Dr. Amit Goenka of Nisus Finance shared how the company combines transaction advisory and fund management to create tailored real estate and urban infrastructure solutions across India and the UAE. He also highlighted the growing opportunities in India’s urbanisation and infrastructure-led growth story.
Hello everyone and welcome to Small Cap Spotlight. I’m Mubina Kapasi and today I’m in the offices of Nisus Finance, a company that specialises in real estate. Now when I mean real estate, I don’t mean that they’re building real estate but they’re investment managers and specialise in financing of real estate as well as creating credit solutions for them.
I have with me Dr. Amit Goenka, the Chairman and Managing Director of the company. Thank you so much Dr. Goenka for joining us.
Amit Goenka: Thank you very much for having me on your show.
Mubina Kapasi: So to begin with if you could just give our viewers a brief introduction into all the business verticals of Nisus Finance.
Amit Goenka: So Nisus Finance as you rightly introduced is a predominantly real estate and urban infrastructure player within the capital space which basically means that we handle the entire development lifecycle from concept to execution to delivery where there is intervention of knowledge, intervention of expertise and intervention of capital which is clearly the largest bloodline for the sector. So effectively it invites us to do two things, one is on the advisory front because when you’re seeing close to 60-70,000 crores worth of deals a year, you find that every opportunity is unique, every problem is unique and it requires curated ideas and solutions which one is able to assemble because of the vast experience that one has because you’re working the landscape for multiple years.
So you know exactly how people are operating in parts of the globe, to parts of the country, to various capital backing, to various structures and solutions, you’re able to assemble all of that know-how and provide a very curated idea or a solution to those seeking it. So that becomes our advisory and transaction advisory vertical. What it also allows us to do is actually learn from others’ mistakes.
So what other fund managers are doing, what other NBFCs and banks are doing, what are they doing wrong and how do we improvise that when we’re actually coming to putting our own capital to work. So there’s a lot of efficiency that goes into the advisory business. It has also formed a very significant part of our revenue for so long.
Almost about 65% of our revenue came from the advisory vertical because it’s a very high value creative business. Somebody comes to you with a thousand crore project, you charge 2% of that and you know low and behold you’ve got 20 crores. You’ll get that only if you and you can do that multiple times in the year whereas you can put thousand crores to work and still get 20 crores but once a year, right? So therefore obviously that became a very large value creative opportunity for us.
Of course, fund management is at the core, you know, how do we invest capital, where do we put it to work. So that’s the other part of our business where we employ large scales of money across multiple funds for specific urban infrastructure opportunities which are directed at a very unique idea at that point in time. So these two ideas are really what builds Nisus Finance at the core.
Then of course there is a separation of geographies. We’ve done this business span India, we’ve expanded across the realm of India beyond the four five metros and now we’ve gone across the border to the UAE and capturing the GCC region as a whole. So we set up operations in Dubai and offering the same two twin model of advisory and investments.
So effectively it’s a four-part model between advisory and investments in India as well as the UAE.
Mubina Kapasi: So I see how the two complement each other because you watch transactions happen and then you deploy that knowledge essentially in fund management. So I think that answered my next question.
But I want to ask you what came first for you in your personal career? Was it the finance angle of it or your knowledge in real estate? I just want to understand how Nisus came about.
Amit Goenka: So finance has been the co-driver for me. I started the journey in finance in the late 90s, early 2000s.
In fact I was more head bent on being an engineer and doing R&D and realising that does not offer R&D opportunities and therefore and even if you created something the first question the management would ask you what is the payback, what is the IRR, what is the ROE? I’m like what are these terms? Hadn’t done all of that so moved to finance in a very big way. Started with mergers and acquisitions accelerated on that and corporate finance in investments and saw a very large landscape of that area across the globe. Invested close to 6-7 billion dollars across four continents and that gave me a very deep understanding not only of finance but asset classes, industries, legalities, regulations, risk management etc.
So in doing all of that obviously it was overwhelming. You are understanding multiple sectors at a time you’re trying to but then it never gives you enough satisfaction because you’re never able to deep dive into one space. So if I’m working in the automobile market and I’m buying in a car company, I can only do so much in understanding what a car company does.
I can never actually be there and run it. Likewise when I’m doing FMCG, likewise when I’m doing industrial or chemicals you know you can only do so much as a finance professional. So I said it’s time for me to be specific to a sector and then the question was which sector and I started to think.
