India GPs focus on investee alignment – AVCJ Forum

“We get that alignment with entrepreneurs on day one, saying if you want to go public in two years, you need to start work on that a year from now – are we aligned on that philosophy or not?” Sanjay Kukreja, a managing partner at ChrysCapital, told the AVCJ Forum. “In cases where the entrepreneurs are not comfortable with that, we align on a different strategy, such as a secondary or strategic sale.”

Gaining alignment is helped by the fact that PE firms are increasingly not the first institutional investors in a company. GPs see a growing number of investment opportunities in VC-backed start-ups looking to raise later-stage capital. As the founders of these companies are already familiar with the needs of private investors, forming a partnership is an easy proposition. 

Providing guidance to portfolio companies is also helped by the increasing availability of control deals and the willingness of entrepreneurs to cede ownership stakes to investors. In many cases, firms such as Gaja Capital that previously focused on minority growth deals have begun to emphasize control transactions.

While Gaja targets more buyouts, its goal isn't necessarily to completely replace a business’s existing management. Rather, the firm aims to partner with the company to enhance the areas it knows best - primarily finance and human resources - while retaining the talent that attracted it to the deal in the first place.

“We want to ensure that the entrepreneur is still running his domain, which for us means business development,” said Ranjit Shah, a managing partner and co-founder of Gaja. “Where we can help is around these two verticals to help scale the business as they move ahead.”

Discipline around investments and exits remains a significant concern for Indian GPs, particularly in light of the country’s strong macroeconomic trends. Managers must be willing to accept a good offer rather than hold out beyond the planned exit date in the hopes that a better opportunity will come along.

“In India it’s very easy to get infatuated by our own companies and say that since things are growing nicely, let’s just compound another year,” Kukreja said. “The question I pose to our team is, before we deploy $200-250 million this year, can you show me $250 million of exits? If you can find those exits then let’s do the investments. But we want to be net-neutral to LPs, so we try to avoid having any net new exposure.”

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• Topics
• South Asia
• GPs
• Buyouts
• India
• Gaja Capital Partners
• ChrysCapital Management
• AVCJ Events