India’s response to the coronavirus outbreak divides opinion. Supporters praise the government’s swift decision to lockdown in March, while detractors point to its crippling impact on the country’s economy.
Portfolio companies of Everstone, a Singapore-headquartered private equity firm investing across India and South-East Asia, have been on the front line of the India’s battle against covid-19. They include Burger King India, Sahyadri Hospitals and fashion business Ritu Kumar.
Private Equity International caught up with Alok Oberoi, Everstone’s executive chairman (pictured), to discuss the pandemic’s impact on its portfolio, the firm’s push into environmental, social and governance and how the team has acted to protect Indian jobs.
How has your portfolio been affected by coronavirus?
Around 10 percent of our portfolio was significantly affected by covid-19. A hospital business in India, for example, had the most dramatic revenue fall because numbers for elective surgery reduced and there was a massive social focus on making beds available for the government to fight covid-19. We had to support as equity shareholders to bring costs down and, more importantly, fund the business with liquidity.
Covid-19 has also led to an explosive change where three-to-five-year changes happen over one quarter. In our Singaporean IT business, Everise, we had already started a work from home measure for 10 percent of the workforce because unemployment had reached very low levels, our costs were increasing and we wanted to access people who can’t come to the workplace. Working from home is not so easy because you need to create security protocols and set up internet services, but around 90 percent of that business is now working from home, while revenues are up 20 percent.
The pandemic had a positive impact on our gender balance because working from home meant we could access a new part of the workforce that previously couldn’t come to the office because they had a family, for example.
How have you been protecting jobs during India’s lockdown?
In countries like India, the governments are able to provide limited support, so we had to take strong measures to keep staff. Our biggest message to senior management was to forego bonuses and take pay cuts at the senior level. The CEO, of a company like Burger King India, can take a 25 percent cut to compensation and we could keep all staff employed. Getting this balance is the responsibility of private capital and one of the biggest challenges in developing countries.
Before covid-19, our capital was mostly used to build 30 to 50 new sites per year at Burger King India, but the pandemic shut most of the business down, save the delivery processes. To keep revenue versus expenses at a positive EBIT, part of our growth capital was used to stabilise the business and we decided to reduce the number of new outlets in the short-term.
What impact will the pandemic have on the way Everstone operates?
Most people are going to realise that they over-met for business. For the due diligence process, it cannot be possible that physical meeting is equivalent to a video or phone call but I’d say 30 percent to 50 percent of our meetings will become electronic. The biggest change will come for our internal meetings, which will be substantially lower in number, the focus will be a lot more efficient and we’ll work from home around 40 percent of the time.
You’ve increased your focus on ESG in recent years. How will covid-19 affect those plans?
ESG practices are integrated in every business we invest in, but ESG during covid-19 is about prioritisation. For example, we have a hospital company that was upgrading its buildings to conform to fire safety norms before the construction was banned due to the pandemic, which stalled the upgrade process. As the management was also dealing with other problems due to coronavirus, that upgrade was paused. In such cases, we have to be extremely sensible and careful in pushing to get things done in a construct that’s doable and positive. However, the focus on ESG is one of our core agendas and we make sure to always tick that box.
Alok Oberoi is executive chairman of Everstone, having transitioned from a non-executive chairman role on 1 January 2020. He previously spent 14 years at Goldman Sachs, where he served as head of international wealth management, and was most recently the co-founder of London-based multi-family office ACPI.