LPs to Indian GPs: Be disciplined, not opportunistic - AVCJ Forum

Alagappan Murugappan, managing director with CDC Group, said he disagrees with the view that investors must be opportunistic in India in order to secure the best deals. Rather, managers should focus on a chosen strategy.

"While it is tempting to seek out opportunistic transactions - either by doing PIPE deals, or just by doing investments on the secondary market - I don't think that is the strategy we like," he said "It is important to stick to your knitting, to gain more knowledge and experience in doing different kinds of deals in your chosen sector. That way your investee companies believe you can add value."

He also emphasized the importance of pricing discipline, saying that GPs have often miscalculated the entry price by factoring in a huge amounts for future growth that never actually materializes.

Nupur Garg, regional lead for private equity funds at the International Finance Corporation (IFC), agreed that entry valuations are a critical issue for GPs who can often be swayed by hot sectors. She also said GPs must be more disciplined in choosing the right promoter to back.

"It is important to have a business model that is strong enough to go through a couple of potential scenarios and find a partner who can execute on that business model." said Garg. "It is not about banking on good times - that is one of the worries a few LPs are having right now."

She noted that a lot of Indian GPs have gone through trouble with their portfolio companies but the ones that come out stronger usually work with promoters, and their LPs, to identify what went wrong and how issues can be resolved.

Pamela Fung, a principal with Morgan Stanley Alternative Investment Partners, added that aside from better investment discipline, there is still a lot of scope to improve operations to generate bottom-up valuation creation.

"In an environment like India where the economy is growing 5-6%, you have a lot pf inefficiency in the market and a lot of room for growth," she said. "You should be able to deliver the same if not better growth by creating value in a company."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• South Asia
• LPs
• Investments
• Fundraising
• India
• LPs
• IFC
• CDC Group
• Morgan Stanley
• Fundraising