We are uncomfortable with businesses that rely heavily on sponsorship: Anand S Krishnan

Interview with Founder, FidelisWorld

FidelisWorld, the Dubai-based sports, media and entertainment group, has entered into private equity with launch of FW Sports Investment Fund LP, first of its kind PE fund in the sports and sports ancillary space.

FW, established a track record through its proprietary investments, such as Wisden India and the dinner series with Sachin Tendulkar, has announced a first close with raising about $100 million.

Anand S Krishnan, former MD at JP MorganChase, had set up FidelisWorld after retired as CEO of Dubai-based PE firm Dubai International Capital in 2011. Krishnan speaks to Reghu Balakrishnan on rationale behind new fund and investment strategies.

What was the rationale behind launching an exclusive fund in area of sports?

We have always felt that the sports industry in the region, and this means all businesses involved in servicing sport, has been largely untouched by the forces of organized investment and corporate practices.

Despite this, there are plenty of companies that are doing very well in the space. Because no one has really employed this strategy before, the sports universe has never been seen as an industry, with goods and service providers, tech innovators, content creators, and other businesses.

Our thesis has always been to look at creating an ecosystem around such companies where the growth of one can leverage the growth of the other, introduce best practices and proper governance, and apply a level of strategic and financial engineering in order to help these companies compete globally and create value.

What are the investment strategies - areas and size of investments?

Areas of investment are, for the large part, in any sports-related company that can make money regardless of whether a team is winning or losing. We are not hunting valuations, rather we are looking for value. We are looking at real businesses with a strong management, diversified revenue base, and potential to out-compete the market.

For the most part, we are providers of growth capital, partnering with management teams that have proven their ability to build and grow their companies, and supporting them through strategic insights and advice. We will be happy with investing $5-20 million for significant minority stakes to keep founders and management interested in value creation.

There are premium leagues being played in cricket, football and badminton etc. Will these fund be used for investments in teams?

This is not our primary focus. As discussed, we are looking for businesses that have underlying fundamentals beyond valuations built on intangibles such as brand value and hype.

We are uncomfortable in general with businesses that rely too heavily on sponsorship as a source of income. Having said that, we will not close the door on any opportunity that fits within our general thesis and will have a look at teams and leagues on a case by case basis.

Is there any specific allocation for India? and how do you see India as an investment destination?

I think India is a medium to long term story despite rough weather in the short term. We do not have a specific allocation for India, but our investment geography encompasses South and Southeast Asia and the West Asia, in which India is a major market that we cannot ignore.

Current rupee values make for better valuations as we are a Mauritius-based, Dollar-denominated fund. Since we are targeting firms that compete globally, the exchange rates support enhanced exports from India as well. We think the current climate is supportive of our investment strategy more so than strategies that piggyback on domestic demand growth in many of these markets.

 
What could be the exit opportunities for the fund?

We see strategic investors as our main source of exits - either companies looking to lower their cost base or enhance their market footprints. Certain businesses could be mature enough for IPOs. Finally, as the first mover in this space, we feel there is also potential for secondary deals down the line.