Band of Brothers
eeraj Gupta was getting ready to fold. His company V-Link had enjoyed five years of sensational growth supplying cars and buses to BPO companies to ferry their staff. Then competition arrived, growth slowed and it appeared that the company would “hit the wall” in a few years. Perhaps it was best to sell, take the cash and get out. “My advisors had lined up a few potential investors,” says Gupta. That’s how he met Vikram Nirula of India Value Fund Advisors (IVFA). Nirula looked at the deal and turned it down. “I told him that apart from the fleet business I was also planning to get into radio taxis. Vikram told me: ‘If you get the license then let’s talk’,” says Gupta.
Two years later, Gupta is still here. While his company is called V-Link, you are more likely to recognise it as Meru Cabs, the branded radio taxi service which is today India’s largest such company. Even though Gupta no longer has majority control over the company he founded — IVFA has — he is busy strategising on how to get Meru Cabs into new growth areas.
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Image: Kaushik Chakravorty for Forbes India
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From Left to Right: Mahesh Krishnamurthy, Vikram Nirulam Sanjat Arte, Vishal Nevatia and Pramod Kabra. Two other partners, Sunil Theckath and George Thomas, are not in the picture | |
While there are more than 200 venture capital and private equity funds operating in India, you would be hard pressed to find one like IVFA. This firm likes doing control or buyout deals, where the fund owns more than 51 percent of the company. That’s not rare because many funds in India do that (see table). What makes IVFA unique is that its buyout transactions are with small companies that have a turnover of Rs. 50 crore to Rs. 100 crore. Most venture firms in India would much rather pick a great entrepreneur, invest in a minority stake and wait for the returns. The folks at IVFA are able to convince the promoter that even if he loses control, he would be part of a much larger business.
Before they invest, they spend so much time looking at a deal that by the time the process ends, they know as much about the business as the entrepreneur does. “In one deal they spent more time than all other 10 funds put together on due diligence. The entrepreneur gave up but said that they come to my office daily and by now know more about my business than me!” says Deepesh Garg, Director, O3 Capital, an investment bank.
Vishal Nevatia, CEO, IVFA, smiles and says, “At the time of buying any business, we leave no stone unturned in getting to know the business well.” Vikram Nirula, co-founder of IVFA, adds the corollary. “When in doubt, dig deeper,” he says.
Nevatia and Nirula were both working in Arthur Andersen before they quit in 1999 and founded GW Capital, the forerunner to IVFA. “Gary Wendt [ex-GE] who originally conceived the firm, had a strategy of generating long-term sustainable returns through operational excellence and business transformation.
We have stayed true to that principle,” says Nevatia. Ability to get down to the shop-floor was a must. Sanjay Arte (Saint Gobain and Johnson & Johnson) and George Thomas (BPL, Warner Lambert and Hindustan Unilever), were head hunted into the firm. To boost their investment team Sunil Theckath from ICICI Ventures was taken on board. Rajeev Agrawal (who is no longer with the firm) also joined the team around the same time. “We were lucky that HDFC, Ambit and Impala Partners let us pursue our strategy even when we had hitches,” says Nevatia.
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