In 2001, when the world was in the throes of capitalism and yet to wake up to the world of impact investing, one man in India registered an entity to raise funds for transforming rural India with the princely sum of Rs.5000. The following year, he borrowed Rs.1 lakh from his wife and registered an advisory company on the premise that if those who have previously not been entrepreneurs have to turn entrepreneurial, they need someone to advise them.
Meanwhile, in the United States, Jacqueline Novogratz set up Acumen, first as a fund that later became a non-profit. In the UK, businessman turned philanthropist Sir Ronald Cohen set up Bridges Fund Management that in due course crystallised into an impact investing company.
So, the man in question, Aavishkaar group chairman Vineet Rai is a pioneer in the impact space in India and even globally he’s one of the early birds. We are meeting for a long pending Lunch with BS – in this case dinner – in Mumbai’s Colaba area at the Table. We order a Sobo salad to be shared. He opts for shrimp tacos and a diet coke and I order a roasted almond tortellini.
The term – “impact investing”, he explains, was coined many years later at a meeting at Lake Como, Italy in 2008 by ten members of the impact community. Would he then qualify as the “father of impact investing” in India like his mentor BASIX’s Vijay Mahajan, the father of micro finance? He laughs off the suggestion, adding that would be too laudatory.
Rai was 29 when the idea gripped him that a blend of talent and high risk capital could transform rural India. He presented his idea before the board of the Gujarat government non-profit he was CEO of, only to be told that venture capital was barely available in Indian cities, let alone raising such capital for rural India.
Meanwhile, a small group of well-off Indians based in Singapore had heard of Rai and sent him a ticket to visit (he couldn’t afford it, his first ever visit outside of India). They hosted a dinner of 50 local Indians, sat through his presentation and a bunch of them committed some money to his plans, not expecting it back.
A bull in a china shop and keen to prove his theory, Rai came back, quit his job to his wife’s horror and set the ball rolling. A few years prior to his going entrepreneurial, he had came across SKS microfinance and become quite familiar with the micro finance landscape in India. The initial going with Aavishkaar was not a bed of roses and by the end of 2003, Rai was struggling to keep his head above water. That’s when his mentor Mahajan pointed out that Rai was in a sense uniquely positioned. He knew more about micro finance than most people in the equity space and he knew more about equity than most in the micro finance space. Why didn’t he just marry the two?
He followed the advise to a tee and worked “30 hours out of 24” with his small team of equally committed people. It was during this time Intellecap ended up assisting New Zealand billionaires the Chandler Brothers make an investment in India’s MFI and were labeled by them as “India’s Goldman Sachs at Hyderabad prices”. Impressed with the handling of the deal, the Brothers suggested Rai sells them a majority stake in his business, an offer he flatly refused in his naïvety. “At the time, Intellecap had Rs 1 crore spare cash in the bank and I thought I was the richest man in the world”, he says. He had no intention of parting with majority. Moreover, he had no idea how he’d return the money to the Chandlers – he knew there were no free lunches. But the Chandler Brothers were not accustomed to taking no as an answer and eventually Rai relented. In 2007, he sold 40 per cent in Intellecap for US $ 8 million.
Dinner is over and Rai orders a cappuccino. We are by now in 2011 and pressure on Rai to find a way to return the money invested by the Chandlers was building up. So, he took another mad gamble and decided to get into running businesses, against the advice of all. He went ahead and created Intellegrow (an NBFC) and bought Arohan, an existing micro finance company, which they got cheap at the peak of the MFI crisis.
Evidence that fortune favors the brave began to flow in. The Aavishkaar fund became one of the first investors in several early stage, highly successful MFIs of the day including Equitas, BASIX, Utkarsh and others. Arohan grew by from a baby to a giant, ending up as the fifth largest MFI in India today. He goes into a complex restructuring of the group that I tune out of and by the time I catch him again the holding company Aavishkaar Group has been born. The group sold stake in the holding company twice, raising over US$ 100 million in two years (part of the money bought stake back from the Chandlers), taking Rai and his associates’ share in the group down to just over 51 per cent.
I interrupt to point out that many in the impact space question his decision to venture into Africa and South East Asia, arguing that he’s bitten off more than he can chew. “Can we go wrong? Yes, we can. But if I don’t take risks, we die”, argues Rai.
If one adjective that describes Rai aptly is “risk-taker”, the other is “ambitious”. The group today has Rs 8000 crores of assets under management and has created much impact. By 2025, he’s aiming to be well entrenched in the foreign lands and increase his assets under management to Rs 50,000 crore.. He’s also under pressure again to create exit options for his present set of investors.
I change tracks to a broader debate. Over the years, a body of skeptics has arisen globally that argues that impact sector is perched on a moral high ground to make the rest of business look soul-less. This lot argues that every business creates some impact and that the impact community is just wolves in sheepskin.
So, does he see himself as a messiah for India’s poor? Rai holds no grand illusions. The impact sector isn’t “Florence Nightingale” and cannot solve the more complex problems society faces. “If a child is dying of starvation or a baby girl is killed, what can I do?” asks he. He can only solve problems that lend themselves to a viable business model. Moreover, he’s in it because this is what he likes doing, not because he can “change the world”. As we chat, I find Rai remains rather grounded: living in Kandivali although he can easily afford a fancier address in the city, maintaining a pretty strict pay parity in the group and asking his driver to leave during the course of dinner, as he is concerned it may be late for him to find transport to get home.
Three hours have flown and as our chat draws to an end, I point out that he appears to enjoy being in a perpetual “pressure cooker”. “An entrepreneur should always remain under pressure or he dies”, he says quite simply. Through this tense journey, he hopes, many will be left richer in more ways than one – be it his own team, his investors, rural India and possibly himself.