I said well what is going to drive the future? In my mind the answer is clear that has to be urbanisation. While technology will be important and healthcare will be important and everything else will be important but the end of it if you do not have proper infrastructure will you get capital? The first engagement for anybody who comes to the country is the in front of the city. You know what kind of roads, what kind of airports, what kind of hotels, what kind of office spaces, do you want to come into a rundown dirty you know unkempt city or you want to be engaging with a very clean and a very very nice looking location.
So I think that was very clear to me. In 2005, Pressnode really paved the way for global capital to start coming and investing in the country and then 2008 had just happened and what that did was it actually shifted the entire paradigm for investing in real estate because in a lot of ways the entire global financial crisis was predicated on over-engineering real estate investments. It wasn’t US mortgages so when you had RMBS, CMBS, synthetic structures and I’d done all of that when I was in London or I was in the UAE doing investments and I realised that this is going to be a new paradigm.
It’s going to bring capital which is more serious, which is actually driving to build assets rather than only skimming returns through structures and synthetics and that is where the next wave of development will be and there’s this journey which has just started. It’s not an industry which has even formed, there are no serious players, there is nobody, there’s hardly any IPO companies, hardly anybody in the public domain. DLF and some of the largest developers went public much later.
So when you see this formation or this trend starting, I knew in the next 20 years this is going to be a force of the economy and therefore it’s better to be part of that force today and help shape it rather than just riding as part of others and always was interested in creating alpha or a differential path. So when everybody went left, I went right, you know, just a rebel nature of me. So why not directly get into real estate development? Why the finance? See finance is the backbone of discipline because finally capital decides what gets built, how it is built, how it is consumed, how it is perpetualized or democratised and what are the bells and whistles required of the operator.
So finance is the diktat and without that diktat, the developer is in a free reign, which is exactly what happened in the first slate of things. So almost, you may not be surprised, almost 13-14 billion dollars came the country following Press Note 2 and everything went out of the window. People lost a lot of money because there was nobody within the development companies who knew exactly how to work that role.
Even the people who brought in the capital did not know how to actually rein in the developers, how to actually get them to behave. They started learning that, they started to understand that you just cannot give money and hope that will happen. You actually have to actually produce results yourself.
You have to guide the team to do it because we’ve never done things at scale. We’ve never built 100 million square feet of office space the size that we’re consuming today, right? So when you’ve not done that, how do you actually make it deliver? So capital is the driver and unless you control capital, you can’t control anything, which I learned way back in engineering days that you need to control capital to control the organisations and outcomes. So therefore, capital became a natural part of it.
The other thing is that, you know, way back, maybe 17-18 years back, India was still at an infancy of development. You did not have so many high rises, you did not have data centres, you did not have three-day warehouses, you did not have, you know, high-grade commercial buildings. It was very, very rustic.
It is very, you know, mediaeval, very, very elementary. And so it needed to actually catch up in technology, in processes, in governance, in systems, in the ability to actually follow a certain code of conduct, which RERA brought in, etc, eventually. So without that, being part of that means effectively wasting energy on an organisation or on a platform, which is not going to be ready to actually deliver, because why break what is working is usually the mindset.
Everybody is building it, why don’t you do the same thing? So capital can change that thinking. So therefore, it was very important for me on the capital side. So really, real estate and again, you know, I realised also that I’m not the smartest guy in the room.
Let me be honest to myself. So if I go in technology, am I going to get an IP? I’m going to build the next Google? Am I going to be able to be a change in technology? Maybe not. But can I create a large change in urban infra? I can.
And that’s when I realised that if you are half smart amongst equals, maybe you have a better chance. So I realised this is a great opportunity. And I found a great platform to actually exercise my knowledge, exercise my will be experimental about it, see what is the best way to move this industry forward with capital.
And that’s really how real estate happened. And of course, it’s a very engaging asset class, what you can see what you can feel what you can experience, what you can engage with, what you can conceptualise and actually see getting done is a very new feeling. It’s a new high, something you don’t get to see in other sectors.
Mubina Kapasi: True, very true. Anyway, now you are kind of in the real estate, we’ll talk about that in a bit. But the way you explain your business verticals, transaction advisory and fund management, it looked like the transaction advisory one seemed a bit more reliable in terms of your income stream.
Amit Goenka: Yes, fund management, of course, is a big part as well. But I want to know what the split is. Because as I understand, fund management is getting bigger and bigger.
Understandably, for obvious reasons, right? India’s urban infrastructure is booming. So you’re one of the beneficiaries of it. So how would you look at this mix changing? Would you be worried about that predictable source of income, perhaps pausing for a bit or getting lesser? So I think while both are important, see what advisory did for us, of course, apart from being very strategic in terms of knowledge enhancement, gave us very large streams of income over very short periods of time.
