Why flock with the geese when you can be an early bird?

Investor Deven Mehta shares some trade secrets with DNA Money

MUMBAI: Leading garment exporter Gokaldas Exports was a gaggle of 36 entities when Deven Mehta first met the Bangalore-based Hinduja family (not to be confused with the Hinduja family of Ashok Leyland & IndusInd bank) way back in 1987.

It would be a good decade and a half before he would join them as one of their own and almost single-handedly shuffle the 36 entities into one behemoth.

Now 38 years old, this intrepid investor is admittedly the wiser for that experience.
“I am like Rakesh Jhunjhunwala, (the high-networth investor and BSE member), who prefers to invest and trade only for his proprietary account,” quips Mehta.

Unlike Jhunjhunwala, though, he prefers to invest in unlisted companies. And unlike other private equity investors, who are offered deals through investment bankers, Mehta is sounded on deals by word of mouth, and most often by the entrepreneurs themselves.

The risk is understandable. Still, his pipeline of at least 20 offers on any given day would easily be the envy of many investment bankers and private equity investors.
And so would be his experience.

Mehta started work for his father’s firm when he was barely 16 and studying in Sydenham College. Though born with a silver spoon, he is credited with ensuring that SJ group, started by his father Jitendra Mehta some 40 years ago, was steered smoothly from what was a sunset industry to sectors such as real estate and private equity.

“There might not be a single large corporate house or a multinational company who is not under our roster of clients for either buying or selling import licences,” he says. That includes the Tatas, the Birlas and the Ambanis, among others.

“This is a very personalised, service-oriented business, which entails tremendous amount of service at every level. It is one business that is handled in every corporate at a very senior level, even in MNCs. So, this got me a lot of relationships at every corporate house as anybody dealing in exports would need our service,” says Mehta.

Coming back to Gokaldas, Deven proudly says, “I was individually responsible in shuffling the 36 companies into a single entity.” Today, it is one of the country’s biggest employers with some 56,000 workers, and not one union representing them.

Back in 1987, Mehta’s firm, the SJ Group, was the largest intermediary in the import licence trade in the country. It began buying export incentives from Gokaldas, which were traded as export incentives to large corporations who were major importers.

“I would have probably made 400 trips to Bangalore,” he recalls giving some sense of the quantum of work required to get the Hinduja family enterprise to be corporatised.

“It was my plan. I hired the best of consultants such as RSM, the audit firm and Zia Mody, a leading corporate legal eagle, to devise the garment firm’s corporate restructuring.”

Of course, Mehta picked up an equity stake in the garment firm, which went for an IPO. And he exited the firm with bulge bracket profits from his initial investment.  The Hindujas, too, got their investment’s worth as global private equity firm Blackstone bought out their stake.

“The due diligence by Blackstone was completed in an hour, and they got a business which was clean and had customers Nike, Gap and Banana Republic,” Mehta gleams.

For SJ group, which commands a market share of 55% in the Rs 6,500 crore export incentives market, the exposure was god sent, for the market was dwindling what with the government continually reducing import duties.

Today, though, Mehta is well-prepared. He is now focusing on real estate, and has picked up equity stake in a real estate company, Mumbai-based Dev Developers, besides two other companies that have shown a penchant for rapid growth in rail road and infrastructure ?? Innovate B2B Logistics and Bhubaneswar-based ARSS Infrastructure, which is due for an IPO in the next four months, respectively.

He has also wisely diversified into financial ventures, having secured in a broking license from the National Stock Exchange in the nineties.

While Deven is young, he also is ultra-conservative. When he invests in equity or real estate, it is with his own funds; debt, he says, is not for him and leverage is an anathema..

But, with PE firms awash with funds, can he spot the right companies to invest in? Mehta is confident: “We can excel in areas in which we can contribute enormously as we believe in tremendous amount of dialogue, interaction, time and energy in addition to the money we invest in the company.”

A look at his other investments tells the story. Among these is the Ambit House at Lower Parel, which he invested in and leased to the investment bank. Lease rentals flow in every month, even as capital appreciates, since he made the investment at the right time.

The same way, he has bought over 100 acres in Alibaug, on the outskirts of Mumbai, where he says real estate has appreciated 600-700% but still has scope for growth.
Where else near Mumbai can you still get land in acres? The property is located near a jetty, is close to the beach, and has a hilly terrain.

Today, he has only built a beach house for himself on this patch. Tomorrow, there would be beach villas and a boutique hotel on the hill as well.

He is also betting on the Rewas port to bring in a lot of commercial activity in Alibaug as he believes that shipping companies and logistic providers will move in quickly.
j_satish@dnaindia.net