Amit Jatia is clearly smitten by the concept of co-investing. The trigger was around seven years ago, when Siddharth Mehta, Bay Capital’s co-founder, told him he was investing in Sterling Holiday Resorts. “I too decided to put in some money and it worked well,” says the 51-year-old. It sure did; Jatia exited with a 3x return after four years.
By the looks of it, this asset class will occupy a good part of his mind in the time to come. If 70% of his wealth goes into the family’s businesses now, he plans to reduce that to 50% over the next decade. “Of course, that will be on a larger base. We will be choosy about where the money goes,” he says. Having burnt his fingers with a food venture, he is clear that he will not invest in start-ups. “You need to put in a lot of money initially. Even if the concept is good, but money runs out, you are in trouble,” explains Jatia. His approach is clear — invest in a business where the concept has been tested and offers an opportunity to scale up.
Thus far, Jatia has made five to seven investments as a co-investor. Slowly, he is donning the role of a private equity investor. “We will invest in sectors that will get big in the next 10-20 years, similar to how we spotted the opportunity in quick service restaurants,” he says. The trick is to buy a majority stake and then leave the running of the business to the main promoter. Food is one industry Jatia wants to stay away from, since he believes that he “knows too much”. Being sector-agnostic is the plan and he speaks of an opportunity in the service sector, with millennials as the target and the absence of branded players. “My skill is in spotting trends and it will be no different here.”
There has been a remarkable shift in Jatia’s investment allocation strategy. For many years, it was a combination of money going back into family businesses, and the rest being put into mutual funds and fixed maturity plans.
Speaking of return, Jatia expects nothing less than 20-25% from his business and 12-15% from other investments. However, he calls himself a conservative investor and feels comfortable betting on his own business. “I want to balance it with a certain level of liquidity, where writing a big cheque should never be an issue,” he says. There were some stocks held by the family till the mid-1990s, but that has been reduced to an insignificant proportion. “Our own businesses were growing then and the volatility in stocks was not comfortable.” However, Jatia is now letting his son take some calls in the equity market.
Given that, as part of a settlement, the family got a huge exposure to real estate, Jatia is not investing afresh in this asset class. “Anyway, real estate is hardly an exciting proposition,” says Jatia.