And that allows us to always stay very positive and growth orientated. But what AMC does is it gives you very long term annuities. So let’s say when I manage, for example, 10,000 crores, and I’m earning, let’s say 2% a year, I know I’m going to continue to earn 200 crores a year of annuity for the life of the fund, which is six or seven years, without worrying about whether transactions are going to happen or not.
So it gives a very long stream annuity for me, which is very important, because it then sort of cushions your downturn, it cushions all cycles, you know, your cost base and your profits are covered at all times. So I got it wrong, actually, this part of the business is more predictable. So the predictability of AMC is obviously a given, which is why it needs to be obviously larger.
And it is happening like that, you know, so the markets always question, when will AUM become large enough that it becomes the most significant part of your business, and it will at some point, but then losing transaction advisory is a bad idea, because it gives very significant jumps. Also, we’ve also demonstrated over the last 15-16 years, that there’s a very strong correlation between advisory and investments. See, what happens is when you’re putting, let’s say 1000 crores to work, the type of deals that will come to you are also which are going to fall within your bracket, you know, 50 crores, 100 crores, because they know this is what you can do.
Now, that’s the deal flow you’re going to get. Now, within that deal flow, you’ll end up maybe doing 2% of those deals that I less than the 98% can become potentially your advisory clients. So the larger you become, the larger value and volumes of deal come to it, therefore, the larger the advisory income.
So we’ve always shown there’s been a constant correlation between how much AUM you manage, how many products you manage, and what kind of advisory income you generate. But having said that, but you cannot obviously grow at the same speed as AUM, right? So when AUM is growing faster, obviously, today, the ratios are shifting from 65-35 to 50-50, and potentially 60-40 in favour of fund management over the next two years, which is also great, because it gives you very long term annuities to begin with. So both are very important drivers, and which is why now, accelerating both of them in the UAE also ensures that there is significant ratio advisory, but the AUM continues to grow across markets.
Mubina Kapasi: So you know what my next question is going to be then, what is the current AUM? And what targets have you set for your AUM in perhaps the next three, five years? What do you think is going to drive the growth?
Amit Goenka: Mubina, it’s a very interesting question. It’s also a very scary situation, because the speed at which the economies in which we are growing and the space is growing. Today, India is targeting a trillion dollar asset class within urban infrastructure and real estate by 2030.
UAE is targeting $2 trillion. So in the next four to five years, we’re looking at a $3 trillion potential. Combined today, they’re roughly at about $1.2 trillion.
So from $1.2 trillion going to $3 trillion is a very large growth potential for all of us. How much can we do again is a function of our capability, our speed, and our focus. Having said that, of course, one doesn’t want to do too much too soon.
Otherwise, we risk breaking the model very quickly. Where we are today is at 1900 crores as of the first half of this financial year, potentially accelerating to 4000 crores in the end of this year, to doubling that over the next 12 to 18 months. And that, again, I think may be conservative in some way, because as I said, the opportunity is absolutely stunning.
I have seen pairs who’ve grown from 2000 crores to 60,000 crores in a span of seven years. And this is only India. We could do similar numbers, or we could do more, or maybe even slightly less.
But that is with the scale at which one is able to grow. Because the interesting part is that pre 2020, after the spate of all of these surgical strikes and regulation, demonetisation, etc, etc, the market started to consolidate, shrink, and favour the stronger enterprises. Post COVID, the reality has even been grimmer, where the weak players effectively went out of business.
And it’s only the large branded corporate government enterprises which are in play, which means 52 investment companies have shrunk to less than 15. Now, we are part of that few who are now slated for growth irrespective because we’ve withstood time, we’ve withstood our performance, we’ve stood the test of what it means to actually deploy capital at scale in a clear, transparent, integrated and committed manner. So given those checkboxes, which are today mandatory for domestic or global institutional capital, I think we’re today slated for a very high growth.
And again, it’s multi product, most investors, fund managers, investment houses, NBFCs typically focus on one strategy or two strategies. Today, we have multi pronged approach, which is a solution capital. So when we see a very large growth in industrial warehousing, data centres, plotting, you know, low rise developments, one is actually targeting that in a very specific way.
And when saw a slew of NPAs, a slew of IBC matters, a slew of issues with NPAs and projects stuck with banks or asset reconstruction companies, we started targeting that and rescued a bunch of that. So given the solution orientated capital, which is really what the country needs, one is able to actually grow 10 times without a problem. So clearly, I think it’s up to us to see when can we reach from the first 10,000 crores to the next 20,000 crores.
And I think it’s within this decade.
