‘Finally, PE is being recognised as an industry’

Renuka Ramnath was CEO & MD of ICICI Venture for nearly a decade before she started Multiples (Multiples Alternate Asset Management Pvt Ltd), an India focused investment advisory fund that manages over $1 billion of private equity fund. In an interview with BusinessLine , she shares the company’s vision and the ecosystem in the country for PE funds. Edited excerpts:

How has Multiples performed so far? How much money has it?

We should be able to close the $1 billion by the end of April. We have got some of the world’s best institutions. Raising funds for private equity is not that easy. Because it is a blind pole and because we invest in illiquid assets and is long term. If we put ourselves in the shoes of our investors, we can appreciate their position. You have to give all the powers to the managers; you won’t get any money back even in three or four years. There is no open, transparent mechanism to figure out the valuation of the underlying assets as most of the money goes towards unlisted assets. You need lot of consistency from the economy.

How beneficial have the government policies been as far as PE funds are concerned?

It is improving a lot. Finally, PE is being recognised as an industry and the needs of the industry are being heard. Even the new advisory fund regulations are pretty good and cover a broad spectrum of activity that we want to do. We have definitely made a lot of progress. There is still some more journey left to be covered. I don’t think control is something the government is willing to recognise that PE investors will have to control situations.

They made a lot of provisions and regulations which are good if you are just a portfolio investor. But if you are a classical PE investor taking control somewhere to be able to have regulations which are attributable only to PE fund and which will not be misused by promoters because promoter’s job is control. If there are regulations that are favouring us, even the other promoters will misuse the regulations. They may avoid taxes. These are some of the hurdles which they have to still overcome. But they will. At least, we are on the right track.

What is the kind of exposure you have in companies and how much have you returned so far to the investors?

We go all the way. It could range from 10-15 per cent to even 100 per cent. In the first fund, we have returned about 70 per cent of the $400 million we had raised. In the second fund, we had a target of raising $500 million with a sidecar of $150 million. So, we are getting closer to $700 million against $600 million.

Which companies have you invested in so far?

In PVR, we have invested both in the first round and the second fund. We have invested in India Energy Exchange and Delhivery, where we have a significant shareholding. We have invested in Luminous Water Technologies and a Bengaluru-based company called Miltech, which is into making equipment for rice milling. Then there is a small investment in Mogae Media, a start up which provides advertising solutions on the basis of a better understanding of the customers through partnership with telcos. They have done a few joint ventures with German companies for better technologies. They have also launched an interesting product.

If you dial start dot star back, you will be taken to an YES Bank port and you don’t have to remember 1800.

What about e-commerce space? Have you invested in any company there?

We haven’t made any investments so far from the first fund primarily because they are all capital guzzlers and we need to have the ability to invest round after round which our investors might become uncomfortable. Also, that was not the story that we gave during our fund raising. But then, we still wanted to be part of the e-commerce space and hence chose Delhivery. We are also looking at fintech space actively and traditional technology companies which we can migrate to digital opportunities or mobility like cloud.

But how do you look at the overall e-commerce space. Do you think the business models of most of the e-commerce companies are sustainable?

I am not an expert. But it is definitely here to stay. The whole world seems to be going through this discounting war but what remains to be seen is whether the shift is going to happen from not reaching out because I get something cheap to because it is convenient which remains unanswered. But consolidation is good.

For a country as large as India, the three names which are on top of the mind, players like Flipkart and Snapdeal can consolidate their positions and combat competition from Amazon.

They should continue to get funded but at some point of time, the model has to become profitable. Returns are a big issue. You don’t make money from the customers and you lose as well. That there is an irreverence among the customers comes at a huge cost. I think the space is still at an early stage and I expect more consolidation, more people will vacate the space that will allow the bigger players to become consolidated and at the same time have a mechanism to sort out the worthy customers from unworthy customers.

COMMENT NOW