Private Equity in India
In the last decade, private equity in India was over-estimated and now it is undeserved, quoted by McKinsey. So as a job seeker or a professional in the same or different industry, how do you see it?
In this article, we will try to evaluate the private equity in India and go into the nitty-gritty of what worked and what didn’t along with the viability of making it big in private equity in India.
Here’s the sequence we will follow in this article –
- Overview of Private Equity in India
- Private Equity Services Offered in India
- Top Private Equity firms in India
- Private Equity Recruitment in India
- Private Equity Culture in India
- Salaries in Private Equity in India
- Private Equity Exit Opportunities in India
Overview of Private Equity in India
Private Equity in India was very enthusiastic about their future in the early 2000s. Here are the following statistics which made them ecstatic –
- 50% of the total population (which was 1.1 billion at that time) were younger (i.e. under 30 years of age).
- GDP grew by 7.5 percent annually during 2003 – 2007.
- The non-performing assets of banks fell to 2.6% from 9.5%.
- Private investors invested around $93 billion into the Indian market from 2001 to 2013.
But after all of it, things didn’t go as imagined. Rather very rarely Indian private equity peaked (only between 2005 and 2008).
Let’s have a look at the chart below to understand exactly what happened –
So what’s exactly was the issue?
It turned out that the Indian market has fewer private companies than other emerging markets (BRICS).
India has 2600 public listed companies with $125 million in revenue whereas, in China, there are only 1000. So many private firms went public even before private equity firms in India ever reached them. Moreover, India’s GDP has started to decline after 2011.
But things are not as dull as they seem on the surface.
According to McKinsey’s research, it was found that PE-backed companies in India have improved their revenues and also earned profits faster than public companies. That means, it can be said that private equity in India has become a crucial capital source for Indian companies. Private Equity in India did an incredible job by contributing 36% of the equity raised companies in the last decade. During tougher times, Private Equity firms did even better. They contributed 47% in 2008 and 46% on an average from 2011 to 2013.
So, as a job seeker or a professional who is willing to join a private equity firm in India; you may have a glorious chance to be part of this industry which won’t give up on their mission to serve the private companies irrespective of going through tougher times and being exposed to lesser opportunities.
Private Equity Services Offered in India
Private equity in India manages the investments and portfolio of private companies. They research and analyze and help private companies strategize in the long run.
Here’s a whole gamut of services that private equity firms in India offer to private companies –
- Fundraising and Setup: During the fundraising, a lot of things need to be done. Private Equity firms help private companies in sorting out the entire strategy. They help the team to develop the fund investment strategy and also with a pitch book. Along with that private equity firms help companies with deal opportunity and sector analysis, the expected value proposition of the fund, and also with doing the due diligence of clients. Moreover, private equity firms will also help private companies write key components of the clients’ track record.
- Tax & Regulatory Services: Private equity in India can only manage the funds when they have an entire grasp on the tax and regulatory services. Hence, they offer tax & regulatory services as well to the companies who need them. Under this service, they facilitate private companies in fund structuring, restructuring for optimizing the tax, and helping in tax advisory and compliance.
- Risk, Governance & Compliance: Having funds won’t help until companies know how to comply with the regulations and how to utilize the infrastructure well. Private equity firms, thus help companies in mitigating the risks, find out the best fit for the private companies, and facilitate in creating investment manual and in articulating right portfolio management systems and procedures.
- Corporate Finance: In corporate finance, private equity in India can assist private companies in various ways. They serve in deal orientation, project management, negotiation support, valuations, capital structuring, capital raising advisory, joint ventures, and deal structuring. These things are immensely helpful if private companies are looking for growth, profitability, and building a competitive advantage.
- Forensic services: Private equity in India have also been expanding their horizon and working in pretty unfamiliar regions. Here’s one of them. Private equity firms in India help the companies get the corporate intelligence and background checks done along with performing due diligence for the environmental aspects.
Top Private Equity firms in India
In recent times, there are many Private Equity firms in India that have been investing in private companies in India. Following is a list of top private equity firms that have already made their mark in India. The ranking in the list is based on the amount of money raised/invested by respective PE firms –
- ICICI Venture Fund Management: This is a subsidiary of ICICI bank. In the last decade, it has raised almost 3 billion dollars. The head-quarter of this PE firm is situated in the commercial capital of India, Mumbai.
- Kotak Private Equity Group: Kotak Private Equity Group makes investment specifically in healthcare and infrastructure industry in India. Since 1997, it has raised over 2.8 billion dollars and has been one of the most esteemed PE firms in India.
- Chryscapital: It is based out of New Delhi. Since its inception in 1999, Chrys Capital has invested in 50 projects and raised almost 2 billion dollars in PE funds.
- Sequoia Capital: They are world-class PE firms worldwide. In India, they have invested almost 2 billion dollars in the last decade. They primarily invest in energy, consumer goods, and financial services.
