Ashish Dhawan is arguably India's most revered PE investor

Many would agree Ashish Dhawan is the most accomplished private equity investor in the country. While researching for this article, I tumbled up on my own article on Ashish Dhawan published in Business Today magazine in the issue dated July 17, 2005 when I was working with the magazine. We had titled the article (read here) as One Man Industry. The Indian private equity industry at that time had only one big success story - Ashish Dhawan. The magazine had picked him as the Young Super Performer in Entrepreneur category for turning around a fund which wrote off a majority of its dotcom investments it made in 1999-2000. By 2004, Dhawan not only emerged stronger by raising three funds with total assets under management of $450 million which no other entrepreneurial fund could boast of at that time, but he also had several exits under his belt - led by Spectramind which alone returned his first fund of $64 million. Dhawan had beaten many other entrepreneurs from other industries to bag the honour.

Dhawan and his erstwhile colleague Raj Kondur (who left the firm in 2002 to set up a BPO and now a partner with Ascent Capital) set up ChrysCapital in 1999. Many others had set up their own funds at around the same time. They included Dhawan's classmates at Harvard Business School like Sumir Chadha and KP Balaraj who founded Westbridge Capital Partners and Rahul Bhasin who set up Baring Private Equity Partners India with a licence from the international PE firm Baring.

But Dhawan has had the fastest growth among all of these entrepreneurial funds. By 2005, Westbridge was managing only one fund of 2001 vintage with a corpus of $140 million while Bhasin's Baring was managing $215 million in two funds (it had raised its second fund of $175 million in 2005 after the first fund of $40 million of 1999 vintage). In contrast, by end of 2005, Dhawan was way ahead of all his peers as he was managing four funds with a total corpus of $1 billion. That was clearly the magical number which no other homegrown entrepreneurial or an independent fund had achieved in India at that time.

It were not just four funds of an unmatchable size of $1 billion which Dhawan was credited with. He also had stellar exits to show. The first big exit of Dhawan was Spectramind BPO, the outsourcing firm founded by Raman Roy. Wipro bought Spectramind for $93 million in 2002, and that fetched ChrysCap's $10 million investment six times return ($60 million). This deal alone gave back almost entirely ChrysCap's first fund of $64 million. This exit was the most important milestone in Dhawan's career. It was a make or break deal. For, he had lost money (an estimated 40% of Fund I) on at least half a dozen investments in internet businesses. Spectramind helped Dhawan survive the dotcom crash. A venture capitalist who knew Dhawan closely told BT in 2005: "If Dhawan hadn't survived the (dotcom) crash and had not managed to raise his second fund, he would have ended up as a middle-level manager in one of the investment banks."

So it was clearly a turning point.

The Spectramind exit and the successful raising of Fund II of $127 million in 2001 gave Dhawan enough breathing space. Dhawan was the first to spot many investment opportunities early on in a sector's growth. He bet on banking and finance (UTI Bank, Yes Bank and Shriram Transport Finance among others), IT/ITEs (Spectramind, Global Vantedge, Transworks, TechTeam), and infrastructure/ construction (Gammon, IVRCL and Suzlon), and made money on all of these deals. He pioneered private investment in public enterprises in India or PIPE, which was unfamiliar to Indian investors as well as promoters till then.

For instance, Dhawan invested in IT services company Mphasis in 2001 - yes, the same company in which Baring India made a killing - and made some 5x returns. It was a deal which looked like a lemon. A 90% of his investment went down the drain as the stock price crashed from Rs 230 to Rs 50 (Dhawan's buying price was Rs 350 a share). You need a lot of stomach to survive that kind of crash. Dhawan stayed put in the stock and sold them at overall 5X return later. His investment in UTI Bank (now Axis Bank) fetched an IRR of 250 per cent. Dhawan looked at the construction and infrastructure sector when it was really virgin for a PE investor, and got a 40% IRR on his investment in Hyderabad based IVRCL. Gammon is another one where he made money.

"Dhawan is not constrained by dogma. There is a high probability that he will discover the next big play before everybody else," Gaurav Dalmia, a Delhi-based VC and a co-investor of Dhawan in Jobsahead.com, which was later acquired by Monster, told this reporter in 2005 when at Business Today.

By 2005-06, Dhawan had been there and done that as a private equity investor. He had done venture (although burnt his fingers in some of the deals), then he moved to growth, especially PIPE, and by 2008-09, he started making pure play public investments such as the multi-million dollar deals in Infosys Technologies and HCL Technologies - even looking more like a hedge fund. In some deals, he has lost money too, but you look at a fund's performance from the perpsective of its full life which is anywhere from 7 to 10 years.

In 2007, Dhawan raised his last and fifth fund of $1.25 billion, the biggest by an Indian fund ever, although a third of the fund was returned last year in bargain for a greater investment flexibility. His 12 year investment career in India has seen at least three dozen investments and also two dozen exits.

To give the fair due to other fund managers, post-2005, the Indian PE landscape started seeing more managers coming to the forefront. In 2006, WestBridge Capital Partners merged with Sequoia Capital in India and the team finally ended up managing about $1.8 billion (via five funds) making Sumir Chadha and KP Balaraj major players in the Indian PE. The difference is Dhawan did entirely on his own while Chadha and Balaraj had help from parent Sequoia, which is a bluechip fund globally. Same is the case with others like ICICI Venture, which, under Renuka Ramnath and later Vishakha Mulye, emerged as a leading fund in India with six funds and $2.5 billion under management.

The other leading captives in India are IL&FS Private Equity which manages 14 funds wiith total AUM of close to $2 billion making its CEO Archana Hingorani as a top player in Indian PE. IDFC Private Equity also manages about $1.3 billion via three funds and this fund was founded and built by an ex-ChrysCapital veteran Luis Miranda. He is now on a sabbatical and will return to active private equity by next year.

But India PE has seen more entrpreneurial successes. Baring under Rahul Bhasin has emerged as a major player as it raised $550 million in its third fund in 2008. Bhasin now manages $765 million. Ajay Relan left Citi Venture Capital International in 2008 and floated his own fund CX Partrners which closed a $550 million fund last year for its debut vehicle, which is a big deal as he did that in a bad economic environment. Renuka Ramnath left ICICI Venture and started her own fund Multiples, which had its first close at $250 million last year and is targeting to do the final close at $450-500 million.

Everstone Capital is another large player - making its founders Sameer Sain and Atul Kapur India's top PE investors - which will announce its fourth overall and second fund under the Everstone banner on March 7th. Their latest fund is expected to close at $550 million making the total AUM about $1.56 billion.

Among all of them, the 41-year old Dhawan stands tall for a simple reason: He has seen a full cycle of private equity (investment and exits) as an entrepreneuer-fund manager and now he has called it a day.

By: Sahad P V