Indian private equity (PE) companies, under pressure from investors for returns, is hit with another crisis --- finding the right talent. In the last two years, global PE firms have been struggling to find candidates to fill senior, as well as second-level positions in India.
For example, General Atlantic, which saw the exit of managing director (MD) Suneesh Sharma and the transfer of another MD, Abhay Havaldar, could not find a candidate for post in India. Its office in Mumbai is run by a single MD, Ranjit Pandit. Apart from Pandit, the Mumbai team has two vice presidents in senior positions.
Warburg Pincus, which saw exits of MDs such as Rajesh Khanna and Leo Puri, could not fill these posts in the last two years. The firm’s India office continues to be overseen by Niten Malhan, Vishal Mahadevia and Dalip Pathak.
Without disclosing the details, the headhunters said, “We are not in a position to comment, since our work with clients is confidential.”
A managing partner with a global executive search firm that has the mandate from a global PE firm, said, “The primary reason is these are tough posts to fill, and good talent is hard to find. One way to overcome this challenge is to build a strong second line of leadership, from talent that is grown from within.”
Temasek saw the exits of Manish Kejriwal and Padmanabh Sinha in the recent past. Though the company has promoted Rohit Sipahimalani to the position of senior MD, Sinha’s and Sipahimalani’s previous posts remain vacant.
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Pat Hedley, managing director, General Atlantic said, “We have a strong team in India and we are very excited about our new Singapore office, too. We are a global firm and work collaboratively across our regions. We have no further comments at this time.”
Temasek and Warburg Pincus officials did not respond to queries.
The situation is worsening, as quite a few experienced hands have turned entrepreneurs and set up their own shops. Veterans like Renuka Ramnath, Ajay Relan, Manish Kejriwal, Rajesh Khanna, PR Srinivasan, with eight to 10 years of experience in the PE space, have all quit their high-paying jobs to set up own firms.
Anjali Forbes, senior partner (financial services), Transearch India, said, “The PE industry in India has only a handful of people who have the experience of the complete life cycle of fundraising, investments, portfolio management and profitable exits. So, the availability of experienced candidates is a challenge, as many of them have also set up shops on their own.”
The fall in the number of big-ticket deals has also cast a shadow on the functioning of global majors in India that are keen for deals worth about $100 million. According to VCCedge data, PE deals under $50 million accounted for 69 per cent of the total deal volume in 2011, with big-ticket deals (worth $100 million or more) accounting for another 5.4 per cent.
Avdesh Mittal, partner at international leadership advisory firm Heidrick & Struggles, said, “The question is whether PE firms are desperately looking for candidates in the current scenario. In the backdrop of lesser big-ticket deals, global PE firms may not even be keen for hiring at the level of senior investment partners.”
When compared to other financial services areas, private equity has an additional advantage of carry (carried interest or portion of interest) to be distributed to fund managers. However, the fewer number of exits in the recent past has reduced the significance of carry in India.
Kalyani Shastry, associate director, Stanton Chase International, said, “Given the economic scenario and some poor investment decisions, PE firms have not hit a hurdle rate and have seen few exits. This, in fact, has led to impatience among PE professionals.”
Experts say the options before these firms include hiring from investment banks or consultancies.
PR Srinivasan, who started his own firm Exponentia Capital after quitting Citi Venture Capital as managing director, said, “The options are hiring people with merchant banking experience or consultants, and turning them into general partners.”
Carlyle’s former buyout head Rajeev Gupta (DSP Merryl Lynch) and Devinjit Singh (Citigroup India) are from investment banking space. Manish Kejriwal and Suneesh Sharma worked together at Mckinsey. Leo Puri (McKinsey), KKR’s India head Sanjay Nayar (Citigroup) and Rohit Sipahimalani (Morgan Stanley) joined the PE industry from various other sectors.