- Blackstone Group: They have been in India and aiming at infrastructure and real estate since 2006. They have already invested around 2 billion dollars in a diversified portfolio in India.
- India Value Fund: Primarily it was called GW Capital. It has spread its wings in the year 1999 in the city of Mumbai, India. It has raised around 1.4 billion dollars and this whopping sum is divided among four funds.
- Baring Private Equity Partners: It is one of the oldest Private Equity in India and it started its journey back in 1988. It has raised over 1.1 billion dollars over the last three decades and invested in 53 different investments.
- Ascent Capital: This PE firm has been in India for more than a decade and they have already helped more than 40 entrepreneurs to achieve their dreams. They currently manage 600 million dollars divided into three funds.
- Everstone Capital: This PE firm primarily focuses on the clothing industry and engineering firms. They have been in India since 2006 and they are currently managing around 425 million dollars of funds.
Private Equity Recruitment in India
Even if many people would claim that it is easy to crack the Private Equity job in India, know that unless you have the right background, it is pretty difficult to even get the opportunity.
Here are the candidates which PE firms usually hire –
- Investment banking analysts who have made it big in the top-notch boutique banks or smaller sized banks.
- People who have still been pursuing graduations (of course for junior roles).
- People who have already been working in some other PE firms.
If you don’t belong to the above three groups, it would be difficult for you to breakthrough. But there are few alternatives that you can take –
- First of all, you can pursue an MBA from a top-notch institute and pursue a career in investment banking. Then you can look for an exit opportunity and join a PE firm.
- Secondly, you can work in an industry for more than 20 years, gather your experience and then join a PE firm as a consultant.
- Thirdly, think about corporate development profiles. Money is less in this profile, but the environment would be similar. Then you can switch from corporate development to private equity later in your career.
Now, let’s talk about the recruitment process.
Know one thing for certain – that head-hunters play a prime role in hiring for PE firms. So, if you are not able to please the head-hunters, it would be a tough road for you.
There are usually two cycles of recruitment – on the cycle and of the cycle.
On the cycle, the process begins around October, every year. The PE firms look for Analyst positions in “on the cycle” process. In “on the cycle” process, the decision is made quickly, often within weeks and the offers are rolled out immediately after the interview.
- In “on the cycle” process, if you get interviewed at the beginning of 2017, you will continue working in the banking for another 1.5 years and will start working in the PE firm in 2018.
- In case of “off the cycle” process, once the offer is released you will begin to work immediately. In “off the cycle” process, it takes more time to roll out the offer. It takes more than weeks; even months to decide which ones are the best fit.
So, if you would like to join a PE firm, you need to plan ahead for “on the cycle” or “off the cycle” processes.
Private Equity Culture in India
In private equity, the culture is a bit different than investment banking. Unlike investment banking, you will have a healthy work-life balance, but you will need to learn to handle the pressure. Expect a 12 hour day every day, five days a week in most cases. You will get ample time to socialize and spend time with your family at the weekend. But in a few cases, you may need to put in more hours than usual.
Private equity in India is emerging and there is huge scope for development. Thus, in India, the culture within the organization is pretty dynamic and you need to constantly need to be on your toes to make the ends meet.
Working with multi-dimensional people, going through tons of papers and research reports and managing finances would be day-to-day activities. But if you can stick for a long time, you will make incredible expansion of your position, bank balance, and social influence.
Salaries in Private Equity in India
The private equity market in India is emergent. Thus, professionals who work in the Indian market receive much lesser pay in the private equity industry compared to their European and USA peers.
At entry-level, the average compensation of private equity professionals in India is around $20,000 to $40,000 per annum or sometimes lesser than the range. This is chicken feed in comparison to how much private equity professionals receive in the foreign market.
However, the compensation largely varies on the basis of the size of funds. There are many big funds which have started to operate in India. That means there is a huge growth opportunity for private equity professionals in India and they can expect to receive big pay in the near future.
Private Equity Exit Opportunities in India
If you are looking for exit opportunities, the first question is – “why will you leave PE after all?” And if you really don’t like the job, why did you enter into PE in the first place?
In most of the cases, leaving PE firms mean that you are leaving out your MBA as well.
In the PE market, people hop around one fund to another; especially if they work in the smaller funds in the beginning. PE firms go a long distance if they really want someone in their funds. They may also offer much bigger positions and compensations.
In the USA and Europe, you need to put in a lot of effort to earn big, but in India, once you are through with the initial days at smaller funds, your compensation will drastically increase with experience.
Entering into Private Equity in India isn’t an easy job. You need to have the needed background to crack the job market. And in the beginning, you can only expect decent pay and long hours. But if you can stick for a few years, you will earn much more than you have ever thought.
This has been a guide to Private Equity in India, their services offered, recruitment process, their culture, top private equity firms in India, salaries, and exit opportunities. You may also have a look at the following article for learning more about Private Equity –