But that doesn’t imply intrusiveness, says Krishnan. Even as a majority shareholder, Warburg Pincus leaves the operational management of the company to the entrepreneur. “The good thing about them is that they back a team, invest money, and thereafter they don’t interfere or meddle with day-to-day affairs,” he says.

They can, however, be counted on to make their presence felt during the rough times. That, in fact, is their calling card. “People know we have been here not only in the good times but also in the bad times and that great stories and great fortunes are made when things are out of favour and not in favour,” says Kaye.

Not many would argue with him. Least of all Warburg Pincus investees.

On Team Turbulence

There is a recurring pattern of trust as evidenced by Sanjay Agarwal, managing director and chief executive officer of AU SmallFinance Bank. A little after Warburg Pincus invested in the company in March 2012, the stressed financial sector led to a slower growth rate for AU Small Finance Bank (sliding to around 10% in March 2013 from 40% the previous year). “I told Vishal that we had promised higher growth but we don’t want to grow at that pace because the market is not conducive,” says Agarwal. “He told me to do what is right for the organisation rather than what is right for them or what was promised when the market condition was good. That kind of conversation always helps build trust.”

As does the investor’s timely intervention in times of need, like in June 2017, when AUSmall Finance Bank was preparing for its stock market debut. On the day of the IPO’sopening, a circular by the Reserve Bank of India (RBI) barred foreign investors from subscribing to it since the bank had crossed the permissible limit on foreign holdings. It was a tense morning at the RBI office in Mumbai, Agarwal recalls. “Even though we had five or six other investors, only Warburg Pincuscalled in my hour of need,” he says. “Post our discussion we decided the solution was that one existing foreign investor sell about 5 lakh [500,000] shares in order for the RBI to withdraw the circular. Vishal organised this for me in three hours.” By the third day of the IPO, foreign investors were back in the fray.

This also points to a constant vulnerability for entrepreneurs: The timing of their investor's exit, in as much as what works for the private equity player may not be beneficial for the company and vice versa. For instance, when Lemon Tree Hotels had to delay its IPO from the promised deadline (2015) to 2018 due to poor market conditions and a slowdown in the hospitality sector. At that point, most PE firms would have typically pulled out but there was a trust between the two from the beginning, says Lemon Tree Hotels chairman and managing director Patu Keswani. “When Warburg Pincus invested in Lemon Tree Hotels (in 2006), we signed an investor agreement which was a few hundred pages long but in the 13 years that they were invested, I don’t think either of us referred to that document!” That gave him the confidence to request Warburg Pincus to not give up its entire 24% shareholding in the company. The PE firm took heed, and sold 12%via the IPO in 2018. “And, after one year, they asked me to find a buyer for [the balance 12%of] their stake as they didn’t want to suddenly dump the shares in the stock market because that could depress the stock,” says Keswani.

This sentiment of support is echoed even by blue-chip investees like Uday Kotak, managing director and chief executive, Kotak Mahindra Bank. The banker points to a meeting with Kaye in New York in2007 as one that changed the course for the bank. “Chip told me, ‘Uday, I think the world is going in a very funny place and if you get a chance, you must keep raising capital.’ Based on his input at that stage we actually went ahead and raised capital in November 2007,” says Kotak. “This was a fortuitous stand because after January 2008 markets turned weak. So as we got into the crucial phase post the financial crisis, we were well stocked upon equity capital.”

Once Warburg Pincus is convinced about the entrepreneur’s vision, it is able to play a growth catalyst, concurs V. Vaidyanathan, managing director and chief executive, IDFC FIRST Bank. “We started the company [Capital First] with a retail loan book of ₹94 crore in 2010 and built a proof of concept (POC)loan book of ₹2,700 crore by 2012, lending to people who were not filing tax returns,” he says.“We presented the POC to Warburg Pincus and they backed the idea for scale-up, and then we grew the book to ₹30,000 crore by 2018.”After Capital First’s merger with IDFC Bank, Warburg Pincus owns 10% in the merged entity. “Despite the fact that they understood that the transformation will take a good five years, Warburg Pincus supported the merger proposal with IDFC Bank and has been willing to stay invested as good institutional investors.”

This responsiveness to an investee’s needs helped Yogesh Mahansaria, founder of off-highway tyre major Alliance Tire Company(ATC), expand his company globally. “They were invested in ATC for a little over five years(2007 to 2013) when they wanted to exit,” he says. The PE firm discussed the possibility of an IPO, Mahansaria recalls, but he wanted to scope out M&A opportunities. “This becomes difficult to execute as a listed company, hence we wanted to stay private. We agreed we would run a process with other PEs to step into their role,” says Mahansaria. (KKR India eventually bought Warburg’s 80% stake as well as 10%from Mahansaria.) “Although they could have potentially got better value by trying to sell the business to a strategic investor versus another financial sponsor, they recognised we wanted to continue to grow the business.”

In Tune with the Times

Mahansaria, in a sense, represents the evolution in the firm’s investment strategy after its early bets on primarily established market leaders. Warburg Pincus had begun its India investment story in the mid-1990s with the likes of HDFC Ltd, Gujarat Ambuja (now Ambuja Cement), and Nicholas Piramal. But as the landscape evolved over two decades, so has its approach, with a fresh focus on ambitious professional entrepreneurs looking to build new-age businesses. “As the market continues to develop and mature, [so doesour] ability to think about another generation of ownership. I think the size and scale of what we are thinking about is growing,” says Kaye. “And an environment like the current one, which creates some difficulty and disruption, is the most healing, in some ways, from our vantage point as investors.”

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Warburg Pincus: I’ll be there for you