Private Equity in India | Top Equity Firms | Salary

In the last decade, private equity in India was over-estimated, and now it is undeserved, as quoted by McKinsey. So, how do you see it as a job seeker or a professional in the same or different industry?

This article will evaluate private equity in India and go into the nitty-gritty of what worked and what did not, along with the viability of making it big in private equity in India.

Private equity in India was very enthusiastic about its future in the early 2000s. Here are the following statistics that made them ecstatic: -

• 50% of the total population (1.1 billion) were younger (under 30).
• GDP grew by 7.5 percent annually from 2003 to 2007.
• The non-performing assets of banks fell to 2.6% from 9.5%.
• Private investors invested around $93 billion in the Indian market from 2001 to 2013.

But after all of it, things did not go as imagined. Rather, very rarely did Indian private equity peak (only between 2005 and 2008).

Let us have a look at the chart below to understand what happened: -

So, what exactly was the issue?

It turned out that the Indian market has fewer private companies than other emerging markets (BRICS).

India has 2,600 publicly listed companies with $125 million in revenue. Whereas in China, there are only 1,000. So, many private firms went public even before private equity firms in India ever reached them. Moreover, India’s GDP started to decline after 2011.

But things are not as dull as they seem on the surface.

According to McKinsey’s research, private equity-backed companies in India have improved their revenues and profits faster than public companies. That means that private equity in India has become a crucial capital source for Indian companies. In the last decade, private equity in India did an incredible job by contributing 36% of the equity-raised companies. During tougher times, Private Equity firms did even better. They provided 47% in 2008 and 46% on average from 2011 to 2013.

So, as a job seeker or a professional who is willing to join a private equity firm in India; you may have a glorious chance to be part of this industry which would not give up on its mission to serve private companies irrespective of going through tougher times and being exposed to lesser opportunities.

Private equity in India manages the investments and portfolios of private companies. In addition, the research analysis helps private companies strategize in the long run.

Here is a whole gamut of services that private equity firms in India offer to private companies: -

• Fundraising and Setup: Many things need to be done during the fundraising. Private equity firms help private companies in sorting out the entire strategy. They help the team develop the fund investment strategy and a pitch book. Along with that, private equity firms help companies deal with opportunity and sector analysis, the expected value proposition of the fund and the due diligence of clients. Moreover, private equity firms will also help private companies write key clients' track record components.
• Tax & Regulatory Services: India's private equity can only manage the funds when they entirely grasp tax and regulatory services. Hence, they offer tax and regulatory services to the companies that need them. Under this service, they facilitate private companies in fund structuring, restructuring for optimizing the tax, and helping in tax advisory and compliance.
• Risk, Governance & Compliance: Having funds would not help until companies know how to comply with the regulations and utilize the infrastructure. Private equity firms thus help companies mitigate the risks, find the best fit for the private companies, and facilitate the creation of investment manuals and articulation right portfolio management systems and procedures.
• Corporate Finance: In corporate finance, private equity in India can assist private companies. They serve in deal orientation, project management, negotiation support, valuations, capital raising advisory, joint ventures, and deal structuring. If private companies look for growth, profitability, and competitive advantage, these things are immensely helpful.
• Forensic Services: India's private equity has expanded its horizon and worked in unfamiliar regions. Here is one of them. Private equity firms in India help companies get corporate intelligence, conduct background checks, and perform due diligence for the environmental aspects.

In recent times, many private equity firms in India have been investing in private companies in India. The following is a list of top private equity firms that have already made their mark in India. The ranking in the list is based on the amount of money raised/invested by respective private equity firms: -

• ICICI Venture Fund Management: This is a subsidiary of ICICI bank. In the last decade, it has raised almost $3 billion. This private equity firm's headquarters is situated in the commercial capital of India, Mumbai.
• Kotak Private Equity Group: Kotak Private Equity Group invests specifically in India's healthcare and infrastructure industry. Since 1997, it has raised over $2.8 billion and has been one of India's most esteemed private equity firms.
• Chryscapital: It is based out of New Delhi. Since its inception in 1999, Chrys Capital has invested in 50 projects and raised almost $2 billion in private equity funds.
• Sequoia Capital: They are world-class private equity firms worldwide. In India, they have invested almost $2 billion in the last decade. They primarily invest in energy, consumer goods, and financial services.
• Blackstone Group: They have been in India and aiming at infrastructure and real estate since 2006. They have already invested around $2 billion in a diversified portfolio in India.
• India Value Fund: Primarily, it was called GW Capital. It spread its wings in 1999 in the city of Mumbai, India. It has raised around $1.4 billion, and this whopping sum is divided among four funds.
• Baring Private Equity Partners: It is one of the oldest private equities in India. It started its journey back in 1988. It has raised over $1.1 billion over the last three decades and invested in 53 different investments.
• Ascent Capital: This private equity firm has been in India for over a decade, and they have already helped more than 40 entrepreneurs achieve their dreams. They currently manage $600 million divided into three funds.
• Everstone Capital: This private equity firm primarily focuses on the clothing industry and engineering firms. They have been in India since 2006 and currently manage around $425 million of funds.

