Multiples Alternate Asset Management, which is weeks into raising its third fund, targeted at $1.1 billion, expects to close the fund in the next three to four months, says founder Renuka Ramnath, adding, while the market today is much more competitive than earlier, there are sure-fire signs of maturity.
The mantra for the third fund will not differ vastly from the second one that Multiples raised. It is a micro-winner strategy, involving acute evaluation of the firm to be invested in, considering factors such as investment thesis, entrepreneur evaluation, rights in the deal, exit strategy. Additionally, the macro-economic factors cannot be overlooked as, when acting together, they give the tailwind for growth and ensure two to three times the growth of an average peer group player. “The options are better in a high-growth market, albeit at higher valuations, because you see more options in a wider funnel with a higher number of deals,” says Ramnath.
The company will focus on entities in the financial services, consumer businesses, technology, pharmaceuticals, health care, and human resources sectors. Recently, Multiples has funded Peoplestrong, Arvind Fashion, Encube, Dream 11, Sanctum Wealth Management, she says. It also has stakes in listed firms, including RBL Bank and Natco Pharma.
"Two decades ago, if you asked around, people would say private equity was money given to young companies," Ramnath recalls, saying the concept has always been embedded in venture capital. But, now it has taken the center-stage in a mature corporate environment involving more than growth capital, and can also be used for value discovery. Over its lifetime, Multiples has invested in 19 companies and committed Rs 50 billion to Indian companies and entrepreneurs. The company's second fund has invested in nine companies since 2017 and in the last financial year, it has funded four ventures.
The founder points to other opportunities such as housing finance, estimates it to be at least a $100-billion market, and explains why they took an 85% stake in Vastu Housing Finance in 2015. Speaking about her commitment to put Rs 1 billion a year for four years in it, she says, “We looked at all the existing players and there were big companies and also small ones. Instead of assuming a minority position in a small, unlisted firm, and waiting for the entrepreneur to scale up, we found a team with passion and decided to back them all the way,” she says.
More importantly, she says for Multiples, now 8 years old, building an institution that will outlast the superannuation of its core team is the key. "Our core team at Multiples comprises six senior experienced professionals, who are the backbone of the company. The united continuity of a team and the clarity of investment principles are vital for the success of any PE platform," Ramnath says.
Recently, Multiples' CFO Prakash Nene left the firm citing "personal reasons". This lent an air of credence to speculations on the nature of the exit, coming at a time when a new fund was being raised. Ramnath, however, dismisses any conspiracy theory and points to natural attrition.
The emphasis on continuity should be complemented by a culture to attract and assimilate high-quality lateral hire and keep the organisation fresh in its thinking. "Continuity at the cost of rejuvenation will cause decay though one may not notice it immediately," she adds.
Multiples has also invested in frameworks for investing on how to take an exit decision, how to lead up to make an exit happen, and how to leave the company at higher-level of performance. "We do not get excited about a charismatic entrepreneur or a solid business model or a solid macro-environment because there are too many other things that should come together," she says. This includes the ability to respect governance, raise capital, which scale up and keep a business in balance.
What risks will Multiples avoid going ahead? Ramnath says businesses linked directly to oil-prices, unfavorable regulatory environments pose certain amount of risk, but primarily, her international investors regularly ask her about major upheavals. "They are alright with minor road bumps, but the moment a foreign investor loses confidence, they fly away because they are not interested in dabbling around," Ramnath concludes.