WestBridge Capital has come a long way over the last eleven years from starting out as a venture capital firm backing outsourcing plays to an investor focusing on the public markets.
The firm backed a number of outsourcing plays from its first fund like ICICI OneSource, HR BPO Brainvisa Technologies, healthcare BPO Integreo Inc, debt collections firm Astra Business Services, financial BPO Indecomm Global, among others.
But post 2005, the firm started focusing on a broad range of sectors with a focus Indian consumption and infrastructure. After its merger with Sequoia, it also started dabbling in pre-IPO deals in firms like Edelweiss and Idea Cellular through its first $400 million growth fund. It was only during the financial crisis, in late 2008 and early 2009, that the Sequoia team started making direct investments in the capital markets in a big way. Since then, the firm has continued this strategy making more than half a dozen reported investments in firms like eClerx Services Ltd and Ess Dee Aluminium Ltd.
According to Sequoia invested in seven listed companies between October and February 2009, picking up shares from markets when they were most depressed during downturn. The investments were made from Sequoia's first growth fund. Disclosed investments from these included Nasdaq-listed Cognizant Technology Solutions and Hyderabad-based, BSE and NSE-listed Nagarjuna Construction Co. Ltd. The firm made more than 2x on both of these investments in 8-9 months. The other investments remain undisclosed.
Besides, Sequoia also made 5x on its $14 million investment in gold loan company Mannapuram General Finance and Leasing (MGFL) last year through an open market sale. The deal was one of the rare PIPEs (Private Investment in Public Equity) by the firm, where shares were picked up in a listed firm through fresh issue.
Since August 2009, Sequoia/WestBridge has made investments in eClerx Services Ltd (9.6% stake), Ess Dee Aluminium Ltd (1.87% stake), Infotech Enterprises Ltd (4.42% stake), Hindusthan National Glass & Industries (7.27% stake) and Dewan Housing Finance (DHFL) (1.43% stake). The firm is sitting on handsome profits on these deals too. It has invested Rs 72.7 crore in eClerx for its sake, which is worth nearly 2.5x at Rs 179 crore as per yesterday's closing price. Sandeep Singhal has also joined the board of eClerx, which is not a norm when PEs invest through public market but rather in deals through a preferential/fresh issue.
Several other investors like Ashish Dhawan-led ChrysCapital and Pulak Prasad's Nalanda Capital have been focusing on public markets over the last 3-4 years. Both Prasad and Dhawan, like the WestBridge team, have been investing in India for more than a decade. Singapore-based Nalanda has raised $400 million fund dedicated to the capital markets in 2007 after Prasad, known for his investment in Bharti Airtel, left Warburg Pincus to form his own firm.
ChrysCap, which is the largest independent PE firm in India, returned about $300 million from its $1.15-billion ChrysCapital Fund V last year for freedom in investment style. The firm also started out as a technology focused venture investor in early 2000s but started focusing on private equity deals after the dotcom bust, investing in firms like Yes Bank, Suzlon, IVRCL and Shriram Transport Finance during 2004-2005 which later became multi-baggers. But since 2007-08, the firm has been focusing on open markets investing in firms like nfosys, HCL, Hexaware, among others.
Besides, a chunk of growth capital firms investing in India have public market portfolios. These include firms like SAIF Partners, Norwest Venture Partners, Bessemer Venture Partners, among others.
The trend towards much more liquid public markets may continue as the valuations in the private markets remain high and competition for deals among PEs increases in the backdrop of new GPs setting up shops.