It’s been a volatile ride, not just for markets but also for the currency. The depreciation of the rupee will have a direct bearing on returns of private equity funds. In a conversation with Bloomberg TV India, Renuka Ramnath, Founder of Multiples Alternate Asset Management, speaks about how she is reading these signs:
What’s the picture looking like for private equity funds?
Fundamentally nothing has changed for our companies. Whether the ones that I have invested in or the ones that are quoted on the market. But I would say as a country for us to attract long-term capital, we need to show a lot of consistent policy, consistent attitude to taxes, consistent investment framework and regulatory framework and give the confidence to international investors.
It indeed is, because even if you have generated 20-25 per cent rupee return and if you are suffering a 7-8 per cent rupee depreciation, then dollar investors ask themselves a question that if I am going to make 3 or 4 per cent more dollar return by going all the way to an emerging economy like India is the risk justified for the return that I am getting? Because their own home countries are also generating equity returns in 8-12 per cent range, so rupee depreciation is a very big and a worrying factor.
This year was supposed to be a very important year for exits. Because a lot of P-E firms who came in 2005-07 had a very tough time in India. So how do you see the exit piece going?
I don’t think there will be any fundamental change in the story. I think such exits will continue and IPO will continue. This kind of huge volatility causes a momentary disturbance in the time table. Things may get delayed by a few weeks. I don’t think there would be any greater damage than that.
Every quarter, we find bank NPAs rising. How do you see things resolving?
I think there are a lot of good things that are happening. First of all, this recent initiative that banks can take control is going to help the banks greatly. And I am seeing banks like SBI already moving forward briskly with that strategy. So I am dividing the world into two parts, one is imminent stress and other is companies that are already in stress. As a private equity professional, I am very interested in the imminent stress areas. So can we at least arrest the increase in NPAs by dealing with companies which have not already gone into stress? My submission or request to the financial system is that can we focus on imminent stress. Let’s not add to the pile of NPAs that we have.