Grow the wealth: Wealthy join hands to multiply family ‘values’

Family offices like Unilazer Ventures, Hive coming together to invest in new ventures.

Family offices in India, or set-ups that manage and grow the wealth of high net-worth families, are increasingly realising the benefits of tying up with other family offices while investing in ventures, especially early-stage companies.

One such example is Unilazer Ventures and Hive India joining hands to invest in a four-year-old data analytics start-up, Indus Insights. Unilazer Ventures is the investment arm of Ronnie Screwvala and his wife, Zarina Screwvala, who built the media and entertainment conglomerate UTV Software Communications and sold the company to Walt Disney in 2012 for an enterprise value of $1.4 billion.

Hive India is an investment firm anchored by the Patni family, which built IT outsourcing firm Patni Computer Systems, and sold it to US-listed iGate in 2011 for $1.2 billion.

Entrepreneurial families like the Screwvalas and the Patnis, who have sold businesses that they built over a long period of time, are not only looking to invest in new, consumer-focused companies, but also mentoring them. By joining hands with like-minded wealthy families, they can share resources to mentor and invest in a greater number of companies than they could individually.

Amit Patni, a scion of the Patni family and founder and chairman of RAAY Global Investments, which is his family office, says he co-invested with other family offices in at least five companies last year as an angel investor, and is looking for more such transactions in the current year.

“This is a very popular concept in the US and is catching on in India only now, wherein one family evaluates an investment proposal and gets four or five other family offices to invest jointly,” Patni told FE. “One of them takes on the role of a lead investor, while the task of due diligence and following up on the progress of the investee company is shared among the family offices.”

Patni says, going forward, a number of family offices who seek to add value to their portfolio companies will look to join hands and co-invest, as they find this a better way of growing their capital, rather than investing in a private equity fund where they don’t have direct control.

“When two investors who have successfully run businesses themselves jointly invest in a firm, it is hugely beneficial for the latter as they both bring value addition to the table and, collectively, they can remain invested for a longer time,” a well-known first generation entrepreneur-turned-investor said. He declined to be identified. “Such patient capital helps new businesses build a strong brand and scale.”

One of the agencies that is playing a significant role in getting individual family offices together is the multi-family office (MF), which is an entity that supports the complex financial needs of specific families and act as their chief adviser.

Since an MFO advises and is aware of the needs of individual family offices, they can serve as a “natural bridge” between them, says Soumya Rajan, managing director and chief executive of Waterfield Advisors, a multi-family office.

While a single family office is comfortable investing between Rs 10 crore and Rs 40 crore by themselves, any proposal that requires an investment of more than that is usually done along with other family offices.

Since these family offices are privately managed and the company in which they usually invest aren’t listed, details of such co-investment deals aren’t publicly available. But Rajan says deals such as the co-investment by Unilazer and the Patnis cited earlier; the formation of Aarin Capital — a joint investment initiative by Ranjan Pai (MD and CEO of Manipal

Education and Medical Group) and TV Mohandas Pai (former director of Infosys) — and a large real estate-focused alternate investment fund floated by two unnamed family offices, were all examples of how family offices were getting together to multiply their wealth.

All in the family

* Joint investment by family offices a popular concept in the US
* Idea catching on in India, with likes of Ronnie Screwvala and Patni families co-investing
*Deal size of joint investments by family offices typically above Rs 40 crore
* Co-investing helps free up capital and management bandwidth for family offices to look at more proposals

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