There are few people as synonymous with Indian private equity as Ajay Relan. Therefore, when speculation mounts about his moving on from Citi Venture Capital International’s India operations to start up on his own, it is an exciting thought, to put it mildly. None of the reports that have appeared so far have been confirmed yet. In fact Relan himself denies any such plans.
While the two may or may not be related, Citigroup Inc’s troubles overseas on account of the US subprime crisis are now well documented — it closed the second quarter of fiscal 2008 (April-June) with $2.5 billion losses against a net income of $6.23 billion in the corresponding quarter in 2007. In May, Vikram Pandit, the firm’s just over six months old CEO who took over from Charles Prince, launched some hard restructuring measures to stem losses. The bank plans to write down more than $350 billion in assets over the next 2-3 years. This includes $9 billion on account of Old Lane, a hedge fund founded by Pandit which Citi bought in May 2007 for $800 million — read the press release on Old Lane’s restructuring.
Citi’s private equity business is contained within the Institutional Clients Group, a division that was formed in October 2007 with Pandit at the helm. The private equity business has three arms — Citi Private Equity, Citi Venture Capital International and Metalmark Capital. Citi Venture Capital International or CVCI attends to investments in global growth markets such as China, India and Emerging Europe and manages over $3.5 billion in investments and committed capital.
Relan has been at the helm of CVCI India since 1995 and last year the firm said it would invest a fresh $1.5 billion here over three years. At the time CVCI was in the process of raising a global $4.5 billion Growth Partnership LP Fund II, from which the fresh allocation to India would come — this incidentally would be CVCI’s second fund since inception to have a larger than usual third-party investor base, something that Relan has been openly enthusiastic about because it would reduce the dependence on Citi for funds.
There doesn’t seem to be any update on whether this fund has been raised yet. CVCI has not been very active on the dealmaking front yet this year, though it has executed quite a few exits. So far, reported investments in 2008 are $42 million Global Capital Markets in February and additional capital infusion in Sharekhan this March.
When I spoke to Relan last June he had big plans for CVCI in India. The firm’s total investments here at the time were at $500 million but he planned to up the ante and get into bigger deals along the way (upto $250 million per deal). If Relan does quit CVCI, much of these plans could hang in the balance and CVCI would lose out on some invaluable experience — few understand the Indian investing environment as intimately as Relan — which is critical at a time when India’s private equity market is transitioning from a cottage industry to a global influencer.