Renuka Ramnath raises funds for next PE play

Renuka Ramnath, former ICICI Venture veteran and currently founder & managing director of Multiples Alternate Asset Management successfully garnered $250 million for the first close of its maiden private equity fund. While Indian Overseas Bank and Andhra Bank are the cornerstone investors in the domestic fund, the international fund has been anchored by Canada Pension Plan Investment Board (CPPIB) and Commonwealth Development Corporation (CDC).

Ramnath, in conversation with DNA, said that the maiden fund, christened Multiples Private Equity Fund, will be a sector-agnostic with a target corpus of $450 million. The fund’s investment strategy will include making long-term growth investments in mid-sized Indian companies, management led buyouts and spin-offs of divisions from large Indian groups.

Could you tell us a little bit of the investors that you have on board?
I, currently, have both domestic and international investors. In the eventual game, I expect it to be around 1/3rd domestic and 2/3rd international. From the domestic, I have 7 Indian institutions. The cornerstone investors are Indian Overseas Bank and Andhra Bank. There are few other institutions such as LIC, Punjab National Bank, Sidbi, as well as, a few others. On the international side we have CPPIB. This is their very first investment in India. We also have CDC.

We are also talking to a number of international pension funds; there is a lot of interest in investing in India right now. We are going through various levels of diligence and completion.

Do you have any cap on how much money would come from domestic and how much from international sources?
I am quite indifferent as to whether the money comes from international or domestic investors. I want to raise money from people, who have investment experience of investing in a product like this since it is a fairly long-term product and an illiquid product.
I want to only raise money from experienced investors so that they stay with you for the full journey and are genuine partners for you as you build the fund.

What is the time horizon that the fund is looking at?
The fund life is 7 years while the investment period would be four years. I expect about 3/4th of the fund to go into expansion capital. May be 30-35% on carve-out where we buy non-core businesses of large conglomerates. Otherwise, I am quite excited to provide expansion capital to predominantly first generation entrepreneurs.
It’s a sector agnostic fund. I would not be doing any real estate or hard infrastructure transactions out of this fund.

This fund intends to invest more in the services business, knowledge business rather than in hard infrastructure.

Could you elaborate on where you see opportunity in the services segment?
It would be BFSI, it would be education, healthcare, media, but I don’t want to invest in very low end services, where there is no unique value proposition. I would much rather invest in a small company, which has a high margin and a high value-add rather than a large company which is in a me-too business.

What kind of deal sizes are you looking at?
Our sweet-spot would really be Rs 100-150 crore. Of course, our investor base is a very strong base consisting of people who want to put hundreds of millions of dollars into the markets. So we could look at a $50 million dollar transaction where we do probably $25-30 million from the fund and bring our own investors into the transaction. All our investors are very keen to have co-investments.

Could you elaborate on the buyout strategy of the fund?
I am completely sector-agnostic on that front. I would like to invest in any business which is generating cash and has a sound management. The management should be good, I am not very keen to go and buy businesses where I have to change management, but I am very happy to help managements buy their own business.

There were reports about you raising over $500 million fund, is there a correction in the overall corpus to be raised?
I don’t want to do that, because this is the first fund and I want to start with a size that I am confident of managing successfully something that has been profitable for me in the past. I don’t want to be in a competitive landscape, where I am competing with some of the large international funds at this point in time.

Did you have any specific hurdles in raising the money, since people have been talking of the difficult environment trying to do so?
I have a very competent team with a wealth of experience and successful track record. We have chosen a sweet spot where being a truly Indian fund would give us a lot of advantage. Our decision making is going to be local, we will have an ability to assess and take risks where other people may find that these are not risks that a private equity fund should comfortably take. There are many advantages that we have and I must say that my fund raising experience has been very smooth and systematic.

How long before we could begin to see deployment of the funds raised?
That is only a less than a month-old exercise. The desire is to put the money out. My desire would be to transact within the next six months, but we would have to see whether an attractive enough opportunity comes up.

Would you also be looking at acquiring existing investor stakes from people who are looking to move out?
Only if that results in control for us, otherwise no.

Will you look at structured debt?
No, it will be a pure play private equity.