We're the go-to firm when it comes to mid-caps: Equirus MD Ajay Garg

Equirus Group, a niche investment banking player, is in expansion mode: A startup fund and a GIFT City foray to tap into foreign investors and wealth management clients. Federal Bank holds a 20 per cent stake in Equirus, with the late Rakesh Jhunjunwala at around 12 per cent. AJAY GARG, the firm’s founder and managing director, wants to be in a position to leverage opportunities en route to a $3 trillion economy. He spoke with Raghu Mohan. Edited excerpts from a video interview.

Can you give us an overview of Equirus Group as it stands today?

Equirus is well poised to have leadership in five broad business areas: Investment banking (which includes equity, debt capital markets), advisory, equity business, wealth  management, and insurance broking. On top of that we are very deeply focused on five verticals from a sector perspective. These are financial services, consumer, health care, industrials, and infrastructure where most of our transactions revolve around the capital raising, M&A advisory, institutional equities, wealth management and insurance.

How are you positioning Equirus vis-a-vis homegrown firms which have come up in the last 20 years?

Equirus is the only mid-market firm that is able to partner with clients who are trying to figure out what is best suited for them vis-a-vis private equity (PE) raise, capital market solution or M&A outcomes. Most homegrown firms have built expertise in one of the above and are constrained with their ability to look at only PE or capital market and feel that’s the best for the client – rather than having the expertise to understand the interplay and work accordingly on their advice. That’s the type of domain expertise built by bulge-bracket firms which have been there for the last 30-40 years. The desire was that we also bring the same level of ability to mid-market companies.

We are the most uniquely placed firm because the boutique advisory firms or various others that only focus on advisory, at times miss out the capital market opportunity. Also, capital market focused banks, at times, miss out on the opportunities in the private market. Our approach is more from what the client would need rather than saying whatever the firm can deliver; and that sort of makes us the only client-centric middle-market firm which can figure out the right solutions.

You are up against established names. Be it some of the large private or foreign banks.

When I started my career, foreign banks used to have the largest share, but over last 10 years domestic firms have the larger share. And more importantly, we are looking at $3.3-trillion in GDP going to $10 trillion in the foreseeable future. With that kind of market expansion, and the type of expertise we are building as a firm, we become more or less the go-to firm because we are a uniquely placed organisation, where we do have a bank as a minority partner. As an institution, we are also very entrepreneurially driven. We have 80-plus employees as shareholders.

What is the thinking behind your startup fund?

As we expand our wealth and asset management platform, we wanted to build further on the successful track record in the smallcap funds where we have touched Rs 1,000 crore in assets under management. Our clients were looking at alternative investment vehicles in terms of the startup ecosystem. 

A related issue is that of exits via initial public offerings (IPOs) for startups. Are we at an inflexion point between building sustainable business versus just chasing valuations?

The debate is very much settled given the meltdown of valuations of some of these businesses – both in public and private markets. At this point, there’s only appreciation of business models which are seeking to return capital from operations; and we are also seeing all these companies talking on similar lines. That is, there has to be profitability and return of capital to shareholders.

How do you see this influencing your startup fund’s investments?
 

Based on how capital markets react, entrepreneurs will model themselves, and so you will see it in three formats. One is clearly that there will be a lot of entrepreneurs who have reached a stage where they can’t do anything about their business models, so they will become an acquisition target. And second, there will be a bunch of them who obviously have got a sense of the way the markets are looking, will remodel themselves and successfully transform.

They have strong management teams with the vision and capability to transform and disrupt. And the third are entrepreneurs who are at an early stage of evolution – I think they will be more aligned to building it out in a framework where you just don’t burn capital, but also make a business model which allows you to return capital.

What’s driving your interest in a GIFT City licence?
 

Given the success of our smallcap fund, we wanted to take that product to our international relationships – let foreigners and non-residents invest. We thought that the GIFT City vehicle was a good opportunity to do that. -We have sort of set up a vehicle there and that will give us the ability to get non-residents to put money into our fund.