Profile: IL&FS' Archana Hingorani

In 1993, change was in the air in India. The country had emerged from a financial crisis and the government was shepherding the economy through one of its most dramatic periods of liberalization. Talented Indian expatriates began flocking back home to participate in the growth story.

"My move back had nothing to do with this," admits Dr. Archana Hingorani, who was 27 at the time and, after eight years in the US, and wanted to be closer to her family. But her timing couldn't have been better.

After years of socialist policies, India was ready to modernize. "There was a lot of activity and lots of announcements regarding reform, but at the time it didn't seem like it," says Hingorani. "When you are in the midst of change it is not easily visible but that is when everything had gained momentum."

Originally from Mumbai, Hingorani grew up in an academic household, with a father who was a professor of accounting and a mother who worked as a high school teacher. She read economics as an undergraduate and then had a brief stint at Housing Development Finance Corp's oil and gas subsidiary before continuing her studies at the University of Pittsburgh, gaining a PhD in corporate finance.

Imperfect fit

Hingorani planned on forging a career in academia but on returning to India she found the skill set she had acquired in the US was not a good fit for her home country. "It was more about teaching and less to do with the simulating and intellectually engaging research aspect of it," she recalls. "So it was clear then that I would go back to carve out a corporate career."

She duly joined Infrastructure Leasing & Financial Services Limited (IL&FS) as an economist. Unlike today, the IL&FS of 1993 was just a single entity. Set up five years earlier, its remit had been to focus on infrastructure projects at a time when it the government was expected to facilitate private investment in the sector. Hingorani's worked with the firm's economic intelligence unit, which meant spending a lot of time on government infrastructure white papers.

"While our focus was to work on financing infrastructure projects there was no privatization happening at that point so the mandate for the entire organization was to be able to move alongside the government, work with them and learn with them," she says.

Around 1995, the trail of policy recommendations finally began to deliver as privatization took hold. Hingorani was tasked with helping to write IL&FS's first private placement memorandum. This sowed the seed for what became the company's PE division.

Soon after, Hingorani joined the deal team and become one of the founding members AIG Indian Sectoral Equity Fund (AISEF). The $91 million fund reached a final close in 1996. Sponsored by American International Group (AIG) and IL&FS, the vehicle attracted marquee investors from the US, Germany, Japan, and France, as well as a multilateral institution, two Indian state governments and several high-profile domestic corporates.

IL&FS claims that AISEF was the first fund set up in India to provide long-term equity support for infrastructure projects and also the first to allow international participation through a limited partnership structure. Hingorani adds that it was the first fund to focus on both infrastructure and non-infrastructure projects.

"It had a lot of firsts, and therefore a lot of expectation was attached to it and once we had raised that capital, the energy required to implement it was quite significant," she says.

Turning point

In 2000, Hingorani and her team completed one of AISEF's more significant deals - the acquisition of a minority stake in Indraprastha Gas, a government-initiated project intended to get public transportation in New Delhi to switch to natural gas. The project was to be funded though a 50-50 public-private partnership by diktat of the India's Supreme Court.

"This was not transformed the city in terms of curbing pollution and taking care of the environment," says Hingorani. "It opened up a brand new market through a regulatory change that actually broadened the horizon of what could actually happen in the city."

Indraprastha was to be India's first city-wide gas distribution project, covering industrial, residential and commercial zones as well as transportation. The challenge for IL&FS was not just convincing the government co-investors they were the right partner but also negotiating a myriad of legal and operational hurdles once the deal closed. "We realized it was a big task in a legal sense because if you slipped up any of the timelines there were consequences, there were also a lot of operating aspects, the first 100 days would be critical," Hingorani says.

After six months, the investment was already performing beyond everyone's expectations and IL&FS exited five years after that via an IPO. The exit was another private equity first for Hingorani and generated a 7x money multiple and an IRR of 64.9%. Indraprastha is now one the largest gas distribution companies in India.

"I think overall that experience stands out in my mind as something that had a lot of perceived issues in terms of how it could be done," Hingorani adds. "But in the end the deal became a template for other companies to sprout across the nation using the same private-public model. It is still relevant today."

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• Archana Hingorani
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