The best Indian PE firm should be an Indian one

Gopal Jain, managing director and chief executive of Gaja Capital, talks to Deepsekhar Choudhury and Tarunya Sanjay on the evolution of India’s private-equity landscape and what’s holding it back. Edited excerpts

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What drew you to start Gaja Capital?

The idea behind Gaja Capital was to invest in the domestic market opportunity or domestic demand. At the time [2003-04], most people felt safer to invest in USD/INR cost arbitrage businesses: companies with dollar revenues and an Indian cost structure. That made sense at the time because Indian macros were weak, the rupee was volatile and the legal structures were uncertain.

There was a degree of national pride involved too. I genuinely felt that the best Indian private equity [PE] firm should be an Indian one.

How did you convince limited partners (LPs) that this is a strategy they should bet on?

I reminded them that the US was a domestic consumption story and that this will eventually play out in India too. Finally, you have to sell your own credibility. I had a track record. We also decided to put in a lot of skin in the game. And a lot of GPs [general partners] don't do that.

The most important thing is you have to raise the money yourself. And this is very important for new GPs to understand that you can't raise money by attending conferences. In order to sell to foreign LPs, you require persistence. You need to meet them over and over again, and you need to do it yourself. Nine out of ten GPs will say, 'Oh, I hate the process of raising money.' But it's not a choice.

You have to be prepared for two or three days of travel to do one meeting, which may last no longer than an hour, if you're lucky. And you have to do that four, five, six times to get a commitment.