Alternative assets manager Investcorp, which manages more than $22 billion in funds across six asset classes, is doubling down on its India investments. In an interview, Rishi Kapoor, co-chief executive officer of the Bahrain-based fund, discusses the company’s growth strategy and why it is bullish on India. Edited excerpts:
How would you rate India in terms of its attractiveness as an emerging market?
In terms of our focus on emerging markets, India is one of our top picks. I think you see that in terms of just how Investcorp has gone significantly growing its footprint in India very rapidly. This consideration over here for us is not a six-month view. It’s not even a six-year view. It’s probably a 10-30 year view and we tend to take very long-term views around markets in particular, because our approach to markets is you need to have a presence; you need to have boots on the ground. The ability to be a part of the local ecosystem and have local connections and relationships are essential to long-term success. So, we are coming at it from a very long-term perspective.
What are your thoughts on the valuation of startups that are looking to list in the public markets? Do you feel they are reasonably priced?
I think so because it’s not one size fits all, which is actually good. Frankly, to see the market being somewhat discerning rather than paint everyone with the same brush. But the general approach that we have negotiated at Investcorp is that we will always need to pay full value for good assets and it is okay to pay full value for good assets because what is more important in the long run is that those good assets are the ones that can be the basis for long-term value creation through two or three measures. Within the tech space, it’s about having a cost-efficient, scalable delivery model for your end clients, where the next incremental revenue dollar is coming largely to the bottom line. By traditional metrics that you and I grew up with, they are lofty, but looking at the free cash flow generation capability of the underlying business, they do make sense; not in every case, you have to be backing market winners, of which they are, by definition, going to be a handful.
Environmental, Social and Governance (ESG) is a big theme globally, but the concept and the definition change slightly once you travel from one market to another. How do you see this playing out in the Indian context?
The way we look at it is any prospective investment that we are looking to make, we assess potential investments on 15 different dimensions. For each of those 15 dimensions, we actually have KPIs that can be used to measure the current position. Then assuming that the company stacks up as an otherwise attractive investment opportunity and assuming that we have a clear alignment with the promoter or the founder, we take upon ourselves jointly the responsibility to put the company on track towards improvement in each of those 15 caveats. Our job over the course of the next three to five years of ownership of this company under Investcorp is to make an improvement on all those dimensions, together, in full alignment with the founder and the other promoter and shareholders.
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