Many ideas aren't being worked out due to a lack of capital: Nikhil Vora

Interview with Former MD & Head of Research, IDFC Securities

Nikhil Vora, former managing director and head of research, IDFC Securities, has quit the company. He is in process of launching a consumer-focused domestic venture capital fund expected by next month. He speaks to Reghu Balakrishnan on the plans and the challenges. Edited excerpts:

What are the details of the fund?

We are launching the fund by next month, officially. The fund, with a sweet spot of $1-5 million, will explore opportunities in the Indian consumption growth story — education, media, e-commerce, FMCG, etc.

We expect to raise about Rs 250 crore by mid-2014 and have already got commitments from local investors.

The rationale, when fund raising remains tough for first-time fund managers?

India has a great potential for investments in all areas of consumption. With my 20 years of experience, I have seen many great ideas which could not be worked out due to lack of capital. There are young and first-generation entrepreneurs who bring ideas. We are not concerned about the fund raising challenges, as there are like-minded investors along with us. We want to identify and back entrepreneurs with potential ideas.

What are the major challenges in consumer space for a private equity (PE) investor?

At present, the consumer space is fundamentally becoming a buyers' market and backing a right guy remains a challenge. The space is overcrowded and, hence, the valuation remains high. Originating a transaction is a key challenge for PE or venture capital investors in India. However, we have a strong pipeline for potential investments.

Your priorities for investments?

Early-stage consumption has a lot of potential. Many early-stage ventures on consumption keep evolving. We are confident of adding value with experienced operating partners. A well known chief executive with a consumer company is joining our board (of directors) next month.

Exit options for your investments?

The good part is that all will be in early-stage companies. They need series-2 and 3 funding from growth capital, which will open the exit door for us. Strategic buyers are also keen for start-ups and early-stage ventures in consumer space.