Even if many people would claim that it is easy to crack the private equity job in India, know that unless you have the right background, it is difficult even to get the opportunity.

Here are the candidates which private equity firms usually hire: -

• Investment banking analysts have made it big in the top-notch boutique or smaller-sized banks.
• People who have still been pursuing graduation (for junior roles).
• People who have already been working in some other private equity firms.

If you do not belong to the above three groups, it would be difficult for you to break through. But there are a few alternatives that you can take: -

• First, you can pursue an MBA from a top-notch institute and pursue a career in investment banking. Then, you can look for an exit opportunity and join a private equity firm.
• Secondly, you can work in an industry for more than 20 years, gather experience, and join a private equity firm as a consultant.
• Thirdly, think about corporate development profiles. Money is less in this profile, but the environment would be similar. Then you can switch from corporate development to private equity later in your career.

Now, let us talk about the recruitment process.

Know one thing for certain – those headhunters play a prime role in hiring for private equity firms. So, it will be a tough road for you if you cannot please the headhunters.

There are usually two recruitment cycles – on the cycle and off the cycle.

On the cycle, the process begins around October every year. The private equity firms look for analyst positions in the "on the cycle" process. In the "on the cycle" process, the decision is made quickly, often within weeks, and the offers are rolled out immediately after the interview.

• In the "on the cycle" process, if you get interviewed at the beginning of 2017, you will continue working in banking for another 1.5 years and can start working in a private equity firm in 2018.
• In the case of the "off the cycle" process, once the offer is released, you will begin to work immediately. However, the "off the cycle" process takes more time to roll out the offer. It takes more than weeks, even months, to decide which ones are the best fit.

So, if you want to join a private equity firm, you need to plan for "on the cycle" or "off the cycle" processes.

In private equity, the culture is different from investment banking. Unlike investment banking, you will have a healthy work-life balance, but you must learn to handle the pressure. In most cases, expect 12 hours of work every day, five days a week. You will get ample time to socialize and spend time with your family at the weekend. But you may need to put in more hours than usual in a few instances.

Private equity in India is emerging, and there is huge scope for development. Thus, in India, the culture within the organization is pretty dynamic, and you need to be on your toes to make ends meet constantly.

Working with multi-dimensional people, going through tons of papers and research reports, and managing finances would be day-to-day activities. But, if you can stick for a long time, you will make an incredible expansion of your position, bank balance, and social influence.

The private equity market in India is emergent. Thus, professionals in the Indian market receive much lesser pay in the private equity industry than their European and USA peers.

At the entry level, the average compensation of private equity professionals in India is around $20,000 to $40,000 annually, sometimes less than the range. It is chicken feed compared to how much private equity professionals receive in the foreign market.

However, the compensation largely varies based on the size of the funds. Many big funds have started to operate in India. That means there is a huge growth opportunity for private equity professionals in India, and they can expect to receive big pay soon.

If you are looking for exit opportunities, the first question is – "Why will you leave private equity after all?" And if you do not like the job, why did you enter into a private firm in the first place?

In most cases, leaving private equity firms means that you are also leaving out your MBA.

People hop from one fund to another in the private equity market, especially if they work in smaller funds. Private equity firms go a long distance if they want someone in their funds. They may also offer much bigger positions and compensation.

In the USA and Europe, you need to put in a lot of effort to earn big. But in India, once you finish the initial days at smaller funds, your compensation will drastically increase with experience.

Entering private equity in India is not an easy job. First, you must have the necessary background to crack the job market. In the beginning, you can only expect decent pay and long hours. But if you can stick for a few years, you will earn much more than you have ever thought.

This article is a guide to Private Equity in India. We discuss in terms of the services, top companies, recruitment, culture, payscale, and exit opportunities. You may also have a look at the following articles to learn more about private equity: -

• Carried Interest
• Private Equity in Germany
• Private Equity in France
• Private Equity in Hong Kong