...........Reporting: Saurabh Turakhia Photographs: Hemant Padalkar Mumbai

 

HIS SOBER demeanour and staid office might mask the excitement of what he does, but Nikhil Kaushik is actually a bit like a hunter stalking game. Armed with several degrees, an analytical mind and a nose for which investments will fly, he scours the virgin jungle of corporate India, looking for companies to pour funds into - before anyone else spots them.

Kaushik, 28, works for BTS Investment Advisors, a Swiss private equity firm. Unlike small shareholders, these firms buy significant stake in companies and use their financial might to influence the company's management with a view to making it more profitable. They then wait for the right time to sell out, a stage when they think they will get the best returns on their initial investment. This is equity that is not traded on a public stock exchange. (See box ‘Did you know' for definitions of various kinds of investors).

Conversely, many companies and individual entrepreneurs in need of capital for expansion might themselves approach private equity firms. Then the private equity firm evaluates the company, and if it thinks the business will be lucrative, offers its funds in return for a stake.

"It is one of the few fields that gives one a chance to meet entrepreneurs and people from different backgrounds," said Kaushik, who has an engineering degree from Bangalore, a masters degree in the same subject from the US, and an MBA from Hyderabad's Indian School of Business. "Mumbai has a lot of opportunities for entrepreneurship. And what really got me interested was the fact that it is quite a lucrative field."

And how. Kaushik earns upwards of Rs 18 lakhs as associate vice president at his company. (See News You Can Use at the left for career ladder and salaries). The spoils will only increase as private equity expands in India. With the Indian economy expected to continue galloping, despite temporary setbacks, private equity players are flocking here. Already, India has 400-odd such firms, 80 per cent of which are based in Mumbai.

In 2007, the total value of all deals in India was the highest in Asia at nearly $10 billion. For the first time, India edged out China, which came in second ahead of Taiwan.

In the 1990s most private equity deals in India took place in the IT sector, but today private equity deals are abound in diverse fields, with manufacturing, retail, educa tion, telecom, infrastructure, media and entertainment being the current favourites.

Brain gain

Kaushik, who grew up and studied in Bangalore, Chennai and Pondicherry, returned from the US in 2003 because he saw that India was changing and felt it was the place to be in. So he worked with US giant GE in Bangalore for about two years, then helped with his father-in-law's pharmaceuticals business for a year, before moving on to get his business degree (His wife now takes care of the business). At the end of his stint at the Indian School of Business in Hyderabad, he knew he wanted to be in the private equity field. So there was only one place to go.

"If you want to be in private equity, you have to be in Mumbai," he said.

So that's where he landed up in mid-2007, and then got a job with BTS last September.

Today, he's just where he wants to be.

He enjoys all the number crunching that he has to do, which is one-third of working time, and scouting for opportunities for his firm. "You get to learn a lot from the many enthusiastic and diverse entrepreneurs coming up with interesting ideas," he said. "You also get to travel a lot."

But not everything about the job is hunkydory. The working day is long, and even longer when a deal is about to be clinched, and, when so much money is at stake, the job can be stressful.

Once, for example, all the details for a deal that Kaushik was working on had been finalised. Then his firm transferred the money from its Mauritius branch to India. But on sending it to the client after that, the firm could not trace the money for quite some time.

"It finally got sorted out, but it was quite worrying," said Kaushik. One can well imagine it was: the money that temporarily went missing was Rs 20 crore.

Stress busters

To manage his stress levels, Kaushik does not miss his daily round of jogging. Moreover, it helps that unlike many Mumbaikars, he does not have to commute far: he lives and works in Bandra. He likes to relax on weekends by playing Scrabble and watching movies. Occasionally, he hangs out at pubs with his friends.

But one thing nags him: although there are a lot of opportunities in his field in India, there is not enough talent. The flipside, of course, is that this presents a huge opportunity for young people looking for adventure in the Wild West of private equity .

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did you know

ANGEL INVESTOR

These investors usually fund start-up ideas, when the business plan is still on paper.

