Having set up multi-crore businesses from scratch himself, former bureaucrat turned entrepreneur Sanjay Gupta is now planning to help similar entrepreneurs with his newly launched private equity (PE) fund 'Let India Fly for Ever' (LIFE).
Aimed at small and medium enterprises (SMEs) in the "late start-up phase", the Rs 250-300 crore PE fund will provide capital solutions to the enterprises for accelerating their business. While a SEBI approval is being expected within 45-60 days, Gupta aims to wrap up the first round of financial closure within next three months for the fund.
Where Gupta's fund differs from the other PEs in the market is the conscious decision of not demanding a fixed internal rate of return. "In PE, a fixed IRR is a debt masquerading as equity," says Gupta, a 1985 batch former IAS officer and founder and chairman of the over Rs 2000-crore Neesa Group conglomerate that operates 16 companies in hospitality, agri-tech, food-processing, real estate, education, IT, infrastructure, health, biotechnology, energy and security solutions, together employing more than 3,000. The 1200-rooms Cambay Hotels and Holidays Pvt. Ltd is the flagship brand of the group, whose assets includes six luxurious hotels and two golf properties. Neesa Group's other major companies include Neesa Leisure Ltd., Neesa Infrastructure Ltd., Neesa Agritech and Food Ltd., Orient Spa Ltd., Neesa Technologies Ltd., Neesa Financial Services Ltd., Neesa Township & Properties Ltd., and Cambay SEZ Hotels Pvt. Ltd., among others.
After serving as the chairman of the Metrolink Express between Gandhinagar and Ahmedabad (MEGA) since past two years, Gupta recently resigned from the post. An SPV set up by Modi government, MEGA is the nodal agency looking into execution of the metro rail project in Gujarat. Intending to be fully involved in his businesses as well as the new fund, Gupta hopes to cash in on the bulk of his experience as a bureaucrat, business professional and entrepreneur in identifying the right kind of enterprises to invest in as well as in finding investors for the LIFE fund across the globe.
A civil engineer from IIT Roorkee, Gupta served in the Gujarat government for 17 years till 2002, following which he joined the Adani group as CEO - Infrastructure where he helped Gautam Adani scale up and diversify the Adani investment in infrastructure, even as Gupta went on to build his personal hospitality business.
"In the past, I have set up businesses and had to access equity, meet VCs and PEs, make presentations and go through rigamarole. Be Gujarat Petronet (GSPL) where we were talking to IDFC PE or Adani Group, these experiences have taught me that in India there is a big gap between what entrepreneurs should look for and what is actually available," reminisces Gupta, who is credited for successfully turning around the Gujarat State Petroleum Corporation (GSPC) into a blue-chip company as its managing director in in late 1990s.
According to Gupta, PE as a concept originated from the West. However, unlike in the US, PE in India is now meant to be 'growth capital' and focuses only on scaling up.
"With the pressure of generating a fixed internal rate of return (IRR), entrepreneurs get into financial engineering instead of focusing on business and profit. Eventually, he loses sight of cost structure and profit in the process of scaling and making his venture IPOable. Our fund will instead will take a long term view and help a venture accelerate rather than pressurise it to scale up," says Gupta who will act as mentor for LIFE Fund.
And as the name suggests, the fund will look at investing in Indian enterprises in sectors like media and entertainment, hospitality and tourism, healthcare and lifestyle. This is also because these are some of the flagship sectors that Gupta's Neesa Group deals in.
"But we are open to raising funds from outside the country as well. My network with banks, financial institutions, government agencies and HNIs will come in handy. My dream and wishlist is to raise billion dollar for the fund over the next five years," says Gupta, adding that he hopes hundreds of more such funds will come up in the country.
Experts are of the view that while it is the right time to set up a PE fund. "There is a huge shortage for risk capital in India which a PE can provide. Also, there are good prospects currently in India for a PE that looks for a 5-8 years horizon. However, it is the global fund raising environment for PE that is challenging. Nevertheless, it is good time to invest in enterprises in India since valuations are a lot reasonable," says Ashesh Shah, managing director, Trans-Continental Capital Advisors.
However, for LIFE Fund, analysts fear Neesa's troubled background might impact fund raising. "Though there is recession in the economy, it is the right time to set up a PE fund since there are good enterprises emerging in the country. Plus, Gupta will be managing the fund on a personal capacity and will have a corpus and raise funds on his own which will be independent of Neesa Group. However, the recent corporate debt restructuring (CDR) package that Neesa Leisure had applied for might impact the fund's image since prospective investors might demand higher scrutiny," said an analyst on condition of anonymity.
In 2011, unaccounted assets were reportedly found by the income tax department in country-wide searches of Cambay's properties. However, the said assets were held as legal by the Gujarat High Court when approached by Gupta.
In the LIFE Fund, Gupta intends to infuse capital of anywhere between Rs 15 crore and Rs 35 crore into each venture, apart from providing business advice and domain expertise, after raising funds for LIFE from varied sources across the globe.
On his part, Gupta will, however, mentor and act as promoter of the fund while the management will be handed over to a professional asset management company (AMC). "I will try to bring in professionals who are expert in their own fields to manage the fund. I will look at the strategy. On long term basis, I will be more involved with my fund business than Neesa since I already have industry specialists heading each of these businesses," he adds.
Gupta is clear that LIFE fund will not act as an angel investor or venture capitalist. "We will come in at the early growth or late start-up stage. We can't take the angel or VC risk or also not come at a mature growth stage, make money and just leave. We will come when signs of growth is there and will take a long term view of the venture. Our investment horizon will, therefore, be of 8-10 years wherein by fourth year onwards they should be able to make profits and distribute dividends," clarifies Gupta.
In order to select potential ventures too, the fund will rope in transaction sourcing companies who - at a fee - will help in setting up an appraisal criteria for LIFE.
Gupta is also open for doing fund of funds but only in the future. "We have initiated the process of obtaining regulatory approvals and also sensitising potential investors. Upon receiving approvals, full scale domestic and international fund raising will be undertaken. It is likely that we may engage professional fund raising entities," he adds.
Meanwhile, the potential investors are likely to be pension insurance funds, family offices, government agencies, banks, financial institutions, corporates and HNIs.
