companies will get created in the next five years (and beyond)- we hope to partner a few of them!
What has been Carpediem Capital’s AUM and what kind of returns has it generated so far?
Fund I was approx. INR 204 crore. So far, we have divested one of our investments from Fund I where we generated 4x and ~34% IRR on invested capital and distributed back close to half the entire corpus of Fund I. We believe our performance is top quartile for our vintage and by the time Fund I is entirely divested, we hope to achieve what we targeted for in terms of returns.
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