“The 60 crore fund will focus on helping ‘Best-in-Class’ HR businesses to scale” - The HR Fund

The transforming business landscape and increasing volatility in the workplace have created a need for HR support, thus expanding the market for HR in India. Varun Talwar, Founder, Withya Group and Pankaj Bansal, Co-founder & CEO, PeopleStrong and Co-founder, Withya Group, saw this as an opportunity to launch ‘The HR Fund’ in India – the first fund for HR businesses in India.

The duo presented their findings to HR industry stalwarts like, Sumer Datta, Dr. Santrupt Misra, N.S. Rajan and Dr. Arvind Agrawal, who too felt the need to set up an HR focused fund. It is in this context, that the Withya Group announced the launch of ‘The HR Fund’ late last year. The Fund aims to support “best-in-class” HR ideas and practices in India, the sub-continent and the Middle East. The first year’s plan is to utilize the seed fund of Rs. 60 crores in around four investments and have some pool left over for making further investments in these four companies. According to its anchor investors, India would be the focus in the first two years, post which, its plans are to look at the markets in the rest of the sub-continent and the Middle East.

The Fund aims to fill market gaps, and provide entrepreneurs with the necessary know-how and support to scale their businesses. The funding focus will be on Professional Employee Organizations (PEOs) that are yet to evolve in India, with staffing, training and technology/software businesses, which are presently in the early growth stages. As Varun shares, “We are convinced this would work, because the SME segment does not want to manage HR internally, finds it tough to recruit talent or offer significant career prospects, and this will give these entrepreneurs the first mover’s advantage.” Additionally, the Fund will be looking at investing in businesses that provide HR technology, training, payroll and staffing.

The core investors at ‘The HR Fund’ are Varun Talwar, Pankaj Bansal, Dr. Santrupt Misra, Venky Mysore, Arvind Agrawal and N.S. Rajan. The board members also include veterans from the HR industry like Sumer Datta. The one element that brings them all together is their vision for the HR space in India and their firm belief in the opportunities for new entrepreneurs in the space. They are very clear that investment opportunities will be offered to only those, who can contribute knowledge and connections, and not just funds. With only 11 M&A deals in the last 3 years, this is a sector ready and waiting for its time to come.

Further, the knowledge economy has heralded a quiet revolution in the HR industry in India, with the sector growing to INR 228 billion in FY 2011 (CAGR of 21 percent from 2008 to 2011) and HR consultants are gradually becoming engaged in an organization’s growth strategy rather than just being vendors, according to the Executive Recruiters Association and E&Y Report, January 2012.

While the opportunity is clear, the industry until now was skewed, with the bulk of the revenue coming from a handful of MNCs, JVs and home-grown players. The rest are mom-and-pop proprietorships operating at the small size enterprise level, that are unable to scale the business beyond a point and the notion of attracting investment is alien in this industry. Additionally, HR is increasingly an outsourced business function that is emerging as a strong and stable sector. This is true, as it is highly scalable and is a high margin sector that can gain impressive return on invested capital.

The need of the hour will be for entrepreneurs to move towards corporatization - where management teams, board of directors and shareholders, are three separate pillars of the company.

The Team

Dr. Santrupt Misra, CEO, Carbon Black Business & Director, Group HR, ABG
Venky Mysore, CEO & MD, Kolkata Knight Riders
Dr. Arvind Agrawal, President-Corporate Development & Group HR, RPG Group
NS Rajan, Partner & Global Leader - People & Organization, E&Y
Sumer Datta, Founder, Aamoksh Leisure Living & Former MD - APAC, Hewitt Associates
Pankaj Bansal, Co-founder, PeopleStrong
Varun Talwar, Founder, Withya Group