Tata Capital, a Tata Group company, is strengthening its presence in the private equity space by raising $1 billion by the end of 2011 through its funds. The company has already received commitments for $800 million, with around $600 million from foreign institutional investors, primarily based in Japan. The company has invested $150 million in six companies, two of which, are Tata Group ones. Tata Capital Managing Director and Chief Executive Officer Praveen Kadle, in an interview with Reghu Balakrishnan, talks about the company’s investment strategies and future plans. Edited excerpts:
Are investors concerned over Tata Capital's strategy of investing in companies related to Tata Group?
In India, we primarily invest in companies related to Tata Group businesses. A conflict of interest may arise in valuation or some other terms and conditions of investment. However, we have a mechanism to avoid such circumstances and the independent investment committee, comprising large investors, checks every aspect of the investment. We also have strong corporate governance.
Why does the company’s strategy involve investing in companies that are related to the Tata Group?
We invest in independent companies which supply raw materials or provide services to Tata Group companies. The group's presence in salt-to-software businesses ensures the varied presence of group firms.
How did you explain your strategy to investors?
We discuss which areas and companies we would invest in, upfront. We do not hide any information from investors. We invest in sectors which we know well. For example, we are active in the automobile space and this helps us to know the portfolio companies well. For investors, this is actually an advantage. We know those companies well and we add value to the business. We can also sort out any issues with portfolio firms spread across technology, human resources and marketing. Our operational experience even allows us to explore possibilities of mergers and acquisitions.
Currently, there is no one devoted to head Tata Capital's private equity business. Is this a concern?
We have specialists for funds in each area. My role is to oversee and provide operational support. There is no concern, since we have fund managers with expertise in each space. We have a mix of people from analytical and investment fields from the Tata Group.
What is the allocation of funds to each space and what is the Tata Group's financial role in the fund?
The Tata Group is investing about 10-15 per cent of the opportunity fund. After the final closure, we would be able to calculate the allocation to each fund.