VENTURE CAPITALIST

They usually come in when the company has just begun and is just testing the markets with prototypes.

PRIVATE EQUITY INVESTORS

These investors typically invest in more mature companies, when its operations have stabilised and are already generating good revenues and profits.

Unlike ordinary shareholders, all these investors have large stakes and can, and most often do, influence the running of companies in which they have invested. There are different types, depending on when in the life of the company they invest. But none of these investments are traded on a public stock exchange. Also, all these investors take stakes with a view to exiting when the companies have turned profitable and when they think they will get a good value for their stake.

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Case study

CHATROOM: NIKHIL KAUSHIK IS BULLISH ON THE INDIA STORY

How do you intend to take your career ahead?

I plan to learn and understand the complete investment cycle of identifying, evaluating and recommending equity investments in India, monitoring portfolios and exits (selling your stake in the company at an appropriate time). This will help me build a long-term career in the industry with increasing levels of responsibility .

A lot of private equity firms have been posting losses. When do you think will things stabilise?

Please correct me if I am wrong, but I don't believe private equity funds have recorded losses. Most recent losses have been reported by hedge funds and mortgage funds. Private equity funds are usually in for the long run, and short-term market fluctuations do not impact their returns much. As for the current market scenario, I continue to believe in the long-term fundamentals of the Indian market and expect good returns over a longterm investment horizon.

What is the impact on India of the global shakeout in the private equity space?

Due to current global issues, there is expected to be a liquidity crunch in Indian markets in the short term. Given the uncertainty on the Indian political front, this could lead to a slowdown in the Indian economy Howev . er, this is expected to be sorted out, and India should be well on a growth path in the next couple of years.

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Case Study

rapidfire

Sun sign: Aquarius

Your favourite movie: Indian: Bhool Bhulaiya; International: Life is Beautiful

Define happiness: A state of mind where you are one with your surroundings

Define success: Being able to achieve what you set out to do and surpass it too

You hate: Anything that does not require me to put my mind to it

You get inspired by: Success

You are in awe of: The Indian entrepreneurship attitude

You value: Integrity

Your favourite game: Scrabble

You spend your weekends… Watching movies, playing scrabble, going to pubs and hanging out with friends

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Case study

a day in his life

6:00 am: I get up and check my email.

7:00 am: I switch on the TV to get an understanding of how all the markets have performed around the world. After this, I read at least two newspapers and get ready for work.

9:00 am: I reach work and manage current investments, follow up on due diligences.

3:00 pm: This time is reserved for meetings, exploring potential investments, and following up on both potential and current deals.

6:00 pm: After this, I watch a little TV at office to understand the performance of the markets for the day, and stay updated on the latest happenings in various industries.

9:00 pm: I go home. Since I live and work in Bandra, I do not have a long commute, unlike most peo ple who live and work in Mumbai. I then eat dinner. After that, I finish whatever work remains for the day.

11:00 pm: I read a book for some time.

1:00 am: I sleep.

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Case study

ACTUARY SPEAKING: SAMIT UPADHYAY ON THE JOYS OF FINANCIAL MODELLING 

 WHEN NOT flirting with the breeze on his bike, this 27-year young ad The field caught Samit's eye while he was studying commerce at Podar College in Matunga and doing his chartered accountancy simultaneously .

With only between two and four percent of Indians insured, compared with 30 per cent and 40 per cent in advanced capitalist countries, Upadhyay knew the field had immense potential to grow.

Upadhyay reports to the appointed actuary at his firm, and supervises a team of seven people. He manages the significant task of ensuring that his company always has sufficient assets (funds) to discharge its liabilities (outgoings). He must also estimate the company's long-term liabilities, and regularly report on the company's financial condition.

For Samit, success means doing something that nobody has done before. That explains why he holds most dear one achievement – his team's development of a product for diabetes care, which estimated the risk rates for a diabetic population. It was the first product of its kind in the world, he claimed, and it fetched an innovation award from UK's Prudential.

