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Today, most GPs (fund managers) are struggling to get out of theirloss-making investments... Like a number of other emerging markets, India, too, went through agold rush phase, when the PE universe discovered India (2006-07).With this, came the attendant ills of oversupply of money, shortageof seasoned fund managers, and high-entry valuations. PE investingwas about placing bets on exciting young companies that couldsustain extraordinary growth rates and, therefore, high valuationseven at the time of exits or momentum investing, in short. Clearly,this is not the PE proposition, and it is evident now that it isnot sustainable through the inevitable economic cycles. So, what"s the solution? A credible business model for PE needs to revolve around theinvestor — either by helping a company to move into the nextleague or by fixing a financial or operating problem or by fundingand backing an inorganic strategy. Simult-aneously, a clearunderstanding between investor and entrepreneur regarding exithorizons is an absolute must, to avoid discord and conflicts ofinterest. What actions do GPs need to initiate? Execution of such a business model requires a skilled andexperienced team, which has seen the cycles. But most importantly,it requires the ability to engage effectively with Indianbusinessmen to gain their trust and cooperation. Being a PEinvestor does not entitle us to returns, but genuine value creationand problem solving for businesses do. A class of promoters inIndia values this, and is more than willing to enable suchinvestors to make good returns. What changes do you notice in promoters" attitude? Indian promoters have begun to appreciate the PE proposition muchbetter over the last few years. They have also begun todifferentiate between different categories of PE funds, and are ina position to decide who they want as partners, keeping aside thevaluation issue. Events of the last few years have underlined theimportance of compatibility between inve-stors and promoters, bothin terms of achievement of a business plan and exit agenda for theinvestor. As a global PE firm, how do you differentiate India from otheremerging Asian markets? Loss of confidence and enthusiasm among the Indian businesscommunity is certainly a cause for worry. Add to this themacroeconomic challenges, including the currency and governanceissues, investing in India becomes a difficult proposition. Other markets in Asia certainly have fewer problems to deal with atthe moment and, hence, doing business and closing deals arecertainly easier. Having said that, a bottom-up approach toinvesting in Indian companies is likely to provide betteropportunities, due to the negative sentiment overall. How do you evaluate the government"s recent PE regulations? The clarity on tax issues is certainly helpful and the certainty iswhat people look for. However, it is important that there are nomore twists and turns. PE is India"s most promising source offoreign direct investment and should be encouraged. How supportive are other Asian governments? PE is welcomed and reviled in turn in most countries, depending onthe country"s economic situation and political context. Eventhe developed world goes through these cycles. The ease of doingbusiness and certainty on the regulatory front are the two bigfactors India needs to fix. China and Southeast Asia have done agreat job on these fronts. What"s the rationale behind your mezzanine fund in India? It is an addition to our PE business. We see a number of businesseswhere promoters are not willing to dilute their shareholdings dueto market conditions and low valuations, but yet need financing tocomplete projects or fix their capital structures. Mezzaninesolutions are increasingly being used to bridge the risk or returngap for both investors and promoters. However, a number ofmezzanine structures that work globally are not easy to implementin India due to regulatory complexity. SCPE exited Endurance successfully through a secondary deal. Butexiting Powerica through on initial public offering (IPO) is yet tohappen. So, how significant is it to exit through secondary deal inIndia? The market for secondary PE deals is pretty well developed in manymarkets, and is increasingly getting traction in Asia too. Thesustained downturn in the public mar-kets/IPOs is a major reasonfor this. We will continue to be open to all avenues, as long asthey meet our and promoters" requirements. SCPE has not made investment in the last seven months. Are you in await-and-watch mode or is it a deliberate decision of not beingaggressive? Our activity levels are pretty good on all fronts, and we have someirons in the fire. We are high quality suppliers, our products such as Aluminium Bottle Caps Manufacturer , Lip Balm Tubes Manufacturer for oversee buyer. To know more, please visits Lip Balm Tubes.
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