With the Indian equity market trading close to its top and the start-up and venture capital industry in India unable to deliver desired results, Rajesh Sehgal, ex-Franklin Templeton fund manager that used to handle private equity capital and a part of the emerging market groups at Franklin Templeton has ventured on its own to set up Equanimity Investments, a venture capital firm that would focus on investing in early stage growth company.
"I am of the view that going ahead, it will be difficult to deliver alpha (out-performance) in listed equities. However a 10 to 12 per cent is doable for the overall market as a whole," says Rajesh Sehgal, founder & Managing Partner at Equanimity Investments, who adds, "The unlisted space compared to the listed space is lucrative where internal rate of return (IRR) expected is going to be significantly higher than the listed markets by a factor of 2 or 3."
On Monday, the BSE Sensex ended lower below 34,000 at 33,774.66 following the overhang of the alleged fraud case at Punjab National Bank that dragged the entire banking index especially state-run banks.
Meanwhile it may all sound good on making huge returns from unlisted companies, but the fact is venture capital funds have not found exits in the past few years. Sehgal agrees that experience has been poor in terms of deliverables by the funds, however he still feels the industry is at a nascent stage and he would focus on companies that are already making money or has the ability to scale-up.
"We aren't investing in companies that aren't making money. We aren't for charity and not going to invest on ideas but invest in companies that have delivered," says Sehgal whose ticket size per investment is going to be between half million to 3 million in early stage companies, which use technology as their backbone, ensuring scalability and sustainability of their business models. "We aren't going to invest beyond 7 companies a year."
Of the $30 million (Rs 200 crore), the fund plans to raise Sehgal has raised Rs 70 crore of which majority funds are his own to showcase that he is serious player in the game. He has also roped in his mentor and investment guru Mark Mobius in the investment committee who also has his skin in the game by investing his own personal wealth in the fund.
For Mobius, India would be the second country where he is investing in early stage ecosystem. While he has looked at many emerging and frontier markets so far he has only invested in Vietnam.
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