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Innovation, unique structure key to WestBridge's success

The new WestBridge fund has been backed by large global family offices and endowment and sovereign funds

Raghuvir Badrinath  |  Bangalore 

This team of general partners has been together for the past 12 years, something rarely equalled in the Indian venture capital (VC) and private equity (PE) sector. It has raised about $2 billion across six funds and, in the past decade, backed spectacular success stories such as Coffee Day, Vasan Healthcare, Dr Lal Pathlabs, marketRx, Indecomm, Just Dial and And, it has weathered two economic recessions and seems set to capitalise on the current one.

The WestBridge Advisors team, comprising K P Balaraj, Sandeep Singhal, Sumir Chadha and S K Jain, is one of the most recognised in the Indian PE industry. It is now looking to replicate its success in the VC/PE industry in the public market space. WestBridge Advisors’ $500-million fund would primarily focus on public markets, and about 20 per cent of the corpus would find its way into PE deals.

K P BalarajIn 2000, Balaraj, Singhal, Chadha and Jain had come together to launch the first WestBridge fund, with a corpus of $135 million.

Subsequently, they raised another fund, of $200 million. Later, through their partnership with global venture capital fund Sequoia in India, they raised $1.4 billion across three funds. Last year, the quartet exited Sequoia to focus on WestBridge.

“It has been a spectacular journey over the past decade. The new fund is all about being entrepreneurs, being independent. It has been about 18 months since we started investing in Indian public markets and so far, we have invested close to $200 million. We have a long-term view in the public markets space and invest in companies after extensive research and deep understanding of the sector. We would close a couple of private equity deals soon,” Balaraj, managing director of WestBridge Advisors, told Business Standard.

The team at WestBridge has a unique fund structure. “It is a sort of evergreen fund, in which our investors bank on us to increase the value of the asset. It is not a typical limited partner (LP), who would look at taking out their returns after a certain fund life. The fund has a notional life of 20 years and our LPs have the option to press for liquidity after an initial five-year lock-in period,” said Singhal, another managing director.

WestBridge Capital, which raised $500 million in a record period of two months last year, is considering drawing down this pool in three years.

After that, it might be ready for fresh funds. “We take a five- to seven-year view of the companies we invest in, and we build our positions over time. This ranges from $10 to $40 million, as and when an opportunity arises. Currently, we are in an investment mode and values of our investments have grown during the past 18 months. We will start thinking about the new fund by the end of next year to ensure we are ready in case a compelling opportunity arises,” Balaraj added.

Another unique structure of the new fund is whenever an LP wants funds, WestBridge doesn’t have to exit an investee company. “There is a constant pool of capital and we replace the exit with another investor. We are not pushed to a corner for a forced exit from a company,” he said.

The new WestBridge fund has been backed by large global family offices and endowment and sovereign funds, which are happy about the fact that the value of their assets is growing.

“This allows us extreme flexibility to invest across sectors and stages--- from venture to pre-initial public offerings to public markets. We usually tend to focus on emerging companies that have high growth potential and don’t have more than $200-million market capitalisation,” Singhal said.

First Published: Thu, September 13 2012. 00:53 IST