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October 18, 2012

PE Fund Manager Interview: Srinath Srinivasan of OIJIF

 

In a recent interview to Venture Intelligence, Srinath Srinivasan, Chief Executive Officer of Oman India Joint Investment Fund (OIJIF), discusses the first two investments announced by the JV fund of State Bank of India (SBI) and State General Reserve Fund of Oman(SGRF). Prior to OIJIF, Srinivasan had headed Indian PE investment unit of South Africa’s FirstRand Bank and before that was Head-Private Equity at Reliance Capital. (This interview first appeared as part of the latest quarterly Venture Intelligence India Roundup report.)  

Venture Intelligence: OIJIF has announced two investments in succession: Rs.55-Cr in the privately held electronics boards & systems maker Indus Teqsite and Rs.72-Cr in the publicly listed explosives maker Solar Industries. Can you tell us what attracted you to the companies? Is their having defense as one of their key verticals a contributing factor?

Srinath Srinivasan: Both the companies have strong competitive advantage and their business have strong entry barriers. This leads to them having strong pricing power and we believe that they will continue to have enough cash flows to fund 20%+ growth rate in the foreseeable future without further dilution. Finally, we believe in investing, only if valuations are fair and this worked in both the cases.

As a sector agnostic fund, we don’t have any specific affinity to any sector. It is true that in the case of Indus Teqsite, defense sector accounts for over 70% of the revenues. However, in the case of Solar, defense segment will start contributing in couple of years. Solar’s core business continues to be mining explosives in India and abroad.

VI: Which sectors are you scouting for investment opportunities at this point?

SS:
Currently we are looking at deals in specialty chemicals, waste management, engineering, IT infrastructure and healthcare amongst others. Irrespective of the sector, our preference is for companies with sustainable competitive advantage, backed by competent management teams.

VI: What sectors are you staying away from?

SS: We are staying away from real estate and infrastructure utilities.

VI: What will be your minimum ticket size per investment?
 

SS: Ideally we would like the check sizes to be US$10-15 million, but in exceptional opportunities, we can consider a deal size as low as US$5 million. We can increase the deal size to write out large cheques along with co-investment from SGRF. Typical deal size for co-investment deals would be at-least US$30-35 million and above.

VI: How about buyouts and distressed deals?
 

SS: We are pursuing some distress companies as well, though growth investing continues to be the core focus.

VI: What would be your preference in terms of participating in syndicated deals?
 

SS: We welcome working with other PE Funds in syndicated deals.

VI: How does OIJIF work vis-à-vis Oman Investment Fund’s direct investments in India? (Oman Investment Fund has invested in the Universal Commodity Exchange, NCDEX Quippo Telecom Infrastructure and Nimbus Communications) 

SS: SGRF is a separate Sovereign Fund entity in Oman and pursues its own investment strategy executed by an independent fund management team than that of Oman Investment Fund.

VI: At the time of the launch of the fund (in June 2011), it was announced that the fund would start with an initial corpus of $100 million (contributed by SBI and SGRF) which would later be expanded to $1.5 billion. Are you seeing enough deal flow to deploy that kind of capital? If yes, will the additional capital again be contributed by the 2 GPs or will OIJIF look at attracting third party investors?
 

SS: The deal flow has improved over the last year. We now see 10-15 investment opportunities per month. SBI’s vast network and relationships are useful in closing deals.

The Fund’s current goal is to deploy the $100 million contributed by the two GPs. Once we have achieved substantial deployment of corpus, we will embark on raising our next fund in 2013. Our GP’s will remain as the main contributors and, if required, we may invite other third parties to participate.