IVCA Conclave 2017: Will Allocations in Investment to India Rise?

The Private Equity and Venture Capital Association held an Annual India Alternative Conclave at The Grand, Vasant Kunj in New Delhi on 6th March, 2017. The conclave witnessed a celebrated guest-list. One the first day, the Honourable Minister of State for Civil Aviation, Shri Jayant Sinha addressed the august audience.

The day witnessed eminent panelist lined up on stage to discuss about Limited Partners and their access & control to investments in India & Abroad. To discuss the current global scenario, the event had Ajay K. Kapur, Dy. Managing Director, SIDBI; Vikram Desai, Director, CPPIB India Advisors; Nupur Garg, Regional Lead- South Asia, Private Equity & Venture Funds, IFC; Wen Kui, Senior Investment Manager, China Eurasian Economic Cooperation Funds. This session was moderated by Padmanabh Sinha, Managing Partner, Tata Opportunities Fund and Vice-Chairman, IVCA.

Vikram Desai, put forward his opinions and observations on how his organization (CPPIB Indian Advisors) looked at allocating funds across different countries. He said, “We are currently grappling with the problem of economies of scale rather than that of resources. Once a country like India knows how it can put to use all its resources and begin development projects in many sectors simultaneously it will be simpler to invest. The idea that we are trying to build here is that since every sector is dependent on every other sector in one way or the other. It’s impossible to think of development in one sector separately, ignoring the other. Indian companies (both government and private) should understand that for fund allocations from global organizations there is stiff competition. We as LP’s have to compare global investing opportunities before we decide to choose the best one.”

Ajay Kapur from SIDBI on this note introduced his points, he said, “I would say that in the past few years we have just focused on startups and are greatly relying on them for saving us from the economic doom, or creating employment or driving innovative growth and digital technologies. But we must acknowledge the fact that the past few years have been of major under-performance. Though India PM has made several announcements which has been able to create a lot of buzz for the Indian ecosystem but the larger role remains to ensure long-term qualitative growth which ensure stability too. If that’s possible the funds will flow. Also, I feel domestic pension funds is something we really need to introduce just as much we need venture debt providers. Another aspect I think that is a matter of concern for investors, that entrepreneurs here are quite conservative, and banks today are a lot more into risk-detailing than we think, hence how can you think about global investors being attracted to Indian projects?”

Third in the row to speak was Nupur Garg, from IFC she said, “We have been suffering from insane growth numbers of macro-slowdown and under-performance. It’ not easy to talk about P.E. allocations and the question asked here is P.E. as convincing a case to invest in India? We can actually think about institutionalizing the whole thing, I suppose that can really ease a lot many things along with documentation, which will be really good. We should be focusing on creating good disciplines for a structured industry; I see dependence on venture debt going up in the future. It is one big instrument needed. Also, I feel funds take time to close and we should be on a patient road giving a clear window of 5-10 years rather than hop on a quick-bus to success.”

Wen Kui, also put forth many important view-points from back home, she said, “Investment from the government needs momentum just like the Chinese government supports our ecosystem. She rightly pointed out that the Chinese investors so far had not been keen on investing in Indian growth but the factors now are changing. Kui said, “The P.E. environment in China is over-heating as of now, sky-rocketing valuations are driving-people crazy, losing the sense of what should be the limit to invest in a company, many investor are actually thinking of switching the playground in search of better deals and India for sure can be a big and better play-field as big unicorn stories from here are also talked about there.”

Overall the discussion concluded on a note that some changes are needed in the investment sector to a significant change in many portfolio companies. Secondly, since there is a pressing need to create jobs and a safety net, only then we can expect any change in the consumption patterns. Also other sources of capital emerging domestically are hugely welcome such as pension funds.