Pulak Prasad's investment mantra: buy quality stocks, hold them for long

Way back in 1998, global private equity major Warburg Pincus invested around $300 million in Bharti Televentures. When the New York-based PE fund offloaded remainder of its 20 per cent stake in Bharti in 2005, it cashed out at $1.9 billion. That's the beauty of Pulak Prasad's investment strategy, who had led the investment decision in the telecom firm during his stint at Warburg Pincus. People who have closely followed Prasad's investment style, said he has a knack of identifying the next winner. "Prasad likes to buy big stakes in high-quality stocks and hold them for a long time. He refuses to sell his winners even after these stocks have multiplied many times," said a person familiar with this ace investor's functioning style.

Nalanda Capital's tag line also summarises Prasad's this philosophy. "We consider ourselves to be permanent (part) owners of high-quality publicly-listed businesses run by exceptional people," it reads. The name Nalanda is believed to be derived from Nalanda University, an ancient place of learning in Bihar, from where Prasad originally hails. Before starting Nalanda in 2007, Prasad was with Warburg Pincus for nine years where he was managing director and co-head of India. Before Warburg Pincus, he had spent close to six years at McKinsey in India, South Africa and the US. An alumnus of IIM Ahmedabad, Prasad joined McKinsey after completing his masters in business administration in 1992. He also holds an engineering degree from IIT Delhi and worked as a production management trainee at Unilever in India.

Little is known about Pulak Prasad as he is a bit reclusive.  "But his investment approach bears a lot of similarity with Warren Buffet's value investing style," said another person. On account of his investment philosophy, Prasad had many early successes in the  Indian PE industry. The Singapore-based Nalanda Capital is one of the pioneers of popularising structures like PIPEs (private investment in public enterprises) as the sole investment strategy in Indian market. The fund house usually builds up big stakes in the range of 8-10 per cent in mid-cap firms and prefers to be one of the largest institutional investors.  Currently, companies like Amara Raja, Berger Paints, DB Corp, Genpact, Page Industries, Just Dial, TTK Prestige, V-Guard and WNS among others are in Nalanda's portfolio.  With around $900 million of funds raised through three rounds, the fund house currently manages assets worth around $2 billion. "They are kind of a passive investor who supports the management and guides them to scale up," said an official with a Bengaluru-based VC fund. Given the working philosophy of Nalanda Capital, the fund house's support for Mindtree management against L&T's takeover bid comes as no surprise to industry analysts who have tracked the firm. Since the beginning of this unsolicited offer,  the fund house not only sided with Mindtree's management in their opposition to the deal, but also has also publicly come out in its favour. 

"In an exceptional business in good hands, why risk changing anything at all? Why would Mindtree be better off as a non-core holding of a of a diversified conglomerate than in the hands of its proven, passionate and committed current owners?," the fund house had said in a letter. "If we factor in opportunity costs compared to Mindtree’s unhindered trajectory, this sudden hostile disruption would be specially damaging," it had said.

The fund house had also reached out to some institutional investors asking them not to tender their shares in the ongoing open offer, prompting some investors to approach Sebi on allegations of "acting in concert" with the management. 

Subsequently, the fund house tendered its entire 10.61 per cent stake in Mindtree on the open offer, which would fetch it close to four times return at around Rs 1,708 crore. "By taking a public stand, Nalanda Capital has tacitly sent a message to is portfolio companies that it stands by them even during difficult times. Though it has lost out at the end, this messaging is vital for its future investments," said the Bengaluru-based VC investor.