“Doing Fewer Things, But Doing Them Well, Is Our Philosophy”

Unlike other private equity firms, True North (formerly India Value Fund Advisors) buys a controlling stake and nurtures its buyouts, managing partner Vishal Nevatia tells BW’s Clifford Alvares:

How is your investing model different?
Our model is unique. We focus on building conglomerates that consistently do well over economic cycles. We like to own more than 51 per cent of our businesses. This accounts for about 75 per cent of our corpus. We don’t do startups or early-stage investing. We like to buy businesses that have revenues of Rs 100 crore or more, say Rs 200-Rs 500 crore, and scale them up to become admired businesses.

Do you run your acquisitions?
Generally, when an entrepreneur has tried various models but isn’t able to scale the business any further, we enter. Our confidence is in the fact that we can run businesses and build management teams. The entrepreneur then owns 20-30 per cent.

For each business, we find an appropriate CEO, who acquires a stake. He runs the business, but our internal business-management team supports and guides the CEO partner.

You started in 1999. How did you go about raising funds and finding companies?
This business was started by Gary Wendt in 1999 when he was the GE Capital CEO and wanted to start a PE fund to nurture businesses. But when Gary went back to corporate life, we decided to continue because we felt it was good for India to nurture businesses. We built a team with a similar thought process and philosophy. We raised funds domestically. But now, 95 per cent of our capital is raised overseas.

Buyouts are not that uncommon anymore, but most companies that are bought by various PE firms have steady businesses. India is still evolving; there are many ups and downs. Hence, it’s difficult to nurture a business. We like the challenge of building a business.

How did some of your early investments work out?
In all, we have invested in 30 companies. Now we hold 15, having exited the rest. One of our early investments was Trinethra, a small retail chain. We scaled it up to more than 150 stores. The Birlas approached us to buy it from us.

ACT, a wired-broadband service in our portfolio, has grown from Rs 50 crore to Rs 1,200 crore revenue now, and continues to grow at a phenomenal pace. The way it has built the business in terms of culture, value, ethics, is outstanding.

How do you identify companies and build on them?
We have a 16-member business-management team and a nine-member investment team. We focus on four sectors: healthcare, financial services, consumer and technology products or services. The average experience of the business-management team is 20 years.

Sixty per cent of what one needs to do is the same across sectors. Yes, 30-40 per cent differs. All our businesses get together every year to discuss challenges. But, yes, having domain expertise is important. And doing fewer things, but doing them well, is our philosophy.