As the private equity industry expands in India, fund managers are partnering industry veterans to micro-manage their portfolios and add value to their investments. A number of senior officials, such as Arun Nanda, S Mahalingam and Girish Paranjpe, have joined or set up PE funds following their stints in large-cap firms.
“As funds are making bigger deals, you need a certain skill set to work with the management alongside the regular investment partner,” says Gopal Srinivasan, chairman at TVS Capital Funds. The firm recently roped in former Tata Consultancy Services’ chief financial officer S Mahalingam, and got him on its advisory board. “India has a talent pool of people who have experienced both pre- and post-liberalisation periods,” he adds.
PE funds admit that deep sectoral knowledge comes with hiring an industry expert as either a senior advisor or operating partner. Firms like Advent International hire a few operating partners on a part-time basis and use their expertise for specific companies.
“In terms of sourcing interesting opportunities, diligence on board, they (industry veterans) come with tremendous experience. The best deal-makers in the world do not have sectoral expertise,” says Avnish Mehra, director at PE firm Advent India PE Advisors. Vikram Chhatwal, former head at Reliance Health, was the force behind Advent acquiring a majority stake in CARE Hospitals.
“This is a standard predictable way ahead as private equity funds share the same view as how a CFO would look at a company in terms of growth, benchmarking, next set of investments etc,” Srinivasan of TVS Capital said.
Many PE funds have roped in veterans to help them run portfolio companies across sectors. At times, even senior executives in a company feel the need to enhance entrepreneurship by starting a fund . Former Infosys veteran TV Mohandas Pai is a case in point — Pai set up Aarin Capital and Exfinity Fund to help startups apart from his other education ventures. Alok Misra, former CFO at BPO major WNS, was hired as senior vice-president at PE firm General Atlantic.
“I see this as a growing trend, to create good investments and add value. As the sector matures towards adding value and doing things differently, this phenomenon will only gain strength,” says Mehra of Advent India.
Challenges also come with hiring experts as they are new to the PE style of working. “Not many high-level management executives are comfortable with the part-time nature of work,” says a fund manager who does not wish to be named.
“Also, companies have a stable workload throughout the year unlike PE firms, where the pressure is deal-specific. This leads to volatility in work hours,” he adds.