The entrepreneurial bug has bitten private equity veterans again. And this time, the environment may just be right
Ajay Relan is the kind of man who’s rarely rushed for words. You know, the kind of man who’s been there, done that. Until 2008, he managed Citigroup’s private equity operations (CVCI), where he built a great team and a great track record.
After he quit, he built yet another solid team and raised a $500 million fund called CX Partners, the largest first-time fund by an Indian.
But that’s not how he behaved two months ago, when a young investment banker in New Delhi spoke to him of a young consumer products company growing at unheard-of rates and seeking Rs. 500 crore in funding.
“I’m so excited I can feel my hands shaking,” he said then.
That wasn’t the Relan this young man knew. So, in his head, he dismissed the exuberance as signs of first level interest, and nothing more.
Imagine the investment banker’s surprise then when two days later a team of professionals from Relan’s fund went across to meet the entrepreneur he had talked about; not just that, they were actually discussing the broad contours of the deal.
A couple of days later, Relan invited the entrepreneur and his management team to meet up with his investment committee. Two days after that meeting, a term sheet was ready and all the stunned entrepreneur had to do was sign and accept.
The entire process took less than ten days.
Now, while CVCI under him was very quick, he would have still taken at least a couple of weeks to think over the details. Not here; not when he’s doing his own thing.
In another era, this was unthinkable. Deals could get interesting — even exciting at times. But it never enough to cause emotional upheaval.
Relan, on his own, is behaving more like a mid-sized businessman than a fat cat banker. Sure, he has a reputation, but that counts for nothing if he isn’t quick on his feet and doesn’t connect to the businessman on the other side of the table.
When you ask him how the fund is doing, he says, “We’ve done four deals. We could have done better.”
Nearly 1,400 kilometers away, on the outskirts of Mumbai, another private equity entrepreneur is in a celebratory mood.
“We’re bootstrapping,” says Renuka Ramnath, the Harvard-educated former ICICI Ventures veteran.
Since predicting which company would top the sector charts was difficult, investing in unlisted and private companies was a mug’s game. Failure rates were high and eventually most investors played safe and deployed small amounts, almost insignificant parts of a company’s capital.
Globally, investors who allocate capital to private equity and who want an India exposure are coming around to the view that independent teams are better positioned to do this investing.
The presence of over 300 funds in India — at least on paper — completes the conundrum: too many funds sitting on too much capital, delivering very poor returns. Not exactly the ideal market.
(This story appears in the 13 August, 2010 issue of Forbes India. To visit our Archives, click here.)