The joy of putting his financial modelling skills gives him a great high. To succeed, one needs an aptitude for mathematical reasoning, he said, but added that a lot of the reasoning can also be qualitative "We have to consider various situations, such as how a policy holder will react to a hike in interest rate, how a jump in the Sensex will impact our subscribers," he explained. "We also have to present regular reports for board meetings."

A member of the Institute of Actuaries of India, Samit has already cleared a few papers. After completing nine papers, he will get a diploma in actuarial techniques, and when he finishes fifteen papers, he will become an actuary .

But while number-crunching may be his cup of tea, he is not always lost in the world of numbers. His normal working hours stretch from 9.30 in the morning to 8 in the evening – a long working day, but he has a five-day week.

He often takes time off to immerse himself in Nature, and has a taste for adventure as well. In June last year, he took 26 days off to go on a tour on his adventure bike, a tour that started at Delhi and ended at the Pakistan border. While maintaining a work-life balance is challenging, Samit also makes sure he plays tennis for at least two to three hours a week.

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ASSOCIATE

Once the team has zeroed in on a company to invest in, the senior analyst helps in conducting what is called "due diligence" on the company, namely checking that its accounts are in order, that its operations and facilities are sound and it is adhering to various environmental standards.

 Pay: 16 lakh to Rs 30 lakh a year

PRINCIPAL

This person deals directly with the client, and may also have a role in the final negotiations with the company when the private equity firm is about to invest.

Pay: Rs 40,000 to Rs 90,000 a year

VICE PRESIDENT

This person leads large and important deals and helps to raise funds for the company, funds that it uses to invest in various companies.

Pay: Rs 50 lakh to Rs 80 lakh a year

MANAGING PARTNER

This person is responsible for the entire private equity team and also directs fund raising.

Pay: Rs 80 lakh upwards

Some companies also have profit-sharing arrangements for senior staff, going up to five per cent of earnings.

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SKILLS

 Anyone who likes to crunch numbers to arrive at values for companies and can quickly digest information about a new sector can make a mark in this field.

Having an MBA or CA degree would be ideal, as these give you the ability to understand the financial nitty-gritty and the analytical skills to evaluate whether a company's business plan will fly.

As one climbs the corporate ladder, one has to develop good negotiating skills as well.

But ultimately, one also needs to have a passion for spotting good investments. This will feed into your "gut feeling", which is intangible but will give you the edge over those who have similar paper qualifications. Instinct is an often overlooked skill.

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TRAINING

POST-GRADUATE LEVEL

Not many institutes offer specific courses on private equity, because the some of the basic skills required can be acquired by doing an MBA in finance or a Chartered Accountancy course. These skills include analysing balance sheets and profit-and-loss accounts, and using financial models to evaluate the prospects of the particular sector.

INDIAN SCHOOL OF BUSINESS IN HYDERABAD

offers a short five-day course on the subject.

Cost: Rs. 50,000.

Website: For more information, go to http://www.isb.edu/cee/EventMgmt.as px

>> More on www.hindustantimes.com/ hotnewcareers

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GO GLOBAL

In many ways, India, being an emerging economy, is the place to be. As its economy grows and companies expand, the hunger for capital will only increase. But many multinational private equity firms are based in India, and many in Mumbai itself. So one can work in a global setting right here. Also, after one gains experience in India, one can explore opportunities abroad. One can relocate to the overseas branches of multinational private equity firms. India is quite similar to other southeast Asian countries, and Singapore and Hong Kong are hotbeds of private equity investment, so there are many opportunities there. Usually after moving from India to southeast Asia, professionals move on to mature markets in Europe and the US.

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PLUSES AND MINUSES

One learns about many sectors because before you recommend an investment in a company, you must thoroughly understand the sector in which it operates.

You get to interact with a range of energetic entrepreneurs.

You get to travel a lot within and outside India to meet entrepreneurs and company officials.

You must put in long hours, especially when you are working to close a deal. You might even have to work on Sundays.

The field is very competitive, as all private equity companies are hunting for opportunities in India right now.

Within a company, there is a lot of competition between teams looking into various sectors.

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