Innovation Hub India

INDIA

Investing in India-centric opportunities

aarin capita - Mohandas Pai - New
“What guides us in investment is how do we see our investment making an impact on business, that is, disrupting the traditional business models, coming out with new models and growing and making a lot of money”, Mohandas Pai, Founder and Chairman of Aarin Capital.

There is no question that Mohandas Pai holds strong opinions on an impressive variety of subjects. He walks the talk too, playing key roles in financial governance, democratic processes, civic issues, education, philanthropy and important in the context of this article, as an angel investor and a mentor.

Becoming an innovation enabler, investor, and a mentor was a very natural thing to do, says Mohandas Pai in this interview with Sandhya Mendonca. After leaving Infosys, the blue chip IT company where he was the CFO and a Board member, handling two technology businesses – the BPO and the banking business, he wanted to do something very different. That’s when he started Aarin Capital with entrepreneur Dr. Ranjan Pai (the two are not related).

They set up 10 funds, and today they have got 266 stock investment in startups. They have a total investment of US $ 450 million, with 35 fund managers who all work independently. The Pais are GPs (General Partners) and LPs (Limited Partners) in all these funds. Apart from this, Mohandas Pai’s family has investments in 32 funds. While he meets 2500 companies each year, he also works on the startup policies with the Governments of Karnataka, Rajasthan, Goa and the Government of India.

It’s not the numbers that make Aarin Capital stand out as a venture fund. While it invests in technology-intensive businesses in life-sciences & healthcare, education and others, it is clearly focused on potentially large India-centric or India-first market opportunities.

To this end, Pai is working on building innovation networks between cities across the world. “We work to get companies to remain in India and not get domiciled outside. We are working with some governments outside to create various devices to create co-operation and to make sure that this connection between London and Bengaluru, Paris and Bengaluru, Berlin and Bengaluru and then maybe Dubai and Bengaluru, Singapore and Bengaluru, and China and Bengaluru, Tokyo and Bengaluru because now this innovation network has to spread to cities. It can’t spread to countries. Countries are too large. It has to be very specific and innovation has to be centred in cities globally.” While this network would start with Bengaluru as the hub in India, it would spread to Delhi and Mumbai.

This city excites him, and he quotes statistics: “1.6 million out of the Bengaluru’s 10 million population work in technology and KPO (knowledge process outsourcing). Bengaluru has 25,000 IT companies and startups; they export US $ 45 billion. It has more than 7500 startups employing maybe 300,000 people, apart from IT services. Bengaluru has over the last 10 years got US $ 40-45 billion of venture capital.”

“Bengaluru is India’s richest city in per capita terms; Bengaluru’s GDP is around US $ 120 billion, Karnataka is about US $ 190 billion. A very rich city, it has consumer demand, and that’s why Bengaluru absorbs the highest quantum of Grade-A office space in India for the last 12 years, about 12-13 million square feet a year. Bengaluru has the second largest residential market in India. It is the middle-class city with no business class and the middle class is all highly educated, highly skilled. Out of the population of 10 million, about 3 and half million work – which is very good. They work in IT, they work in government, they work in the public sectors, they work in the private sector, they work in financial services, they work in consulting – so it is a large middle-class city and that is a natural attraction.”

Pai predicts that all sectors will grow, for example, AI, machine learning and data analytics are horizontals, where all sectors will work. What will improve and what will be more visible is robotics and electric vehicles.

For its part, the government has to improve the quality of life of its people, he says. “That’s the most important thing. We don’t need any more policies from the government. We want a city where the infrastructure is good and the commute time comes down. For the commute time to come down, we need elevated corridors, high speed corridors across the city so people go from one corner to another.”

“This city contributes the third highest quantum of income tax and corporate tax in India. Karnataka contributes about Rs. 1,20,000 crore – we are the third highest in the county, and a large part of it – 80% is from the city. The city is a large contributor to government taxes, both in the state and for the center, and deserves better treatment.”