As managing director and chief executive officer of India's largest private capital and venture management company, the 44-year-old Renuka Ramnath is credited with raising the India Advantage Fund Series II, the country's largest private equity fund till date with a corpus of $810 million.

ICICI [Get Quote] Venture was the first to invest in retail ventures like Pantaloon [Get Quote], Shoppers' Stop and Subhiksha; in Internet firms like Naukri; media/entertainment firms like PVR Cinemas and TV Today; and in biotech with Biocon [Get Quote].

Excerpts from an interview with Surajeet Das Gupta.

Do you need a separate fund to address M&As? How are firms viewing this?

I think my private equity fund is ideally positioned to take care of M&As (mergers & acquisitions). As for how people are viewing M&As, there are huge changes. First, more and more Indian companies are looking to the West to acquire firms as they see some value-creating opportunities. They are open to at least having a conversation on selling their business, which wasn't true even five years ago.

Today, nobody's saying "this is profit-making, so I won't sell, or this is loss-making, so I'll sell it." They are asking what is the opportunity loss in not doing an M&A? Indian promoters are saying let me own fewer companies and have larger market shares and value, rather than be a marginal player.

Our M&A situation in the next three-five years will be very different. One, there are a lot of returning NRIs, who are coming back and creating value out of intellectual property. On the other hand, there are big companies who've been very successful in their overseas acquisitions. Both of these will positively impact the Indian M&A market. I think half the market capitalisation of companies will be dominated by businesses that didn't exist in India 10 years ago.

You have funds of over $2 billion and you are the biggest equity fund company in India. What is your road forward?

There are four components of our strategy:

• In the last five years, we've taken significant minority stake of about 30 per cent in companies and have had an active influence in the way the company is run.
• Second, we have pioneered entry into real estate.
• Then we pursued a third strategy to take controlling stakes in companies, putting very competent management and working with the management in creating value where you're the owner and shaping the destiny of that company.
• The fourth strategy is to look at new instruments like mezzanine funding (a combination of debt and equity), which gives mid-cap companies wanting to grow quickly some breathing space, while not losing control over their company.

Given all the regulatory constraints that are there on commercial banks to provide debt in buy-out situations, we felt that we'll create our own alternative. Similarly, with all the restrictions in lending to real estate projects, there is a scope for funds like us to get in. Some of the newer strategies that we added to this bouquet is engaging in finding opportunities for Indian companies to become global companies, preferably through acquisition.

What about setting up a restructuring fund? Or buying companies in distress and turning them around?

We found that the compromise that existing lenders have to make to sell an asset is far in excess of what they're willing to make at this point in time.

What are the new funds that you are looking at?

We are starting a small cap fund of around Rs 500 crore (Rs 5 billion) to begin with. We could look into a fund-of-funds, which invests in other equity funds, and even a hedge fund. We will go in for a mezzanine fund too.

What about an infrastructure fund?

We're looking at infrastructure projects but are not creating a separate fund. We have to be sure we want to do a separate infrastructure fund and not do infrastructure-type transactions out of our private equity fund. As far as possible, I'll try to keep conflicts to a minimum. The moment I have multiple funds, my investors might get worried, so I do not want to create confusion in their mind that they might be losing out.

Are you going to invest in cutting-edge technologies?

ICICI Venture isn't the most appropriate partner for such transactions. These require very strong technological conceptualisation skills for which there are experts. There are people who do that and bring it to a stage where the proof-of-concept is established. I don't see us getting into the concept stage.

You're seen as an equity fund which does not take big exposures.

Our latest funds are at ticket sizes of $50 million and in some situations $80 million as well. With leverage, we have no problem into doing deals of $200-$300 million.

You are asking some of your investors in funds to co-invest with you in acquisition deals. How will that work?

We've laid out a transparent process for all investors. We will offer the co-investment opportunity to all of them simultaneously. Thereafter, both the speed of response and the strategic fit in a particular situation will determine who has the right to participate.

How many of your investors have actually asked for this?

Seven. Of course, their exposure will always be lesser than ours. So, for example, in a $100 million deal, we might take an exposure of $60 million and raise the rest from the other investors.

How long do you support your existing partners, firms where you have invested money?

At least 40 per cent of my latest $810 million fund will go for existing clients. So you can see how much we support our existing clients.

You've invested in a lot of retail firms. With the big boys coming in, can they survive?

Certainly we have to make a call on who can withstand competition. But I don't believe that everybody has to sell to anybody who's bigger.