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| Kanwaljit Singh |
A multi-stage private investment firm, Helion Advisors Pvt Ltd (HAPL) has made a couple of investments in the current calendar year. Its first placement was in NetAmbit, a financial products distribution firm based out of Noida in Delhi. A co-investment deal Helion with Bessemer invested Rs 50 crore in the second round of fund raising by NetAmbit. Very recently, Helion invested in a quick service restaurant (QSR) called Mast Kalandar based out of Bangalore. Kanwaljit Singh, managing director, Helion, discusses the firm's investment approach, potential placements within this fiscal and developments with portfolio companies. Excerpts...
Could you throw some light on Helion's investment strategy and sweet spot? Has anything changed in the recent past?
Our investment strategy earlier comprised technology and technology powered companies. However, over two years ago, we added the entire consumer space as our area of interest. This was a big change in recognition of the fact that a big, realistic opportunity existed in the country and it would be interesting to build new businesses in this space over the next five years. While the investment strategy did see some change, sweet spot very much continues to be in the $2 million to $10 million range. The reason being, it gives us flexibility to target very young companies by investing smaller amount as well as look at more mature companies wherein the funding requirement is large. The companies we target for investments are typically in the early to mid stage in terms of their evolution.
You've done two deals thus far. Are there more in the pipeline? Can we see some closure within this fiscal?
We are currently evaluating 5 to 6 deals but haven't closed any yet. A fairly broad spectrum of companies is being looked at for example ventures in the e-commerce space, a couple of them in the education business, retail, healthcare and media companies. While I cannot give out specific numbers, we should be able to close 2 or 3 deals at least. The investment could be anything in the range of $10 to $15 million between the two.
In retail, are you targeting any specific opportunities?
We broadly look at companies focusing on the services aspect rather than a product-based entity. So segments like food and beverages, health and fitness and a few other service areas on an opportunistic basis are being pursued.
A lot of things have changed in the last 18-odd months particularly in the private investments space and more so with respect to portfolio companies in terms of cash conservation and optimising operations. Is the phase over or the pressure continues to exist?
If I break your query into two, the recognition and the focus on conserving cash, being prudent, managing business in a more optimised manner, I'd say the last 18-odd months have taught that lesson. So the generic learning for the industry per se in my view is that, every entrepreneur these days is much more prudent about building a stronger business keeping in mind the growth but not at exorbitant cost.
Having said that, different companies in different stages of evolution will have different priorities. So very young companies will not look at profitability initially and continue investing for growth while more mature companies will largely focus on profitable growth. And there would be a few other companies trying to balance between the two approaches. As for larger businesses are concerned, they would want to look beyond just the core business model.
So it's not a single easy answer to the question of saying whether the phase of focus on cash conservation has gone. I think the consciousness of cash and profitability has increased for everyone. My view is that the focus on profitability as a concept has become much more important now. Overall I'd say it's a crucial lesson learnt by entrepreneurs across the business strata which will be practiced religiously in the years to come.
One of your portfolio companies MakeMyTrip.com went IPO over a couple of months ago. Any particular reason for listing on the NASDAQ and not in India?
There were two or three broad categories for listing overseas. A business like MakeMyTrip.com has some fairly strong global benchmarks and reference points. One of the beliefs of the company board was there will be a better understanding and appreciation of the business of the company there. Second of course is the width and the depth of the investors is much wider when you go to an international exchange and we were advised accordingly that there will be an opportunity to appeal to a larger set of investors and the overseas listing has clearly demonstrated the same.
Generally PE / VC firms tend to exit (partly or fully) when a portfolio goes public, but you continue to hold on to the investment.
We certainly continue to stay invested in the business and hold about 10% stake in the company.
What are your exit plans with this investment?
I can't really comment on what our exit plans will be and the fact that it is liquid the opportunity to exit is always there. We haven't taken a call on this as yet though. Typically, once the company goes public, the avenues for the investors are to sell it in the public market. So it could be trading on the stock exchange, selling to a financial institution interested in buying a block, and so on.
What kind of returns are you sitting on with this investment?
It's been a good listing for us and I'd avoid divulging any numbers.
Given the buoyancy in the current market, what is the best bet between IPO and trade sale as an exit option for PE / VC firms?
IPO versus trade sale is always an option depending on the stage of the company, the opportunity and the market acceptance. And if you look at some of the recent examples, IPOs both in India and overseas have been more rewarding in terms of valuation and market capitalisation. Having said that not every company can go IPO as it needs a certain size and scale and opportunity etc. My understanding is that IPO and trade sale would more or less be on the same footing rather than one below the other.
Are you largely doing pure equity deals or a mix of equity and debt or may be pure debt?
Our mandate and focus is only equity and once in a while or in case of special circumstances we do look at more structured deals that are linked to performance and future targets. We do help our companies if they need to raise debt. However, most of our portfolio comprises young companies for whom debt is not really an option in the initial phase.
Any of your portfolio companies looking to raise more money in the near future?
There are always companies in the market looking for next round of funding. As for our portfolio is concerned, Hurix Systems is looking to raise funds and we are helping them with it. A Mumbai-based entity, Hurix is in the education, publishing outsourcing space. The process has just begun and we are looking at raising anything between $10 to $15 million of growth capital largely to invest in technology and sales and marketing in addition to building a content library. We will be looking at co-investing in this round of fund raising. Another portfolio company that will see fund raising is YLG, which is a salon chain based out of Bangalore. The exercise will begin six months from now so it's a little premature to put a number on the extent of fund raising.
Does platform play also figure in as a growth strategy with any of your investee firms?
I think the possibilities exist with YLG because there are lots of small, local, city level salon chains who will be a very good opportunity to consolidate with YLG. Having said that, we are still in the business building stage, making sure that the YLG model is right and consolidating the operations in the Bangalore market. However, as a growth strategy for YLG over the coming 2-3 years we believe platform play will be one part of the strategy. In fact, the platform play opportunity could be true for a host of our portfolio companies going forward as long as there is a strategic fit with the growth plans.
Helion is currently investing from its second fund isn't it? How much of it has been invested already? Any new fund raising plans in the pipeline?
We have two funds of which the first fund the size of which was $140 million is fully invested. The placements being made now are from the $210 million second fund and we have invested just about 50% of the entire corpus as yet. Our typical pace of investing is anything between 4 to 6 deals in a year. I think we have enough money to invest and new fund raising will take some time to happen may be after we have deployed around 70% or 80% of the second fund.
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