Vishakha Mulye, managing director and CEO of ICICI Venture, India’s largest homegrown private equity (PE) firm, estimates PE investments...
Vishakha Mulye, managing director and CEO of ICICI Venture, India’s largest homegrown private equity (PE) firm, estimates PE investments in India to grow at around 25% in 2015, the same as last year. Mulye told Neha Bothra that a number of unlisted firms were hunting for capital to expand and, after having returned $1 billion to investors over the last five years, ICICI Venture would be looking to tap into these opportunities. Excerpts
What is your outlook for PE investments in India in 2015?
Last year, the industry saw about $10 billion in investments, up from around $8.5 billion the previous year. Growth was almost 25% last year and I feel the trend should continue in 2015. PE has become a major funding source for Indian companies. I think this will continue. There are many investors who are interested in India. There are many unlisted companies with great potential.
How are international investors looking at India as a destination?
Clearly, people have high expectations from India. After very long, we have a majority government at the centre with a clear mandate and the will to do things. That has gone well with international investors. India will continue to attract capital if this momentum continues.
A couple of years back, entrepreneurs were borrowing or raising money mainly to give their investors an exit option or to balance the business. Now, they are thinking about expansion and diversification, which is a very good sign. However, I think these are early days and we need to wait and watch whether these intentions really culminate into action on the ground. I am optimistic that if the current momentum continues, one would see some good things happening.
Which are the sectors investors are bullish on?
We like consumption-related sectors, such as financial services and infrastructure services, such as logistics. Within financial services, our focus goes beyond banking, to other financial intermediaries. Insurance could be interesting. Niche non- banking financial companies, which have developed models to deal in specific products, will also be interesting.
Is this a good time to exit some past investments? Are you looking at exits?
Our funds are closed-ended. We invest in companies, hold the investment for 3-4 years and look at exiting at the right time. We are very disciplined in our approach. In the last four to five years, we have returned close to $1 billion to investors.
Our recent fund, in which we invested over the last four years, is coming to a stage where we can explore divestment. We have already started making exits from it.
I personally feel this is the beginning of the growth phase in India. We will keep evaluating and see how we can optimise returns to investors.
How has the response been to your Special Situation Fund (which has a focus on distressed assets) and the real estate fund?
Very good. We closed it at $825 million in 2014. We look at investing in stressed, distressed and special situation cases. We have already invested a significant part of our capital and our deal pipeline is strong.
Our recent real estate fund looked at investing only in near-completion assets and that too in the metros, along with projects where all approvals are in place, to minimise risks. It has done well for us. The product and thesis we used was more mezzanine.
Some of your investors had expressed concerns over the performance of the India Dynamic Fund III. Any update on that?
The fund was raised in 2005-06. The slowdown in the economy, and the events that occurred in the international market, had an impact on Indian realty
too. Plus, regulatory approvals got delayed and liquidity in this market dried up.
Therefore, liquidity in these funds did not come for a long period. We did give a liquidity option to our investors and a significant part of the fund has since been exited.