Private equity Pasha
It seems like the gold rush is on in the Indian private equity market. And the man who can claim to be cheer-leading the rush is Ashish Dhawan. Having raised $1 billion in capital over the last eight years, the 38-year-old Senior Managing Director of Delhi-based ChrysCapital has mopped up another $1.25 billion-the highest by any 'entrepreneurial VC' like him. That's $2.25 billion under the belt, then. How significant is the achievement? Well, consider that when Blackstone, the world's biggest private equity investor, entered India, it set aside $1 billion and promised to bring in another $1 billion if need be.
It's been 26 months since Blackstone set up shop in Mumbai, but it has invested around $525 million. As for other 'entrepreneurial' PE players in the country like Rahul Bhasin of Baring Private Equity Partners India (BPEPI) or Donald Peck of Actis, they are yet to raise anything close to $1 billion on their own steam. "The purpose is to provide long-term capital for high-growth companies and get good rewards in return," says the Harvard-educated Dhawan, who invests in about five firms in a year.
But this being the PE business, raising money is often easier than investing it-at least, investing it in a manner that generates the sort of returns investors in such 'alternate assets' have come to expect. In a market where the average IRR is around 33 per cent (global IRR is around 14 per cent), ChrysCapital expects returns from the new fund to be around 20-25 per cent against the hefty average annual return of 60 per cent since January 2000. "We expect returns to be lower than the historical rates. The firm has already plucked the low-hanging fruits and the objective now is to control the risk with longer holding periods," says Dhawan.
ChrysCapital's diversified portfolio comprises more than 40 companies across sectors such as financial services, manufacturing, consumer services, pharma, business services, and infrastructure. Last year, Dhawan made his biggest investment when he picked up 5 per cent stake in Idea Cellular for Rs 500-550 crore, which could well be a long-term investment. Says Dhawan: "Idea is performing extremely well and the telecom story as a whole looks promising." Yet, it's a crowded market where ChrysCapital operates. Apart from Blackstone, there's Carlyle, Texas Pacific Group, Kohlberg Kravis Roberts (KKR), Warburg Pincus, not to forget smaller but nimbler players such as BPEPI, Actis, and ICICI Venture.
Worse, the private equity investor's worst enemy is a booming stock market. When stocks are on a roll, like they have been in India, it becomes harder to pick unlisted stocks early enough and cheaply. Promoters tend to expect higher valuations for their companies, and that makes it harder for the PE investors to earn the fancy returns they promise their own investors. That's one reason why ChrysCapital, born as a venture fund, decided to turn to private equity. Now, with another $1.25 billion to invest, it's looking at reinventing itself some more. "We are looking for both growth and buyout investment options and would invest between $30 and $300 million per deal with a holding period of 4-7 years. We would also consider partnering with domestic companies in overseas acquisitions," says Dhawan.
In terms of size, ChrysCapital had already differentiated itself from its Indian peers. With ChrysV, as its recent round of fund raising is christened, it has put a lot more gap between itself and its home-grown rivals. Perhaps some day, he may become India's very own Stephen Schwarzman, Blackstone's legendary co-founder, who recently made $2.6 billion with partner Peter Peterson when the firm IPO-ed. And don't rule out Dhawan making money like Schwarzman; the private equity business works on a 2/20 principle, which means the firm gets to keep 2 per cent of the fund raised as management fee and another 20 per cent of whatever it makes, provided it is above a certain agreed upon rate. So, if ChrysV ends up doubling the money, Dhawan (and his A-team) will stand to gain $500 million.
