VJ Menezes Of New Silk Route Partners Anticipates A Pick Up In Deals

VJ Menezes of New Silk Route Partners - an Asia focused growth capital PE firm managing $1.4 bn through New Silk Route PE Asia Fund -spoke to MINT in an interview

The PE firm has already invested in 9 companies across diverse sectors since its inception in 2006.

Founded by Rajat Bhatia, Director of Goldman Sachs, Silk Routes Partners has invested in Reliance Infratel, INX Media and five other Indian companies.

At a time, when global PE firms including UK based Candover and Strategic Value Partners are shutting their shops in India due to slowdown in PE transactions, New Silk Route is looking for avenues to invest.

The size of the deals are also getting smaller in India as PE companies are designing the deals keeping in mind the smaller size of the companies seeking capital, promoters reluctance to cede control and the Indian takeover regulations.

Since, 7 out of 9 investments by New Silk Route are India based, VJ Menezes, Senior Advisor, spoke about investments in India, sectors to look out for and opportunities for buyouts in India.

Here are the excerpts.

On his experience in India, Mr Menezes said that Silk Route has already invested one-third of its $1.4 bn in India. Silk Route has invested in Bhubaneshwar based Ortel Communications, Rajkot based Rolex Rings Pvt Ltd, Mumbai based Dawnay Day AV, a financial services company, Secunderabad based Aster Communications and Aster Infrastructure.

NSRP is looking for more avenues for investments.

When asked about the valuations and expectations of Indian promoters, he said that the market is overpriced and in some specific cases, it is highly overpriced.

A number of deals including a deal between Bangalore based Prestige Estates and PE firms HDFC Ventures and Temasek failed over valuation issues.

When asked about buyouts, he said that Indian companies are presently looking for growth capital, hence buyouts have to wait.

Buyout in India? Is a question in itself. Can a PE firm get a cash producing asset in India which can run on auto-pilot without the entrepreneurs intervention? Do the PE firms have the patience to deal with the government authorities in India? These questions make buyouts very unlikely in the Indian scenario.

According to Mr Menezes, telecom, infrastructure, power and consumer goods are attractive sectors for investment in India. However, the deal data tell a different story. IT & ITes industry registered 12 deals in the July-September period, followed by BFSI, which registered 8 deals in the same period.

Next to follow were Shipping & Logistics, Healthcare & Life Sciences and Manufacturing, which attracted five investments each during the period.

On Indian regulations, Mr Menezes said that the Indian markets have had more than its share of regulations but companies like Citibank have succeeded in doing good business in India.

He also said that the deal pipeline is looking good in India and he anticipates the deal activity to go up further.

New Silk Routes' Dawnay Day experience has not been a good one. New Silk Route acquired 25% stake in Dawnay Day in 2008, but the company's top management team quit a year later to start their own businesses.

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