Almost an year after going solo to set up Multiples Alternate Asset Management, Renuka Ramnath on Thursday announced the first closure of her $250-million fund. The former ICICI Venture managing director & chief executive officer says that in a couple of months, the fund is going to announce the second closure at $450 million. Ramnath has succeeded in roping in Canada Pension Plan, which has invested $100 million in the first fund. In an interview with Shilpy Sinha, Ramnath discusses the fund's investment strategy. Excerpts:
What was the experience of raising your maiden fund after going solo?
It’s a systematic effort. You can’t put the cart before the horse. My fund size is pretty modest. I started with $400-million target and reached $450 million, instead of starting with $1 billion and closing at $400 million. First of all, you need to know who your anchor investors are and does your story convince them. I have done this earlier and had a very good team. I had anchor investor from Indian institutions from very early on and it made a lot of difference. Andhra Bank and Indian Overseas Bank are the cornerstone investors. That was a great vote of confidence. I had five other domestic investors who are committed and have experienced my fund management in the past. Then came Canada Pension Plan after three months of extensive due diligence. That is a big shot in the arm. It was a thorough exercise. It wasn’t difficult, but meticulous and a systematic journey.
Do you see an increased interest of overseas investors in India?
I see a number of new institutions coming to India. Lots of people are coming to India, very deep-pocketed and with long-term money. They are deeply involved in understanding the Indian market. There is tremendous interest in India and more infusions from Scandinavian countries, Australia, the US and Canada. They are getting more and more comfortable with each passing day. They are getting more comfortable with the currency and governance. It will take at least three-five years to get comfortable with the new economy and new market, and India will be a new market from their perspective.
Has the due-diligence increased over the last year?
As far as large institutions are concerned, they have a well-developed processes and are not going to compromise. That is why they did not invest in 2007-08 because nobody qualified for their rigour. With more proven track record, everyone wants to analyse history and we will see a lot of investors coming into India. Over four months of hard work, they analysed our work and have put all the checks and balances in place.
Investors are mainly institutional. Did you not tap retail investors?
We wanted to raise money only from investors who have experienced this product. Retail would be around 10 per cent of the total fund. It’s about creating a team and not just raising money.
What would be your investment strategy?
We have the patience to move with a company for three to seven years. As a fund manager, we have to see where to put our money. Fundamentally, we would look at investing in expansion, buying of non-core business from a big company, more strategic model. Our deal-size would be Rs 100-150 crore. Our investors are deep-pocketed and if we want to invest in large deals, we can invest even more.
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Which are the sectors you will be looking at?
We want to be sector agnostic. This fund is not meant for hard core infrastructure and real estate. We are not looking at low-end manufacturing companies. We are looking at smaller companies with high value proposition. Profitability and uniqueness of the value proposition are much more important than size. I am very keen to invest in first-generation entrepreneurs with domain knowledge and want a viable business model and will scale them up to a sizeable business.
How do you look at present valuations?
Stocks are fully priced, if not overpriced. As a private equity player, I am not put off by the valuation because I am not looking at listed companies. I am not looking at returns for three quarters down the line. I have seven-year money which can be extended to 10 years. Markets will provide a very good window for investors who have been in the market.
What are the future challenges?
Finding right deals on right terms and being able to deliver returns. Nothing else matters. When you are building an institution, you have to find the right deal, make money and create value.