‘The entrepreneur is the anchor-pin of our businesses’

EVER SINCE THE CRISIS, THERE’S BEEN A NATURAL MOVEMENT TOWARDS LOWER RISK. HOWEVER, COME JUNE-JULY, WE SAW INVESTORS MOVING TOWARDS RISK

The Avendus Group has gone on to establish dominance in i-banking and hedge funds in the five years since KKR picked up a 58 per cent stake in 2015. It’s been a remarkable journey for a firm which started life as the online advisory, Cool Startups, in 2000. RANU VOHRA — co-founder, managing director and chief executive officer of Avendus Capital — spoke to Raghu Mohan on how he wants to make the firm more relevant across business lines taking advantage of disruptions in the market. Edited Excerpts:

How is Avendus positioned as on date?

We have four business lines. Our core is i-banking; then, we have wealth, and alternate asset management; and credit solutions. The criticality of the solutions makes them insulated to some of the cyclical movements. And the accessibility, and the distribution base which Avendus has built with institutions over the past two decades is so strong that clients are very comfortable with our approach and processes. It helps us in times like these because of the natural gravitation towards quality. You take out the peripheral; and stick to your core. Over the last two decades, Avendus has created a brand which stands for integrity, quality, and most importantly, the promise of delivery to a standard.

How do you see M&AS playing out in the postcovid world?

A lot of groups have to make their choices on which businesses to invest in. Outbound M&AS between 2004 and 2008 were led by a credit boom and the ability of Indian companies to extract more out of overseas assets. We still hold the promise of having one of the highest growth rates in the world.

Domestic M&AS will be led more by consolidation. Some companies are likely to be large beneficiaries of the pandemic — it presents them with an opportunity to acquire businesses which have not held up well during the crisis. A combin ation of all these will lead to a reasonably fertile ground for M&AS.

How does this feed into the wealth management space?

Ever since the crisis, there’s been a natural movement towards lower risk. You had increasing penchant for buying gold. That’s what happened in the first two months of the pandemic in March and April where everything around risk was shut off. Come June-july, and we saw investors moving towards it (risk). You see, a lot of them missed out on the whole movement in April-may when the bourses bounced back very smartly. I think this is the time when the high- and ultra-high net worth individuals (UHNIS) and entrepreneurs have started to look at risk afresh.

Then, you have assets in the private space which are more difficult to get, but people realise the value of holding assets in technology and digital, which have given disproportionate returns in markets like these. A classic UHNI is carefully building a portfolio of absolute return funds and nonconvertible debentures; and a whole host of risk assets which will vary from typical portfolio management services to private equity.

It’s just over five years since KKR came on board as an investor. How has the journey since been?

In two rounds, we ended up raising just under ~1,000 crore, which is very large for a company that was primarily doing agency business. The businesses we were invested in were already throwing up cash. The need for capital was for building a solution-net around these businesses — by way of increased focus on wealth management and alternate assets even as our core credit business also got built by that. The idea is to become a more diversified financial services business. Ever since KKR invested, our revenues have gone up three times and profit after taxes by four times in the first three years of the investment. This year will be an aberration, but you know, there has been reasonable growth in the business mix.

Scale was, perhaps, lower on our priorities; now it’s higher. Our hedge fund business is two-thirds of the whole market today; so too, in digital. We have been able to grow and consolidate our market share, and build dominant positions in certain business areas. And, hopefully, all of this will start increasing our impact.

Will Avendus remain a non-banking financial services company, or will it become something more than this?

I think, we will continue to be one of the most focused financial services organisations. For us, what’s important is that while we are building businesses to scale, we want to be very focused on areas which provide the right solutions to entrepreneurs — the anchor-pin of all our businesses.

Each of our businesses has been a journey from being a visible to a relevant to a dominant business. In i-banking and hedge-funds, we are dominant. We are getting to relevance, and to dominance, in our other businesses. We will take advantage of the disruptions in the market. There are several white spaces in financial services. On the asset management side, we find that the rigour is missing in quite a few ways. We are trying to create businesses where we have the right nuts and bolts.

You see, a lot of equity investing happens around a star — ‘oh, my God, I want to put money behind this investor’. We have created a more institutional processled kind of organisation. Not that individuals don’t matter. I don’t know if it’s a long-winded answer to your question, but it’s not that I am looking to be a bank, or anything like that!