Mubina Kapasi: Okay, awesome. You know, you had your IPO. And you are I think one of the first, correct me if I’m wrong, but I think you’re one of the first listed businesses who is so specifically focused on real estate solutions, or the only ones. Yes, there are other listed players, but then they have several, but yours has a more focused approach on in this particular sector. Do you think that that is also in a way a competitive edge when it comes to attracting investors? Because obviously, being listed, it lends you a certain credibility.
And in the same tone, I’d like to understand from you what is your competitive edge there?
Amit Goenka: Yes, while listing does add credibility, but again, it was more to understand what is it required to be the best in our country. And for that, you’ll have to look at global templates, right? Because clearly, we’re going in a certain direction. When we look at globalisation, we’re looking at the best of breed solutions and platforms from global landscapes.
So when I saw that a lot of my peers, a lot of the other players in the country that came in, whether it was Brookfield, or Blackstone, or KKR, were all listed in their countries. I said, why are we not like that? When you have global players who can come to India and make a large impact, why can’t domestic managers do the same? And for that, you need to first build credibility, because that’s what we’ve never built. Fund managers never build credibility for themselves.
Everybody felt they were only here to earn their 220 and not worry about capital. I said, I will put my money first. And my 100% money went into actually our funds.
And I have no other investors except for what we do. Zero. So I said, first, let me put everything in.
That means I’m committing myself to this particular product and this platform. That is the first starting point. And then listing determines the ability to actually play at scale in a very transparent look through manner.
Because everybody felt it’s a black box, you will take my money, after one year, I’ll get some report or nav report. And then I’m lost as to when I’m going to get my money back. And when I actually make real returns.
It’s all paper returns, right? And I don’t know whether that’s genuine. I said, that can’t work. You have to be able to show exits, you have to be able to show real bankable in the money returns.
You have to be able to show how you’re actually moving your strategy from visioning to execution. And I think that’s really where the listing works, because it also gives you full look through into what am I actually doing? What are my earnings? Where is it coming from? Am I actually shafting the investors? Or am I actually doing good? How much of my own money is in play? Am I just saying it or am I actually doing it? So when everything is available for examination and scrutiny, there’s nothing left to hide. And that is the only way when you can start becoming global, looking global, following what the global majors have done, which is why they’re global, which is why they’re at this scale, because they are willing to put everything down and say, this is who we are, and come play with us.
So it was definitely a very big step to make that happen. Credibility, yes. So Mubina, India has so far been dominated by banking players who are allowed to do everything, from banking to private equity to alternatives to mutual fund and what have you.
And the US realised that many, many years ago, post the 2001 crisis, that there has to be a separation and conflict. And that’s when all of these major alternative managers, whether it’s a KKR, Brookfield, Blackstone, etc, started to become very big. That is bound to have happened in India as well.
There has to be a separation and conflict of interest. You cannot have your depositors getting sold a risky product, because you’re a banking client. So there has to be separation of conflict of interest and which was not happening.
So realise that what is now being seen in the private equity space, where you have large players were not necessarily banking players, because the good part was that the banking guys never really understood private equity, because they were lenders by profession. They understood credit, they understood real estate, they’ve lent this to them. But they never understood private equity.
So at least private equity started to form independent platforms. But nobody become large enough to become a soft bank. So I said we can become a soft bank also from here, when it comes to private equity, we can become a Brookfield, Blackstone, KKR, everybody also from India.
So therefore, also when you do that, and when you list it, you are able to say that I’m willing to compete on the same terms on the same lines, the same disclosures, and be an independent manager without having any conflict with anybody else. So that credibility building was very important, because then you get discovered. Because then you have global audiences looking at you, then you have low global investors looking at you, your global private equity funds looking at you and say,
Mubina Kapasi: Oh, okay, now I understand what you’re saying. Otherwise, you’re a mouse squeaking from the corner. But now you’ve come at a stage and now we can hear you better, we can see you better. So that visibility was very important.
Amit Goenka: Credibility was built on track record. But the visibility became much larger. And that was now very important, because now we become a bigger magnet for global and domestic capital.
Mubina Kapasi: I want to talk about your framework for when you, you know, conduct a private transaction, because at the end of the day, that’s what your business is built on, right? You have to identify the ones that are going to be tomorrow’s stars and help your fund perform. So if you could share a little bit of a glimpse into how that thinking works, and how do you decide whether an asset is worth your time and money or not, if you could share a little bit.
Amit Goenka: See, underwriting is a science and an art.
