‘We hope to manage $1bn in seven years’
Jupiter Capital, the family office of Rajeev Chanandrasekhar — the Union minister of state for electronics and information technology — is to take on a new avatar. It is to be a specialised fund which will focus on software-as-a-service (Saas) in a big way. chief investment officer and executive director of Jupiter Capital, spoke to Raghu Mohan. Edited excerpts:
What is behind the repositioning of Jupiter Capital from a family office to a specialised fund? Very few such entities have morphed into a private equity (PE) or venture capital (VC) firm.
A family office manages the wealth, or one part of the wealth, of an individual, or family. The idea behind the shift is to grow the business around professionals. From a family office with that first limited partner (LP), it will now become an anchor investor and partner with different blue-chip LPS. Jupiter Capital wants to become a $1-billion asset manager in the next seven years. We will launch a $150-million fund called J1 Capital.
It is about being more than managing the wealth of one individual. And instead of providing returns in multiples of 4, 5, 10, or 15, for one LP, the idea is to partner with several LPS, and be able to provide those kinds of returns. But yes, few if any of your family offices became PES or VC firms with different LPS. So, this is the journey we want to bring to the market. Jupiter Capital is a 15-year old firm. It’s time it grows out of its boundaries, associates with several LPS, and develops into an institution.
Howmuchhasthefamilyofficeinvestedto date?willthoseinvestmentsbetransferredto thenewentity?
It has invested $200 million. But we are talking about two different entities. Jupiter Capital is an
anchor investor of J1 Capital. This new fund will be an alternative investment fund.
What happens to Jupiter Capital’s subsidiary, Jupiter Aviation?
That division is one part of the investments we have made and it will stay as it is. It is the wish of one LP (Rajeev Chandrasekhar) to invest massively in aerospace and aviation. And I am going to give you the example of Axiscades.
What will be the difference in approach to investments by JI Capital compared to the family office?
Jupiter Capital invested in multiple industries with each investment providing a stellar performance — as engineering and R&D (ER&D), media, healthcare, wellness, technology, digital, electric vehicles, hospitality, and fast-moving consumer goods.
J1 Capital — the new fund — will focus on B2B, software-as-a-service (Saas), and consumer brands. The Indian Saas industry is witnessing explosive growth, with the number of Saas companies doubling over the past five years and revenue growth multiplying five-fold to $5.3 billion. Growth continues unabated at a pace of 51 per cent compounded annually, making the possibility of this becoming a trillion-dollar industry by 2030, a strong reality.
Financial services, CRM and data intelligence and analytics are the top Saas categories in the Indian Saas market. The expectation is that this aggressive growth will create 200,000-plus new jobs over the next five years. It’s no secret that the future of business and scale is Saas-driven, more so in the post-pandemic landscape. What’s interesting, however, is how quickly Indian companies have set a global benchmark for the industry. The exponential growth unlocked in the last five years is a testament to how capitalefficient the Indian Saas industry is. The capital required for B2B Saas startups to reach unicorn status is half that of such startups in India. And the revenue per employee for Saas companies is twice that in the IT services industry. Of the 51 unicorns, ten are from the Saas space, with four having joined the coveted club in 2021 alone.
Do you think LPS are relatively more comfortable taking on new investments because there are more exit options?
India as an investment destination has significantly improved with reforms like the Goods and Services Tax, and the Insolvency and Bankruptcy Code. Most of the reforms are related to foreign direct investment in sectors such as defence, construction, insurance, pension, broadcasting, single-brand retail, and civil aviation. The rise of startups has also roped in investments from abroad as well as Indian LPS.
In recent times, domestic PES and LPS are entering into collaboration in the form of “coinvestment”, which presents a favourable scenario for both. It ensures better returns on investment, and diversification of portfolios for LPS. In terms of exit options for startups, it is still relatively tough out here. Additionally, LPS are investing in PES since the returns are promising compared to startups, and the risk involved is lower. The initial public offering (IPO) is an exit route from startups with investments from LPS. But this is also a tough road, as it takes years to file for an IPO and finally exit.
Going ahead, what will be the role of Rajeev Chandrasekhar in the new scheme of things?
It will be zero. He has no role now in Jupiter Capital, nor will he play a role in the new fund, JI Capital. Jupiter Capital is the anchor investor in JI Capital, not Rajeev Chandrasekhar. I cannot be any clearer with you on this issue.