Amit Patni talks about RAAY Global Investments, his investment philosophy towards different opportunities, the future of the family office and the sectors that are likely to see growth in the future
Established in 2002, RAAY Global Investments is the single family office of the Amit Patni Group which offers a holistic approach towards asset management and capital preservation for the family. The company has developed a family-centric approach that aligns investment opportunities with the family’s vision, legacy and values. With more than 22 years of experience in technology, software and projects, its director, Amit Patni, in his various roles, has independently ensured implementation of Greenfield projects and launched new business operations. In his current role, he admits that he enjoys meeting and networking with entrepreneurs and VCs and identifying the next big trend the industry.
To be able to exit, you have to build a strong value in your product and technology which will interest a strategic buyer
After the Patni family divested its stake in Patni Computers, they established RAAY as a family office. It currently has five anchor investments that include Nirvana Venture Advisors (US $40 million digital and Internet venture fund), Elysium Investment Advisors, The Hive-India (Big Data incubator), Waterfield Advisors and Campden Family Connect.
In this interview with Poornima Kavlekar of The Smart CEO, Amit Patni talks about RAAY’s investment philosophy, its anchor investments, the future of family office and the sectors that are likely to see growth in the future.
Please take us through your investment philosophy at RAAY Investments. How has it evolved since the family office was setup in 2002?
The setup is like a family office which houses the advisory team, including the CIO who heads the investment team. We have two basic divisions – the investment team with analysts and our own trading desk for trading in stocks and bonds. Over the years we have structured the investment portfolio for each individual and for the trust which has been set up. Based on the asset allocation per individual and for the trust, we work out the annual target return numbers which should be spread across different assets. Our target is to beat the benchmark and, even in bad times, we aim to cover inflation. We also use external advice from time to time, especially, when you want to execute the products.
Additionally, we are angel investors and have invested in a few ventures in the last two years. Our philosophy here is to look for destructive businesses that are sector agnostic like healthcare, pharmacy, manufacturing and so on. For example, from the family office, we have invested in Bombay Shirt Company (which does custom made shirts), Microbrewery and a few smaller pharmacy chains.
We also set up our own foundation, RAAY Foundation, for philanthropy. We are currently running one project at Wadia Hospital for Children in Mumbai. We partnered with another NGO which specialises in treating children with multiple disabilities. The family office funded that project.
Help us understand your decision-making process in terms of pursuing an investment opportunity?
For private companies, we have Nirvana fund which invests in consumer Internet companies with a different theme and process. At the family office, where we invest from our own capital, we look at companies based on the team, their background, their idea, marketability and scalability of the idea. If these criteria are fulfilled, we then meet the team, go through the business plan, visit their office and then do cross referencing and subsequently, proceed to the term sheet stage.
In the technology space, the yet-to-be-hot sectors are big data, internet of things and artificial intelligence. Healthcare and consumer related industries like retail, luxury goods or consumer services will also boom
At Nirvana Venture Partners, what makes you say yes or no to a deal?
It is basically the idea and the team. If the idea has too many players and has too much competition, we will pass on that. Even if the idea is not new, if the way it is implemented is different, then we consider it.
It would be great if your share a quick word on each of your anchor investments. What is your long-term vision for each of these initiatives?
○ Camden Family Connect
Camden Family Connect is a joint venture with Camden Wealth of UK which is a platform for bringing families together by networking through conferences. It holds conferences in different parts of the world where it brings in experienced people on the panel to discuss family dynamics, how to set up a family office and succession planning. In the next two to three years, our goal in India is to do about 8 to 10 events and build a premier family member base of 100 to 150 who will benefit by attending these conferences and get opportunity to use the membership to attend Camden global conferences.
○ Waterfield Advisors
This was set up two years back for which the company partnered with Soumya Rajan, an ex-private banker from Standard Chartered Bank. This is a holistic advisory company which has advisory capabilities that aids families on investment, philanthropy, mergers and acquisitions. Over the years, the general advisory companies or private bankers do a lot of product pushing without understanding the actual need of the family or ultra HNI. Ours is an international model where multi-family offices focus on giving correct advice on investment as well as ancillary advice to families without producing and selling products. Now, in the last two years, we have about 20 premier families and our vision is to grow to 35 to 40 families in the next 12 months to 18 months.
