Q&A: True North’s Vishal Nevatia

Q: Why did you decide to rebrand the firm?

A: We have been around for over 15 years. About two years ago, we all sat down and thought about what we could do better in the next 15 years. One of the initiatives was that we should change our brand to something more representative of what we are. We felt that India Value Fund was a very generic name. It says, at best, that we are a private equity fund from India; it does not talk about anything beyond that. From day one, our strategy has been to combine the business nurturing DNA of a conglomerate with the sharp focus of a private equity fund. We believe that to deliver consistent returns across economic cycles we must have DNA that allows us to build admired businesses for all stakeholders. The second consideration is how we do business. We have a well-defined value system and we believe that “how” we do business is significantly more important than “how much” business we do. None of this was reflected in our brand. We conducted an exercise over the last 18 months with all stakeholders to co-create a new brand entity that reflects our values and our aspirations for the next 15 years.

Q: And what led you to True North?

A: Our brand identity has to be true to who we are; it has to be differentiated from other private equity firms; and it has to be sustainable so that even if our strategy changes over the next 10-20 years it remains relevant. To be ascertain who were are, we spoke to 100s of stakeholders.  The consistent feedback we got was that we do the right thing, don’t take short cuts and conduct ourselves in the correct way, and that was something people found to be distinctive about us. ‘The right way’ is not necessarily the first thing that comes to mind when you think of financial firms. Once we established that ‘the right way’ was how we wanted to position ourselves it was a case of finding an appropriate name, and we thought of True North.

Q: How does this fit in with the formalization of the firm’s sector-focused strategy?

A: It is part of a journey, an evolution for us. About two years ago we looked at our entire value chain and the scope for improvement at every point – micro considerations like how to source better, how to underwrite better, how to exit better. This led us to move to a sector-focused structure. Until about five years ago we were concerned that, given we were already focused on control, being sector-focused might result in adverse selection. But in recent years we have found it does make sense to be sector-focused. We have been investing in financial services, healthcare and consumer for a while, and we added technology products and services. We are looking for a senior partner with experience in this space to join us.

Q: What was behind the decision to expand into technology products and services?

A: Not having an understanding of technology products and services is no longer an option. Technology is impacting all sectors, including financial services and healthcare, so we need to develop a deep understanding of what is happening. Also, when we look at past data, PE investments in technology products and services in India have delivered very good returns to LPs.  Given these two facts, we feel it is imperative that we must build expertise in this sector at the earliest.  For each sector, we have a partner on the investment side and a partner on the business management and operations side (and the operating team gets the same economics as the investment team). The business management partner is typically someone who has run a large business in that space and transformed it. So we want someone who is highly respected in the technology products and service space, someone who has deep experience of transforming technology businesses, within India and maybe internationally as well.

Q: How has the general development of the Indian economy impacted your strategy?

A: We started in 1999 and India was a $500 billion economy. Today it is a $2.2 trillion economy. There is a depth in sectors that wasn’t present before – and some of these sectors have grown even faster than the overall economy. The private equity market has also matured. Ten years ago, we would have been the first experience of private equity for most companies. Today we have more than 5,000 businesses to choose from in India that have already experienced private equity and are looking for help. There are entrepreneurs who understand the asset class well. While the market has been through some ups and downs, it has matured and is ready to move to the next stage.

Q: And this stage involves more control?

A: Over the last 10 years, 70-80% of our investments have been control deals and we expect to see more of these opportunities emerge. We see more entrepreneurs who are willing to sell their businesses. They are more open to evaluating their ownership options – asking whether they are the right owner, whether they should be doing something else. There are also 5,000 companies in India that are 20-40% owned by private equity and the founders are not necessarily going to hold on to those businesses.

Having said this, there are still good entrepreneurs who are keen to take their business to the next level and who we are happy to work with, and so we want to keep the option of investing 20-30% of our capital in minority deals.

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• Topics
• South Asia
• GPs
• Buyout
• India
• India Value Fund Advisors
• True North