Have 5-6 portfolio firms planning IPOs: ChrysCapital's Sanjay Kukreja

ChrysCapital, one of the largest and most established India-focused investment firms with over $6 billion in assets under management, is exploring investments in areas such as enterprise tech, financial services, pharma, healthcare, consumer, manufacturing, and new economy sectors, said Sanjay Kukreja, partner and chief investment officer (CIO), ChrysCapital. In an interview with Peerzada Abrar, Kukreja also said that the environment for companies going public is facing some headwinds, but better businesses will continue to go public despite cycles. He said ChrysCapital has five to six portfolio companies planning IPOs in the next 18 months. Edited excerpts:

 

What inspired you to pursue a career in private equity and investment management? 

I was still in school when I fell in love with investing and started investing very early on, largely in listed markets at that time. It became a passion. I started reading books on investing, starting with One Up on Wall Street by Peter Lynch, followed by Warren Buffett's works and Benjamin Graham's value investing books. This early influence led me to pursue economics honours from SRCC and later a finance-focused business school education. I always wanted to make a career in investments, and when ChrysCapital was being set up, I joined at its inception. Over the last 25 years, I have played a role across various sectors, from financial services to enterprise tech, and for the last five to six years, as the CIO across sectors.

 

What are some of the most successful investments you made at ChrysCapital? 

One of the earlier deals I did back in 2003 was Shriram Transport. It was a $25 million investment that returned over 10x, helping return our $250 million Fund 3. Investing in an NBFC consumer finance business focused on truck finance was contrarian at that time, but we believed in the potential of organised finance replacing money lenders for truck operators. The company scaled its market share from under 5 per cent to over 30 per cent, delivering immense returns.

 

Another standout was Mankind Pharma. We invested when it had under Rs 500 crore in topline, focusing on affordable medicines for small towns rather than top-end, high-priced drugs. Supporting their market strategy led to them becoming a multibillion-dollar company with an over Rs 80,000 crore market cap.

 

We also had successful investments in enterprise tech companies like HCL Tech, KPIT, and Mphasis. The common thread was backing grounded, hands-on founders who were not afraid of being different and executed their strategies well.

 

Any major learnings from these experiences? 

The common thread is backing grounded founders who are hands-on and have a relentless focus on execution. Investing in unconventional sectors or strategies often pays off. For instance, Infogain's US-centric IT services thrived despite the trend favouring offshore models, proving the importance of being close to the tech hub.

 

After being convinced about the management team, we look at business quality and how we could constantly improve that over time. Some of our best returns came from backing the best entrepreneurs in really good businesses that were differentiated and had a sustainable moat (competitive advantage).

 

How has the investment strategy changed over the years at ChrysCapital? 

The fundamentals remain consistent. A good investment strategy is one that retains its essence through multiple cycles. The core of our investment strategy is building deep expertise in a few sectors with a combination of investing and operating skill sets.

 

At a portfolio level, we would perhaps have the highest return on equity (RoE) or return on capital employed (RoCE) on a look-through basis of our companies of any PE firm in India, and I believe that has been at the heart of delivering consistent returns through cycles.

 

The investment strategy has evolved more towards deals where we have a controlling stake over time. From under 10 per cent of our portfolio a decade ago, we now have greater than 50 per cent control or joint control in our companies.

 

We transitioned from value investing to paying fair prices for high-quality businesses around 2010-2012. We are comfortable investing in businesses that do not really need capital, focusing on quality management, high return on capital businesses that are scalable, with reasonable pricing, and adding value through our expertise.

 

Over time, we have also done more deals in the US-India corridor.

 

What is the fund size now, and what trends are you most excited about and exploring? 

Our AUM (assets under management) is over $6 billion, with our last fund at $1.3 billion. We focus on enterprise tech, financial services, pharma, healthcare, consumer, manufacturing, and new economy sectors.

 

We see potential in manufacturing, healthcare, and financial inclusion, driven by India's growing wealth and demand. We raise new funds every three to four years and will make announcements at the right time.

 

What growth do you expect in the Indian economy in the next five to six years, and how is ChrysCapital preparing for it? 

We expect 6-7 per cent GDP growth, with 12-13 per cent nominal growth, including inflation. Targeting sectors with 15-20 per cent growth and strong market share gains can yield over 25 per cent IRR (internal rate of return). India’s strong talent pool and entrepreneurial spirit support this growth.

 

What kind of impact do you see global economic trends and AI innovations having on your investment decisions? 

Macro challenges are unpredictable, so we focus on good sectors, strong entrepreneurs, and management teams to navigate them. Differentiation becomes apparent in challenging times.

 

Regarding technology, we assess whether it is a headwind or tailwind for our investments. For example, during Covid, we shifted from financial services to tech businesses like Lenskart. We stay vigilant about technological impacts and avoid sectors likely to be disrupted.

 

With many PE and VC firms in India, how does ChrysCapital differentiate itself? 

India still has a capital deficit relative to the growth opportunities in front of it, so there is plenty of scope for the private equity market to grow and flourish.

 

We differentiate through sector expertise in our core sectors. Having returned over $8 billion across 80 exits and 25 years, we have navigated cycles well and created a respected track record.

 

That differentiates us in our ability to win deals and add value to our companies. We have also uniquely managed a very successful founder transition. Our team has been relatively stable, and we have a great culture at the firm, making the journey enjoyable for everyone.

 

How do you view the IPO scenario in India? 

Indian capital markets are becoming deeper and more resilient, with domestic savings mitigating foreign outflows. The environment for going public is facing some headwinds, but better businesses will continue to go public despite cycles.

 

We have five to six portfolio companies planning IPOs in the next 18 months.

 

What long-term impact does ChrysCapital aim to make, and are any policy changes needed? 

We aim to make capital accessible for scaling world-class businesses in India, removing capital constraints for the best businesses.

 

Policy-wise, reducing compliance costs is crucial for business growth. India is at an exciting juncture, with the next 15-20 years presenting immense growth opportunities.

 

I am optimistic about India’s future and confident that with the right focus and effort, the country will achieve remarkable milestones.