Private equity-venture capital space witnesses churning at top


October 2, 2014

Reghu Balakrishnan, Business Standard

Mumbai, 2 October 2014

The Indian private equity (PE) sector has, of late, been witnessing a churn at the top. In the past two months alone, at least six top executives have quit leading PE firms, citing reasons such as starting their own funds, a lack of performance by the existing funds, and entering the e-commerce space, which has recently witnessed a lot of action.

Among the notable exits is that of Kanwaljit Singh, co-founder and senior managing director of leading venture capital (VC) fund Helion. Singh quit two weeks ago to pursue his interest in the fast-moving consumer goods (FMCG) space, according to a Helion statement.

Singh serves on the boards of Attano, Fashionara, Hurix, HummingBird, LifeCell, Mast Kalandar, Qwikcilver, Yepme and YLG Salons. He has also worked with FMCG giant Hindustan Unilever.

Vikram Utamsingh, managing director, Alvarez & Marsal India, said: “In a few situations, the senior PE executives have had success with their funds and have developed a good track record, and now feel it is the right time to become entrepreneurs and raise a fund on the back of their track record.”

Another noteworthy exit is that of KKR India’s PE head Heramb Hajarnavis, who quit this month to set up his own venture. Before joining KKR in 2010, Heramb was the managing director of Goldman Sachs’ principal investment unit.

“We have also seen a couple of PE professionals wanting to move from PE firms that do large-size deals to those that do small- and mid-size deals, as the volume of mid-size deals is quite high. This is because the carry fee that PE executives earn depends on the deals they do and the returns they make on those deals,” said Utamsingh.

According to Sunit Mehra of executive search firm Hunt Partners, the disputes among founders is one of the major reasons for such a churn. “Most of these firms are partnerships driven by first-generation entrepreneurs. Over the past four years, this industry has seen tremendous stress. Inevitably, this phase has had (and will continue to have) an impact on business fundamentals of several of these ventures, and, in addition, has tested relationship between the founders.”

However, a few have joined the e-commerce bandwagon, which attracts a major chunk of talent from India Inc nowadays. Last month, Nishant Verman, vice-president of venture capital firm Canaan Partners, had quit the firm to join India’s largest e-commerce platform Flipkart to take care of mergers and acquisitions. Abhijeet Muzumdar, former vice-president at Bessemer Venture Partners, joined Amazon India to get involved in investments and acquisitions in India. Abhishek Kumar, head of investments at Palaash Ventures, joined Snapdeal with a similar role.

“A mid-level manager in a PE or VC fund is specifically looking at companies that can be invested in or acquired for further growth with a relatively short span of time. Well-funded e-commerce companies that are in a rush to gain both growth and margin are also looking for acquisitions or partnerships that can provide them an inorganic boost. So, there are certainly overlaps in the skill sets needed,” said Devangshu Dutta of Third Eyesight.

Recently, Rahul Khanna, managing director of Canaan Partners, launched a Rs 300-crore ($50 million) debt fund. Khanna is reportedly quitting Canaan and getting involved with the new venture by the next year.

(Published in Business Standard.)