○ Nirvana venture
This was our first initiative after we exited our flagship company, Patni Computers. We set this up in 2011 with a vision of becoming the premier investment fund for consumer Internet companies. We anchored the fund, raised money from Japan and Germany, and currently, it has invested in nine companies across the consumer Internet space which includes payments, healthcare and more. The vision is to build the second fund on the same theme. Here, we also work with companies very closely and help them raise follow-on capital.
This was set up three years back with an aim of getting into the public market space and building a bond strategy based on systematic decision making. We partnered with IDFC PE which ran a public market product and we deployed our stock capital which extended for three years. Now, we are getting queries from foreign family offices and fund of funds from the U.S. and Europe. Our target is to raise external capital in the next six months to eight months (already have a term sheet).
○ The Hive
This is headed by my brother, Arihant, and has an association with The Hive in the U.S. which does work primarily in the big data and IT space. We have four companies now and will be adding a few more. Also, we have been building a networking platform where we do a lot of events with other companies like Microsoft in Bengaluru that bring the big data community together.
Where do you see the PE/VC ecosystem in India 10 years from now?
This ecosystem will mature. In the last two years to three years, many home grown VCs have mushroomed and global VCs have entered the country. In the next ten years, a stage will come when the sector will mature and consolidation will take place. The good part is, with a lot of industrial houses in India (families like Birlas and Tatas) setting up their own fund, more money will be raised in India with institutions also willing to put money down.
According to you, what are the “yet-to-be-hot” sectors which will boom over the next few years?
In the technology space, there is big data, Internet of things and artificial intelligence. Healthcare and consumer related industries like retail, luxury goods or consumer services will boom.
What is the key to build an ‘exit-able’ company?
The company should have enough market to scale. This means you have enough revenue and then, the valuation increases.
To be able to exit you have to build a strong value in your product and technology which will interest a strategic buyer.
You also need to build a brand. Once you have a brand the other person who is buying it knows that there is a brand value.
Tell us about your first exit as an investor.
Our main exit was Patni Computers. The rest are very new and we are in the process of achieving scale. Of course, there is OYO Rooms where I was one of the angels. The company was mentored by Venture Nursery and I am a charter member there. We had put in the initial investment in the company and within a year and half the promoter got a term sheet from a VC fund and most of us exited at that point. I feel we exited too early. Now the company has further rounds of capital. Other than that, we are still building most of the companies and require at least another five years to seven years to do that.
Do you see a lot more family offices being setup in India? Please take us through the finer nuances of making a family office work for all stakeholders/family members involved?
Family offices are evolving now. We were one of the few families who set up a family office 15 years ago. Similar to when we pioneered setting up the IT business, we are now thinking ahead and feel, that we need to separate the corporate and treasury operations from family wealth. As generations grow there should be a Chinese wall between the two. In the last few years, many families have seen liquidity through asset sale and a lot of income is coming into families. They have realised that to manage income a separate set up is needed.
To have a proper family office, the promoter should build a separate team and should not merge it within. There is a tendency for CFO of the company to manage the assets. Instead, there should be a separate team or it should be outsources to an external advisor to have clarity within the family on the person in-charge of it. Ideally, that person should be a professional CIO handling the investment and one of the family members should be designated as the main decision maker in terms of investments so that there is no confusion. Alternatively, set up a committee process where certain final decisions are taken by the committee. There should be a clear mandate given to the CIO on the risk on each individual of the family so that you can set up a risk profile.
Once you have done your asset allocation and have given clear mandate, it is important to facilitate independent functioning of the family office.
What are some of the other types of anchor investments you are looking at for RAAY?
We have our plate full right now and have to fortify these businesses. So, for the next 18 months, we have to make sure that we achieve what we have set out to do.