“When I first heard the phrase True North, I honestly didn’t know what it meant,” Vishal Nevatia, the firm’s 50-something founder and managing partner, confides as he recounts how his firm got this name. Originally called India Value Fund Advisors (IVFA), it was rebranded in 2017 after Nevatia roped in a branding expert, Alok Nanda, to give it a name that reflected its true nature. IVFA, he believes, sounded like an India-focused mutual fund.
Nanda suggested “True North”, a name that sounded both international and unique while resonating with their core philosophy: that True North could be achieved by rigour and accuracy. It seems Nevatia wanted Nanda to get feedback from as many as 30,000 employees (all partner and investee firms) before settling on the new name. Nanda finally agreed to run the process past 1,000 employees.
We are at True North’s office at the Grand Hyatt in Mumbai—a quiet 4,000 sq. ft space with minimalist décor, tasteful interiors, and the pin-drop silence characteristic of private equity (PE) offices. Displayed alphabetically on the wall in the reception are posters of companies the firm has funded: ACT Fibernet, Biocon, Fedbank Financial Services, Hicare, Home First, Manipal Hospitals, Radio City and Zydus Wellness, among others.
As we sip on green tea in a boardroom called Yoda (the Star Wars character), it’s amusing to note that the other conference rooms too are named after fictional mentors and masters from film and literature: These include Rafiki (The Lion King), Albus (Harry Potter), Miyagi (The Karate Kid) and even a hallway called Oogway (Kung Fu Panda). I suggest doing the interview at his corner office but am told he doesn’t have one.
Nevatia, with plastic-rimmed glasses, denims and a business shirt, looks quite different from the time he started one of India’s first PE firms, 20 years ago. Gone is the moustache and baggy pleated suit, in its place is a salt and pepper stubble and a wiry frame, a result of regular weightlifting and only two meals a day. He sports a smart watch and a Buddhist bead bracelet.
Nevatia’s own beginnings were humble. He started out in Akola, a midsize agrarian Maharashtra town—his father was into cotton trading and vegetable oil extraction. Nevatia, who has three sisters, lost his father when he was in class IX. The extended family offered support but the business went bust and Nevatia, who wanted to pursue engineering, changed tack. He studied commerce at Mumbai’s Sydenham and followed it up with chartered accountancy.
Towards the end of the 1980s, he joined the accounting firm Arthur Andersen, spending a decade there before he felt the itch to develop a new company. Just around then, star executive Gary Wendt had quit as CEO of GE Capital and was planning a global fund. He had roped in Housing Development Finance Corporation (HDFC) and Ambit Capital’s Ashok Wadhwa to partner. IVFA was supposed to invest $125 million (around ₹925 crore now) in India and Nevatia joined as CEO for the Indian arm. A few months later, though, Wendt decided against investing in India.
Nevatia, who had left his job, felt like the rug had been yanked from under his feet. “I had very little in the bank—maybe a few lakhs—and then was presented with the choice of not being a well-paid CEO working for international financiers, but, instead, being an entrepreneur who has to scramble and run the business,” he says.
He thought the fund was a lost cause—till, that is, Ambit Capital and HDFC decided to stay the course. The $125 million target was revised to around $50 million. Nevatia says they hit the road to raise the amount. With LIC, UTI and a few family offices showing interest, they got to $35 million in just a few months.
Then UTI was hit by internal turbulence and Nevatia was told they would have to go to court to get it to honour its commitment of $10 million. “We weren’t going to get into the cross-hairs with a quasi-government organisation even before my fund started,” he says, adding that even though they had binding agreements, they wrote these off and moved ahead with $25 million.
His attempts to raise more money over the next two years failed. “Fund-raising is one of the most humbling experiences, and, typically, it can take as long as 5-10 years to get money from large international LPs (limited partnerships),” he adds. “The reality is that most PE funds are expected to deliver on at least three cycles before they are taken seriously by larger institutional investors.”
The next five years saw the 12-member team on tenterhooks, struggling to avoid rent and salary delays—they managed with the help of their early investors. It was only in 2005 that the firm, which had got its second fund of around $125 million in place, hit pay-dirt with an early investment in Biocon that gave it a 10x return—establishing its standing as a blue-chip investor. They haven’t looked back.
“How has the last year been?” I ask. Business was great, he responds, but the collateral damage owing to the pandemic was tragic. “We had around 13 exits and generated liquidity of over a billion dollars for our investors in the last 12 months,” Nevatia states matter-of-factly. Since inception, he says, on average True North has generated returns in excess of 20% annually on investments.
To date, it has raised a total of $3 billion, Nevatia says, and that includes funds and co-investments. The firm has also invested $2.4 billion across 60 companies and generated a total of $2.5 billion in liquidity to date (this includes $1.1 billion in 2021). At present, they have deployed 80% of the funds from their sixth round, which raised around $600 million; their fifth round had raised around $700 million. True North will start raising capital for Fund VII , expected to be the biggest yet, in the next few months.
To critics, private equity can represent satanic forces that disband great enterprises, turn their employee bases upside down in a move to drive value for shareholders and put their heft behind commercial ventures that may not benefit society at large. Their founders and CEOs are also infamous for being divas with egos that would dwarf those in filmdom.
Nevatia is embarrassed by such perceptions but believes he can only speak for his firm. “We have sort of called it upon ourselves that…humility is to be a core value. I just feel that there is no reason for anybody to be arrogant because if you just look up there will be at least 1,000 people who are bigger and better than you.” Success, he adds, is a lot about being at the right place at the right time. “If that’s so, what’s the value of arrogance?” he asks.
“Whenever we partner with an entrepreneur or a CEO, value congruence is the No.1 criteria for us,” he maintains. “If value congruence is not there with a partner company or a CEO, then we would not invest, irrespective of how attractive the venture is.” The second is that True North invests 95% of its money in four sectors: healthcare and life sciences, financial services, consumer industries, and information technology products and services.
Unlike most of his peers, Nevatia is grounded enough to admit that when they have ventured out of their comfort zone, they have burnt their fingers—like their shot at a freight railway logistics business and an aggregates business that involved cemented stone chips. He says they stay away from “one hit-wonders, passing fads, and any business engaged in gambling, tobacco, alcohol or firearms”.
Nevatia and the firm have crafted their management into two teams: investors, and a team of business builders with deep operating experience and sectoral expertise. His partners—there are seven others— echo Nevatia’s view on investing. Satish Chander, who has been at the firm for 16 years, says they wouldn’t put money in sectors they aren’t comfortable with. Ashish Bhargava, who has been with the firm for 14 years, points to some of the outlier targets True North did aim at, such as Meru Cabs, Radio City and Fame Adlabs.
They seem unfazed by new trends, such as the FOMO syndrome, or the herd mentality common to money managers. Nevatia describes the current market as a fertile field for pushing in big amounts of capital and says “the craziness that has accompanied the digital-first businesses in the pandemic aside, the private equity industry in India has become very large and is maturing nicely, with ample opportunity for investing and exiting from new-age businesses as well as incumbent entrepreneur and family-owned businesses”.
What drives him—returns in the highest of multiples or building businesses best for society? “So, consistently doing the right thing and going to sleep peacefully,” he says. As we return to the back office, one of the company’s mission values, etched on the wall, reads, “Sleep Well at Night.” Nevatia, I see, really doesn’t have his own office. As if on cue, he says, “An isolated cabin can be a pretty lonely place to sit in life.”
Pavan Lall is a Mumbai-based business journalist and author of Yes Man: The Untold Story Of Rana Kapoor.