Rahul Bhasin, managing partner of Baring Private Equity Partners India, acknowledges that private equity is tough business and more so in our country, but he tells Sarika Malhotra that he?s still bullish on India.
It?s mocha that we finally settle for, after deliberating over herbal tea, a soft drink and coffee. As we settle down in his cabin for a chat, one can?t but miss the effort that Rahul Bhasin makes to put one at ease, be it the comfortable choice of seating, or the array of beverages he offers. The cabin is adorned by inspirational quotations, goals and how to reach them, with Confucius an all-time favourite. ?I am completely a pro with borrowed feathers, I borrow little pieces from everybody,? reads out the 46-year-old managing partner of Baring Private Equity Partners India, one of the oldest and more successful private equity firms in India (it has grown over 30% in the past 12 years).
He tells you it was quite by chance he stumbled upon private equity?in fact, it was a flight from Delhi to London that changed everything for the IIMA graduate. ?I was seated next to the global managing partner at Baring, Richard Onians. It was a nine-hour flight and we chatted right through. I found the concept of private equity very interesting and wanted to try my hand at it. I knew nothing about private equity; it was just finding feet in India then. At 33 years of age, I took the plunge, and learnt everything on the job.? This is quite a revelation from a man who, in his first job, worked as the youngest independent treasurer ever for Citibank at 26.
But today private equity is a different story in India. As the PE space gets hotter, how does the man rate the trend of a flurry of funds and heightened activity? ?India is the most crowded PE market in the world. There are more dollars per unit of GDP than anywhere else in the world. Our capital markets are more developed than the rest of the world relative to our stage of development. You juxtapose these and you have a not very PE-friendly environment. In China, the typical PE deal is done at one-third of an IPO price. In India, people look for PE to match the IPO prices or even at a premium. People have got so used to such rich valuations that they think it?s the norm. This is just a reflection of the excess of capital supply versus investable assets. The size of capital available for PE compared to the opportunity set is very large. In absolute dollars it?s not that large?what is $20 billion? But compared to the opportunity set, it?s very large. That?s the big challenge,? cautions Bhasin.
In fact, many observers have pointed out that anybody who has money in India is opening up a PE shop. Bhasin insists this has been true in India always. ?There was a time in India when everyone wanted to open a polyester staple fibre company and they did. Then cotton spinning became a rage and everyone got into it; followed by aqua culture, NBFCs, IT, dot-com and now PE. One has a fair idea of what happened to most players in each of these waves; we will have a similar outcome here too. Of course, it will distort market dynamics for a while, which is why we need to keep raising our game and can?t afford to keep still,? he says.
Bhasin recalls when Baring started operation in India in 1998 there were almost 40 funds in India, of which only six are still around. ?That?s the untold part of the story. Only new announcements are reported; when they shut down, they go down quietly. The PE industry in India is very young and needs to find its feet. Importantly, it?s very different from the PE industry in Europe and the US, the home grounds for this industry. So anyone who has tried to copy a successful model here has struggled,? he says.
Bhasin affirms PE is a tough business. ?You have to keep getting better at what you do. The rate of change is higher than it has ever been; people miss this one fundamental insight.? But Bhasin is extremely bullish on India, ?I am an eternal optimist. Given the potential of the economy, if there were adequate policy reforms, the investable universe will expand and all the excess capital will get absorbed and valuations become realistic. You cannot develop in isolation; if you do that then you are looking for needles in a haystack for businesses that will succeed. So, policy reforms are the key.?
As we sip the coffee, one can?t but ask how does it feel for the man who has spearheaded Baring in India. ?I am just doing my job, the way you are doing yours.? So Bhasin clocks in at office daily at 7 am. ?Yes, but that?s mainly to avoid the traffic, no other reason,? he quips. And what really drives Bhasin in the private investment space? ?You can facilitate the growth of excellent organisations, see them grow, participate and contribute to them. I had met my financial goals in life when I was 29; it?s a little difficult to motivate oneself only on the basis of a pay cheque.? So is philanthropy next in line? ?We have a very clear division of labour within our family?my job is to earn, my wife does the philanthropy. There?s a lot to do where I am and I am loving it.?