Entrepreneurs should think in terms of evolution and adaptability

October 11th, 2021

In a conversation with YourStory, Siddharth Mehta, Founder and CIO Bay Capital, talks about what the firm looks for in startups during investment. Siddharth (Sid) Mehta is the Founder and CIO of Bay Capital and a respected expert on Anglo-Asian economic and financial trends.

In a career spanning 19 years, Siddharth has gathered extensive experience as a fund manager working closely with global institutional investors and managing and advising on their Indian investments.

During this time, Siddharth has been instrumental in building a successful investment firm. In 2006, Siddharth founded his own investment house, the Mumbai-headquartered Bay Capital Partners, which has quickly grown to become a significant investor in the long-term structural growth in India through investments in publicly traded businesses.

A keen observer of financial trends in both India and the UK, including the impact of Prime Minister Narendra Modi’s economic and geo-political policies globally and on the Indian market, Siddharth has a particular interest in companies that have benefitted from the Indian growth story. His listed equities expertise means he is often asked to provide insight-led analysis on India’s publicly-traded companies.

Siddharth holds a bachelor’s degree in Business Management and Finance from King’s College, University of London. He divides his time between London and Mumbai.

In a conversation with YourStory, Siddharth unpacks Bay Capital’s investment philosophy.

Your Story (YS):Why Bay Capital and how is it different from the others?

Siddharth Mehta (SM): We are an independent India-focussed investment firm with vast collective experience of operating across market cycles and investing across stages, public to venture to even distress! We are able to take an extremely long-term view on our investments (10 years) and this makes us ideal partners for businesses that think in decades and not quarters. We have a stellar advisory board, which is able to provide us very unique insights into the ever changing global environment.

Our differentiators are our long term thinking, our ability to manage and contain risk in volatile environments, our ability to nurture and build enduring partnerships with our investors and our investee businesses, the diversity and composition of our team, and finally our vast network in India and overseas that provides us with a unique vantage point from which we can look out and position ourselves accordingly.

(YS): What is Bay Capital’s investment strategy, and the opportunity within India’s ecosystem?

(SM): Our investment philosophy and approach is to buy and hold a concentrated portfolio of high-quality businesses and allow them to deliver superior risk-adjusted compounding returns over an extended period of time.

Our flagship investment vehicle invests across public and late-stage/pre-IPO businesses and these are businesses that have long runways for growth, are judicious capital allocators and have a large and dominant leadership position in the segments that they operate in.

We are as excited by the India story today as we have been in the past. The country finds itself at a unique inflection point and just as the India of 2021 is very different from the India of 2010, we are very sure that the India of 2030 will be vastly different from today. The composition of the economy and the financial markets will undergo a dramatic change. This has profound implications for long-term investors and we believe that we are uniquely positioned for this.

(YS): How has the pandemic transformed the ecosystem and what are the new opportunities available?

(SM): The pandemic has taken a colossal toll on lives and livelihoods across the world and India has been no different. Though unfortunate in itself, the pandemic has acted as an accelerant to many trends that existed prior to 2020. Hence, the consolidation of profit pools/revenue pools and market share pools has only got pronounced.

Take the case of mortgages for instance. Leaving the banks aside, incrementally the top 2 non-bank mortgage businesses account for close to 90 percent of incremental mortgage lending. We are witnessing this across many other sectors and categories where there is rapid consolidation.

Additionally, the pandemic has acted as an accelerant to the digital adoption of products and services. The traction in several D2C (direct-to-consumer) businesses and the rapid scale-up in the ecommerce channel from some of the existing FMCG businesses are a clear pointer to this. We have seen many businesses breaching the scale barrier as a result of this rapid adoption and the paths to the profitability of many of these businesses are getting clear as well.

There is a range of opportunities, especially in the digital ecosystem and we believe that as discerning investors, we are uniquely positioned to be able to identify and participate in many of these.

(YS): Which segments and sectors are you focused on?

(SM): We have always been sector agnostic in our approach and see ourselves as bottom–up investors. In the public markets, across sectors and segments, we like businesses that are efficient allocators of capital, businesses that have high governance standards, are in dominant leadership positions and those that have very strong competitive advantages either on account of brands or distribution or technology.

We are very excited by the rapid digital transformation in India and see a wide array of opportunities to invest there. Our primary focus is on consumer internet businesses but we remain agnostic.

(YS): What are Bay Capital’s future plans and advice to entrepreneurs?

(SM): We will continue to remain India focussed and build out our business confidence in the long term structural India story. There will be bumps along the way but the trajectory is clear. Our advice to entrepreneurs is to focus on building something that endures and to build to solve uniquely Indian problems in uniquely Indian ways.

Also, entrepreneurs should think in terms of evolution, the spirit of constantly seeking, discovering and learning afresh and adaptability, flexibility in thought and action that ensures that one is able to course correct rapidly, to spot the opportunities of the future and position oneself accordingly.

Excerpts from the interview have been covered here on the YourStory website :-

Posted by Siddharth Mehta, Founder & CIO