Indian PE firm True North expands in private lending space, senior executive says
Private equity firm True North, one of India’s oldest private equity fund companies, is expanding into private credit. In an interview, Managing Partner Vishal Nevatia spoke about the opportunity he sees in credit and how tech companies have matured to make them attractive to private equity investors. Edited excerpts:
For more than 20 years, you have focused on private equity; why this sudden movement of expansion in private credit?
So first, it’s not sudden; it’s something we’ve been thinking about for five years. The idea has always been that we first have to build a very solid foundation and prove that we can do well on a commodity, which is the product of private equity. And generally, to prove in private equity that you’re doing very well, in our opinion, you need to deliver over three full fund cycles. So we think this has happened to us. Now, we have built a brand and understanding of companies, which can easily be extended to other alternative asset classes. And the most natural thing, after private equity, is performing credit.
Even though we have a billion dollar private equity fund, you know we can’t, no matter how well you do, go and get $ 4 billion in the next fund tomorrow. You can only grow very gradually to $ 1.3 billion to $ 1.4 billion, and so on. So, globally, the largest private equity funds have all expanded into multiple products.
How big is the opportunity in the private lending space? Considering some of the issues with major failures of Indian companies and huge loss fund managers, do you see this is a more difficult business today than the EP?
From a market perspective, the market opportunities for performing credit are huge in the future. Private credit today is where private equity was 15 years ago. Okay, people made mistakes, lost capital.
Few fund managers have succeeded in raising, deploying and generating returns on performing loans. But the ecosystem has, over the last five to seven years of investing, realized what works and what doesn’t.
How long will it take for the credit platform to be operational?
We have the team in place. We will decide over the next 30 days on different aspects of the fund’s strategy like how much money to raise as you want to make sure you are raising a little less than what you can actually deploy to make sure we are doing a great job. work and don’t take too much money to waste it.
Many private equity firms are increasingly focusing on new age technology companies. What is True North’s strategy?
In 2014-15, we saw that by 2020 all businesses will become technology companies, and technology will no longer be a support function, and that there will be an omnichannel shift such as Amazon will become omnichannel, and we ‘I will be getting closer to Walmart and Walmart will go all digital to get closer to Amazon.
So to that extent, over the past five years, we’ve been pushing all of our existing companies and businesses to be highly digital.
So we have two categories of businesses: digital businesses, which are existing businesses that have used digitization, and one that is set up to be digital from the start, called digital first.
Today we have looked at almost all companies that are digitally focused, but waiting for them to mature, and we are confident that now the chances of losing capital in them, because they will want a level where their maturity is. rather weak.
Today, we believe that there are 50-70 such companies in India that are digital-focused and have reached a level of maturity where the probability of losing capital is low. We believe that the number of these companies, which number 50 to 70 today, will be more than 250 in the next five years.