Monday, April 20, 2009: Renuka Ramnath leaves her office in Central Mumbai at 9 p.m., her usual time of departure. By 9:10 she reaches her apartment in Prabhadevi, where her parents are waiting to be taken out for a champagne dinner. It's clearly a special moment - her parents will have popped the bubbly for the first time in their lives. But what exactly is it that Ramnath is celebrating? "I am celebrating my 23 years of hard work, and where the job has left me at this point," Ramnath tells her mother at the dinner.
That Monday Ramnath hadn't just checked out of the headquarters of ICICI Venture for the day. After heading India's largest domestic private equity firm for seven years - and working with the ICICI Group for over two decades - she was leaving it for good. Speculation on the reasons for her resignation has ranged from her unhappiness at Chanda Kochhar being chosen to succeed K.V. Kamath as MD and CEO of ICICI Bank, to a partial sale of ICICI Venture's stake in distressed retailer Subhiksha to a company owned by Wipro promoter Azim Premji.
Yet, those who have worked closely with Ramnath reckon that the biggest reason for her calling it a day at the private equity firm was that "Renuka had hit the glass ceiling at ICICI Venture". What that means is that after managing funds of a little over $2 billion or around Rs 9,200 crore, there was little scope to scale up - particularly when international investors too are reluctant to pour big money into funds like ICICI Venture because their objectives may not be in sync with those of shareholders.
On her first day without a job, Ramnath weighed her options. She remembered the words of Kamath, from whom she had sought counsel after putting in her papers. "Don't be in a hurry to make a decision on the next day itself as to what you will want to do. Take a good six weeks off and then take a call on what will motivate you most," the Non-Executive Chairman of ICICI Bank had told her. Another option was suggested by her mother. "Sit back and ask yourself: Do you need to be doing anything (more) at all?"
In the meantime, feelers from large family businesses were coming in thick and fast - most wanted her to play a role similar to the one she had at ICICI Venture. The memories of the conflict in the expectations of shareholders and investors were still fresh in Ramnath's mind, and convinced her that she didn't want to go down that road again.
At the same time, Ramnath also couldn't forget the sheer depth and breadth of her entrepreneurial experience at ICICI Venture. "Every aspect of decision-making - right from strategy to fund size to winning and nurturing deals to exiting investments - was an entrepreneurial journey for me," she says. "It was not as if somebody was there to tell you what to do, and that you were just an executing CEO," adds Ramnath, who has an antique chair in her new office in Poonam Chambers in Central Mumbai as a tangible reminder of her tenure at ICICI Venture.
Starting a PE fund was clearly an option. But Ramnath knew that she would be without three major comfort factors: an established brand; a regular salary in the bank; and a fund house with assets of over $2 billion. That she now had to start from scratch contributed to an overpowering combination of fear and isolation. "The feeling of building an institution and then coming out of it alone made me feel like a bird whose wings had been chopped off. I was desperate to fly but couldn't because I didn't have my wings."
The Wind Beneath Her Wings
Ramnath knew she had to step out and reach out to people - and to god. Deepak Parekh, Chairman, HDFC Ltd, and Vallabh Bhansali, Co-founder of Enam Securities, were just two of the finance mavens she sought advice from. Both talked to her about possible pitfalls: Like cut-throat competition in PE, the worldwide liquidity crunch, and the need to attract talented people. Bhansali, who even took her for a meeting with Infosys Co-founder N.R. Narayana Murthy, feels Ramnath has what it takes, and more. "She is a pathbreaker not just in riding but also in creating growth," he says.
In those uncertain days, Ramnath also took solace in spirituality, and sought the blessings of her guru in Chennai, Sri Sri Muralidhara Swamigal. And, no, it wasn't a brand guru who thought of the name Multiples for her venture - it was the guru himself. "That was my aha moment. Here was a man who knows nothing about the PE business suggesting a name so apt. That was the sign I needed to go out and build my company," says Ramnath. "That was the moment of truth."
Also providing moral support were promoters of companies in which Ramnath had spearheaded investments as head of ICICI Venture. Like Kishore Biyani of Future Group, who has been an admirer of Ramnath's courage and meticulous involvement in the business. "She has always had strong views about business, which we respected," says Biyani. "I found her very clear and also quick with her decisions," recalls Prem Kishen Gupta, Deputy Chairman and MD, Gateway Distriparks.
In April 2006, ICICI Venture had acquired a 5.18 per cent stake in Gateway, a provider of port-related logistics support services. By July 2009, after attending her son's graduation ceremony in the US, Ramnath had founded Multiples Alternate Asset Management. Keen to work on an independent platform, Sudhir Variyar, a senior director at ICICI Venture, came on board as Investment Director. Their first task: put a size to the fund. Variyar, who Ramnath calls conservative, suggested $300 million.
But the consultant advising them thought they should be more aggressive and, after some brainstorming, a fund size of $450 million was agreed upon. Crucially, investors from the past also stood by her. Those who made money because of her winning investments in companies like Biocon, Shoppers' Stop and Ace Refractories didn't think twice before backing her.
Domestic institutions like the Life Insurance Corporation, Andhra Bank and Indian Overseas Bank, pitched in between June and August 2009. But the big break came in April this year when Canada Pension Plan Investment Board committed $100 million to Multiples. And, in July, the UK-headquartered CDC Group came in with $30 million. "Renuka's past experience made it much easier for CDC to get going on our investing endeavour," says Anubha Shrivastava, Managing Director, Asia, CDC Group.
Multiples today has raised $350 million in just a year. And, although Ramnath terms the market for fundraising "challenging," she's enjoying it nevertheless. There are those who believe that the Indian PE landscape lacks stability. "Despite so many players (272, at last count), few seem to have a precise strategy on how to raise money and where to deploy it," says Ramnath. "But if it was a perfect market, there would be no fun in playing here," she adds with a grin.
Multiples will not have more than 15 companies in its portfolio. Ramnath is not keen on core infrastructure sectors and would prefer to focus on services like healthcare, education and finance. First-generation entrepreneurs will constitute most of Multiples' portfolio, but there will be a smattering of proven business models, too.
The fund will look at acquiring controlling stakes by buying out existing shareholders. Ramnath has a proven record in that domain. ICICI Venture had acquired businesses like Ranbaxy Fine Chemicals and Infomedia, which paid off well. There also will be a lot of PE-to -PE deals. "I had done such deals in 2004 and 2005," recalls Ramnath. For instance, she had sold Intas Pharma to ChrysCapital then.
Of the 15 companies in her portfolio, Ramnath expects about five to be controlling-stake transactions. The rest would be mostly unlisted companies, in which Multiples would hold 20 per cent to 30 per cent and, in exceptional cases, up to 40 per cent. "We would like to be the second-largest shareholder in these companies after the promoters," says Ramnath. She's been there, done that, clocking internal rates of return - the yardstick to gauge the performance returns of a PE investment - of over 70 per cent when the industry norm was half that. Those backing her are doing so because they are aware of her record. That's half the battle won.
Now comes the tougher part: Emulating successes of the past and vindicating the faith bestowed on her. The vision statement of Multiples talks of making distinctive investments with conviction. There's plenty of conviction on display - from investors, promoters, colleagues, and Ramnath herself. That has to now translate into distinctive, winning investments. Ramnath is back. Now she's got to go forth and make Multiples multiply.