Scouting for private equity deals is the KKR India chief’s job, but he continues to argue India needs an active corporate bond market if the economy is to do well.
He says he doesn’t really miss the hurly-burly of banking. The excitement of the trading desk perhaps, but not the endless review meetings, or the compulsory networking. Having crossed over to the buy-side after 25 years at Citibank, Sanjay Nayar’s rediscovered the calculator and is crunching numbers. An out-and-out outdoor person, Nayar, now head of Kohlberg Kravis and Roberts (KKR) in India, says he’s glad he has made the switch from debt to equity and rues to the fact that the corporate bond market in India has still not taken off, writes Shobhana Subramanian.
We’re at the Indigo, the tony restaurant in South Bombay, just off the bustling Colaba causeway, one of Nayar’s favourite eating places. With no sign of the rains, already ten days late, the weather is ideal for a beer. So we decide to split a Kingfisher and make a shandy of it. It’s probably also a good time to be out at sea — Nayar never misses a chance to go sailing on the weekends with friend Adil Zainulbhai, McKinsey India’s managing director, though he says they end up drinking too much beer. That’s not a worry though because Nayar’s a regular at the swimming pool, the jogging track and the tennis court. And there’s the few hours at the golf course over the weekend. In fact, he’s spending more time staying fit these days because there’s less networking to do. A true Libran, striking the right work-life balance, Nayar is enjoying himself in the world of private equity with a couple of deals in the pipeline. What could be the predominant India-themes in the next few years, I ask.
Consolidation, he says, has to be a play simply because there are far too many players in each sector. Apart from that, Nayar is looking to try and somehow capture the inclusive growth and rising rural spends. It may mean one is playing in more non-institutionalised and fragmented spaces, like agricultural services for instance, but several of these companies, he believes, have a long run ahead. Within the more organised segments of industry, Nayar is hoping to first pick up some larger companies, help them grow further, perhaps even go global. In both instances, he would like to back the right promoters, build the right team and create scale with the help of KKR’s global expertise in operational value-add. The third theme, which India will present, but which he feels is still some time away, is restructuring and distress opportunities. “We have strategic capital and we’re clear we have to play to India’s strength, which is entrepreneurship, under penetration of consumption, finance and infrastructure.”
How does he plan to bring in the value-addition at the operational level when promoters in India don’t want to let anyone near their business? It’s true, he says, it’s not easy in India when you’re a minority shareholder unless you have the right relationships. “So, it’s important who you’re working with. It’s true that people have promised value and not done much in the past. But we’re not passive financial investors,” he asserts. It’s a pity though, he says, that there aren’t too many unlisted opportunities and we laugh about how so many companies rushed to list during the IPO boom.
We decide to skip a soup and Nayar opts for just a sesame-cured tuna salad which he’s tried before — he wants it made with fresh tuna tossed with lettuce and arugula leaves. He recommends I try some fish and I pick the red snapper with corn sauce and potatoes. Citibank must have been a tough place to work in, I ask, since the politics there is legendary. Nayar concedes that may be true. It is possible, he says, that the level of politics may have been higher in Citibank than perhaps in an HSBC or a Standard Chartered or some of the other universal banks. “That’s possibly because Citi is driven by ambitious and high achievement-oriented people. It’s a bit like the ICICI of foreign banks — aggressive, innovative, ambitious,” he says, adding that Citi saw ICICI as competition and he’s sure ICICI saw Citi as competition too, at least in some spaces like consumer-banking or wealth-management.
He admires the scale that ICICI has built but feels the banking system in India needs to be far bigger if India is to post a higher GDP. “We’re much too small and fragmented, so we need to get that right, perhaps the PSU banks need to be capitalised further,” he suggests. Also, Nayar believes, in a capital-short country, a vibrant corporate bond market is a must. “I agree that we shouldn’t just open up the debt market to foreigners blindly, that could create too much volatility. But we need to channel savings into the infrastructure space and so companies like L&T, for instance, should be allowed to tap the bond market for long-term debt-capital. I’m sure people would invest in these.” Together with that what Nayar would like to see is a market in interest-rate futures so that there’s better price discovery. And a build-up of long-term liabilities and savings in the system through encouraging pension and insurance. Otherwise, he points out, over a longer period, there will be no long-term capital that the economy can use.
His favourite banker is, of course, is wife Falguni, his batchmate at The Indian Institute of Management Ahmedabad (IIMA). He chuckles at the thought that she’s working harder than he is these days, with every company looking to roll out a qualified institutional placement (QIP). He pretends to be peeved that that she goes trekking with her women friends while he can’t find anyone to go trekking with. Not much of a reader of fiction, Nayar feels he now needs to find himself some hobbies.
We ask for some coffee and I ask if banking has become tougher these days. In some ways, yes, says Nayar, who misses businesspeople like the late Aditya Birla. “He could be a great negotiator but he would always reward you, the follow-ups would happen immediately and we’d get an answer either way. His level of awareness was amazing, he would know it all: What the bankers were doing, what the vendors were doing and he would point out the variances. I miss that level of involvement and follow-up.” Right now though, more than anything, he’s missing his children — twins Anchit and Advaita — who are studying liberal arts in the US and will soon turn 19. And looking forward to a skiing holiday with the family.
