Multiples hones its micro-winner strategy
Founder Renuka Ramnath details the road map as she embarks on raising a third $1.1-bn fund, which she expects to close in the next three to four months
Founder Renuka Ramnath details her roadmap as she embarks on raising her third $1.1-bn fund. PAVAN LALL writes
Multiples Alternate Asset Management, weeks into raising its third fund, targeted at $1.1 billion, expects to close it in the next three to four months, says founder Renuka Ramnath. While the market today is much more competitive than earlier, there are sure signs of maturity, she add.
The mantra for the third fund will not differ vastly from the second one. It is a micro-winner strategy for the firm to be invested in, considering factors such as investment thesis, entrepreneur evaluation, rights in the deal and exit strategy. Additionally, the macroeconomic factors, together, these 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, as you see more options in a wider funnel, with a higher number of deals,” says Ramnath.
The company will focus on entities in financial services, consumer businesses, technology, pharmaceuticals, health care, and human resources. Recently, Multiples funded Peoplestrong, Arvind Fashion, Encube, Dream 11 and 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 (PE) was money given to young companies,” Ramnath recalls, saying the concept has always been embedded in venture capital. Now, it has taken centrestage 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 ~50 billion to Indian companies and entrepreneurs. The company's second fund has invested in nine companies since 2017. In 2017-18, it funded four ventures.
The founder points to other opportunities such as housing finance, estimating it to be at least a $100-billion market. And, explains why they took an 85 per cent stake in Vastu Housing Finance in 2015. Speaking about her commitment to put ~1 billion a year for four years in it, she says, “We looked at all the existing players, there were big companies and 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.”
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 highquality 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 do 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.