Aavishkaar Group featured in Business Standard in an exclusive story as part of ‘Lunch with BS’ tilted’ Early mover advantage’

Saturday 22nd February , Mumbai: Aavishkaar Group was recently featured in Business Standard in a story tilted ‘ Early mover advantage’ when Vineet Rai Founder and Chairman in an exclusive interview with Anjuli Bharagava as part of ‘Lunch with BS’ spoke about how high risk appetite combined with strong survival instinct is the recipe for success.

The entire interview with Business Standard :

In the early 2000s, when the world was yet to wake up to the promise of impact investing, Vineet Rai was registering a firm with the princely sum of Rs.5,00O to raise funds to transform rural India. The following year, he borrowed a lakh from his wife and registered an advisory com¬pany to help new entrepreneurs. Around the same time, in the United States, Jacqueline Novogratz set up Acumen, first as a fund and which later became a non¬profit. A year later, UK businessman turned philanthropist Sir Ronald Cohen set up Bridges Fund Management that in due course crystalised into an impact investing company.

That makes Aavishkaar group chairman Rai a pioneer in the impact investing space in India arid one of the early entrants globally. We are meeting for a long pending Dinner with BS at The Table in Mumbai’s Colaba area. Without wasting time we order a SoBo salad that we intend to share. Rai opts for shrimp tacos and a diet coke and I order a roasted almond tortellini. The term “impact investing”, he explains, was coined many years later —at a meeting at Lake Como, Italy, in 2008 by 10 members of the impact community. Would he then qualify as the “father of Impact investing” in India like his mentor Basix’s Vijay Mahajan, who is ofetn called the father of micro-finance? He laughs off the suggestion, adding that would be too laudatory.

Rai was 29 when the idea that a blend of talent and high risk capital could trans¬form rural India gripped him. He present¬ed his idea before the board of the Gujarat government non-profit he was CEO of only to be told that venture capital was barely available in Indian cities, let alone raising such capital for rural India.

Meanwhile, a small group of Indians based in Singapore had heard of Rai and sent him a ticket to visit them (Rai couldn’t afford the tickets for what would be his first-ever visit outside of India). They hosted a dinner of SO local Indians, sat through his presentation and a bunch of them committed some money to his plans, not expecting to get it back.

A bull in a china shop and keen to prove his theory, Rai returned to India, quit his job — to his wife’s horror — and set the ball rolling. He had earlier helped Vikram Akula in building SKS Microfinance as a friend and consultant and had become quite familiar with the micro-finance landscape in India. But the going wasn’t easy for Aavishkaar in its early days and by end-2003, Rai was struggling to keep his head above water. That’s when Mahajan pointed out that Rai was in a unique position — he knew more about micro finance than most people in the equity space did and he knew more about equity than most in the micro-finance space did. So why doesn’t he just marry the two?

He followed the advise and worked “30 hours out of 24” with his small team of equally committed people. At that time, Intellecap was assisting two billionaire Kiwi brothers, Richard and Christopher Chandler, find the right opportunity to invest in India’s micro-finance industry. Impressed with his handling of the deal, the brothers offered to pick up a majority stake in Rai’s business. Rai refused. “At the time, Intellecap had Rs. 1 crore in spare cash and I thought I was the richest man in the world,” he says. That apart, he also knew there were no free lunches and was scepti¬cal of the strings that might be attached. The Chandler brothers were not accus¬tomed to taking a “no” for an answer and persuaded Rai to sell 40 per cent in Intellecap for $8million. The year was 2007.

Our dinner is over and Rai orders a cap¬puccino. We are by now in 2011 and the pressure on Rai to find a way to return the money invested by the Chandlers was building up. So he took another mad gam¬ble, against the advice of all. He went ahead and created Intellegrow (an NBFC) and bought Arohan, a micro-finance com¬pany, which he got cheap at the peak of the micro-finance industry crisis.

As they say, fortune favors the brave. The Aavishkaar fund became one of the first investors in several early stage, highly successful MFIs of the day including Equitas, Basix and Utkarsh. Arohan grew by leaps and bounds and is the fifth largest MFI in India today.

Rai starts talking about a mind-blow¬ingly complex restructuring of the group that I tune out of and by the time I catch him again the holding company Aavishkaar Group has been born. The group sold stake in the holding company twice, raising over $100 million in two years (part of the money was used to buy back stake from the Chandlers), taking Rai and his associates’ share in the group down to just over Si per cent.

I interrupt to point out that many in the impact space have questioned his decision to venture into Africa and South East Asia, arguing that he’s bitten off more than he can chew. “Can we go wrong? Yes, we can. But if I don’t take risks, we die,” argues Rai.

If some describe Rai as a risk-taker, others say he is ambitious. The group today has Rs.8,O00 crore in assets under management, and by 2025, he aims to be well entrenched in the international market, with assets under management to the tune of Rs.50,0O0 crore. He’s also under pressure again to create exit options for his present set of investors.

I switch to a broader debate: Over the years, there has been criticism globally that the impact sector is seeking to take a moral —high ground and make other businesses appear soul—less. This lot argues that every business will have some impact and that the impact community comprises wolves in sheepskin. So does he see himself as a messiah for India’s poor? Rai holds no grand illusions. The impact sector isn’t really a “Florence Nightingale” and can— not solve the more complex problems that society faces. “If a child is dying of starvation or a baby girl is killed, what can I do?” he asks. He can only solve problems that lend themselves to a viable business model. Also, he’s in it because this is what he likes doing, not because he can “change the world”.

That more or less confirms my assessment of Rai —that he is grounded. He lives in Mumbai’s west¬ern suburb of Kandivali although lie can easily afford a fancier address iii the city. I also see him asking his driver to call it a day even before we finish dinner because he is concerned it might be too late for him to find trans¬port to get home.

We have been talking over three hours now. As we wind up, I tell him that he appears to be enjoying the perpetual— pressure-cooker work environment. “An entrepreneur should always remain under pressure or he will die,” he says simply. He just hopes many more are left better off at the end of this over—wrought journey.

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