Siddharth Parekh, the younger son of HDFC Chairman Deepak Parekh, has teamed up with childhood friend and Wharton mate Sumeet Nindrajog to promote Paragon Partners, a private equity firm that will provide growth capital for mid-market deals.
The duo is raising its first fund with a targeted corpus of $200 million; the first close is likely to be announced at $60 million in four to five weeks. The private equity firm's advisory board includes Deepak Parekh and Marico Chairman Harsh Mariwala, among others. Mariwala will play a key role in mentoring companies. The venture received the Securities and Exchange Board of India's (Sebi's) approval in August as a Category-II Alternative Investment Fund (AIF); it is likely to make a final close in 9-12 months.
Interestingly, Siddharth Parekh's elder brother, Aditya, had teamed up with his friend Sameer Shroff a decade ago to start private equity firm Faering Capital. The fund is raising Rs 1,800 crore for a second fund and plans to return half the capital it raised in the first fund to investors by March next year.
Paragon Partners will operate in the mid-market growth capital segment and invest between $10 million and $25 million to pick minority stakes in unlisted firms with sales of Rs 100 crore to Rs 600 crore. The fund will focus on five sectors - manufacturing, infrastructure services, financial services, consumer discretionary and household services.
The fund is targeting the mid-market segment with a cheque size of $20 million, as the feeling is that there are a lot of companies here that require capital, and the market is not as well-served as the one for larger deals of $30 million to $50 million. Paragon will compete with BanyanTree Growth Capital, Motilal Oswal, TVS Capital and Tano Capital, which operate in the same segment.
"We will be active, hands-on investors and focus on improving operations," says Siddharth Parekh.
The fund will help investee firms with business development, organisational development and operations improvement.
"Our differentiation is our unique team profile, which combines investment and operational experience, and the advisory board, which will mentor and help firms network," adds Sumeet Nindrajog.
Much of the initial money has come from domestic investors but offshore investors will eventually contribute more than half the money. Though limited partners, who invest in private equity funds, have become more selective, Parekh says the fund-raising environment is better than what it was last year or two years ago.
The fund's advisory board includes other eminent people like Sunil Mehta, who earlier held senior roles at AIG Insurance and Citibank; and Jeff Serota, former senior partner at private equity group Ares, where Sumeet worked for a couple of years in the US. Ares has $15 billion of assets under management.
Siddharth Parekh has over seven years of private equity experience. He was an investment principal at Actis, a leading emerging-market private equity fund with over $5 billion of assets under management. Before Actis, he worked with the International Finance Corporation, investing in the manufacturing & services sectors. Prior to that, he spent two years with the Boston Consulting Group in New York.
He holds Master of Business Administration (MBA) and Master of International Affairs degrees from Columbia University and a bachelor's degree in finance and management from the Wharton School at the University of Pennsylvania.
Sumeet Nindrajog has over 14 years of experience in advising, investing and operating in companies in North America and India. He worked at Ares Management in its private equity group in Los Angeles, and with UBS in the investment banking group. Sumeet is also a co-founder and an executive director at Hoover Automotive, which was a master franchisee for Nissan cars in India.
Before joining HAI's operations, Sumeet managed automobile retail outlets, part of his family business. Additionally, he started and sold two independent ventures in India - a 13-Mw biomass project in Gaps Power, which was sold to IL&FS; and Grande Palladium, a commercial real estate project in Mumbai's Bandra-Kurla Complex, which was partly bought by Marico Industries and JSW Group. He holds a bachelor's degree in finance and management from the Wharton School at the University of Pennsylvania.