Bhupesh Bhandari: Ideas that work

BACKSTAGE

When the AV Birla Group recently placed some equity with a clutch of investors in Idea Cellular, the only Indian name in the mostly foreign list was ChrysCapital. It had bought four per cent in the company for $120 million.

It appears the top group honchos wanted only overseas investors in the cellular services operator. But it was because of ChrysCapital Senior Managing Director Ashish Dhawan's excellent rapport with the AV Birla Group that the fund was able to find a berth in Idea Cellular.

Dhawan had sold an information technology company called Transworks to the AV Birla Group in 2003. "It has worked very well for them," says Dhawan. (At the time of sale, the AV Birla Group had offered a performance-linked incentive to ChrysCapital; the performance was beaten and the fund pocketed the incentive.) For Birla, the Transworks acquisition was led by Sanjiv Aga who later went on to head Idea Cellular.

At the same time, Dhawan had been eyeing Idea for a while. Fascinated by the growth in the number of mobile users in the country, he found Idea was the only target left for a private equity fund like ChrysCapital. "I had initially spoken to them some 8-9 months back," says Dhawan. Perseverance paid off and ChrysCapital was soon on board.

But that is not where Dhawan's role in the deal ended. He also helped TA Capital of London do its groundwork for picking up another four per cent in Idea Cellular. After all, Ajit Nedungadi, who heads TA Capital in London is Dhawan's best friend from Yale.

For Dhawan, it was the second large investment in a matter of days. ChrysCapital had earlier invested $85 million for slightly less than five per cent in UTI Bank.

With an MBA with distinction from the Harvard Business School and a BS in Applied Mathematics and Economics with magna cum laude honours from Yale University, Dhawan founded ChrysCapital in 1999. The first fund of $64 million was invested 40 per cent in venture capital (mostly dotcoms) and 60 per cent in growth Capital (Spectramind, UTI Bank and others). Dhawan lost heavily in the dotcoms but the IRR on his growth capital was 100 per cent. The overall IRR was a respectable 31 per cent.

The second fund of $127 million (investments include Mphasis, IVRCL and Yes Bank) has harvested 35 per cent and its current IRR stands at 38 per cent.

But it was with his third fund of $258 million, set up in early 2004, that Dhawan hit the jackpot. With investments in Suzlon Energy and the transport companies of the south India-based Shriram Group, the fund's current IRR is over 100 per cent. Now, Dhawan has a fourth fund going of $555 million, 40 per cent of which has been invested. But Dhawan does not expect it to give the same returns. "Valuations are so high today. Going forward, we will be happy with returns in the range of 25 per cent," says he.