There cannot be any formulaic or any sort of an algorithm which can tell you, unlike in standard credit underwriting, well, algos can take your credit history, your asset value or your bank account statement and discipline give you a credit score. This goes beyond that, because you’re actually investing or lending to someone who’s trying to deliver a certain outcome. In doing that, obviously, first, the counterparty’s track record is very important, how solvent or how credible they are.
And which means on the ground grassroots intelligence, getting to know what is not published or available. So that is the most important force. The second becomes our ability to actually sensitively manage every variable in the play.
So when you look at any project, and you say, how is the risk management going to work? What is it that we are able to control? How do I ensure 100% that we will exit at a particular date with these returns, irrespective of economy, geographic, or any other environment, or regulatory environment. So when you have those frameworks of risk management in place, which is doing very, very high level stress testing on the counterparty on the asset class or the opportunity on various other aspects, which goes to into delivering a project, then you know that when it comes out of a stress testing framework, it and it stood that for two, three months, then it has a very high chance of actually succeeding. So that’s the first part, which is the credit underwriting.
The second part is in making it happen. Today, we have the largest team in the country managing less than $500 million. Today, we have a team of 60 people.
Now, 60 people typically worldwide would be managing 600 billion, you know, or 60 billion, to say the least. So when you have that kind of bandwidth, 800 million years of people sitting behind every investment you make, and ensuring 24 seven that boss, you have to deliver this, you have to sell this much, you have to collect this much, you have to ensure this money comes into the Reita escrow account, you have to ensure that this completion date happens by this date and time. So when you have a very large talent pool, which is looking at legal, regulatory, technical, marketing, finance, credit, all of that over a 24 seven basis for each of your investments, then you’re effectively driving your own outcomes, you’re not leaving it to market and chance.
So that is the second and most important part is actually hands on engagement with our investments. The third is, of course, my own capital at work, as I said, you know, if I lose it, where am I? As a first generation entrepreneur, either it’s make all or lose all, you know, so that fear factor will always be there, which is important as well, I think. And lastly, we are built around a singular idea of investments into a certain asset class.
And that’s what we do. So we have no other diversification. It’s not like we’re running a mutual fund, and we’re running by the way, another PMS vehicle, and we’re also running insurance, and we’re also doing banking.
So one doesn’t work, it’s fine. So all our exit are in this one basket, and therefore you have to protect it with all your might. For that the ability to actually engage with all that matters from a regulator to bankers, to developers, to marketers, to influencers, to economists, to have you to industry bodies becomes very important.
So we’ve created a very cohesive ecosystem around us that keeps us sharp, that keeps a very strong alignment of interest along with us, so that if we succeed, they succeed and vice versa.
Mubina Kapasi: So you learn from your transaction advisory, applied it to fund management, and clearly you’re learning from your fund management and now the acquisition of ACCCL. So I’d like to hear a bit about that. What was the rationale behind that acquisition? And how do you see that business grow?
Amit Goenka: Again, something we didn’t sort of think about, even not less than two years ago. And which is why it’s not part of our IPO objects, because we didn’t know we’re going to do this as late as December 24, when we went public. It happened, but it ended up ended up happening in August of 25.
But it was very clear to me that what are we, we’re solvers of problems. That is what we are at the core, and we’re great solvers of constraints. So whether it’s our advisory, whether it’s our capital, our capital is not standard capital, you can’t say, oh, I want a home loan, and let’s go nicest finance and give me the largest amount of loan at the cheapest price.
We’re not that or we’re going to give you the best LRD, or we’re going to do the maximum amount of construction finance for the next 10 years at 8% or 10%. No, we’re not that, that’s banking. We’re solution capital, we’ll try and solve for a certain set of problems, a certain set of opportunities.
So that’s exactly where I saw the biggest constraint today was actually delivery. We know when you are moving, and if you see the balance sheets are largest of the developers in the country, everybody’s gone from selling 7-8000 crores of inventory to 20-25,000 crores of inventory in less than two and a half years. How do you do that? You need to deliver, you cannot have a spate of uncompleted projects.
And for that we need capacity, and we don’t have the capacity. So therefore, if you can own capacity, then you’re going to rule the roost. So I saw now that there is today, the availability of capital, it’s come in reasonable quantity, credit funds have been raised, private equity has come back, but in a bigger way for fewer players, we will increase our book size.
So capital is available for the worthy and capital markets have been very vibrant number of developers have gone public, their capital has become far stronger, their ability to raise capital has become much better. So capital is not a constraint. Demand is again not a constraint because you don’t have inventory overhang.
I remember way back in 2010, we used to say, Oh, Mumbai seven year inventory overhang. Love you made stock for the next seven years. Today, we don’t have even 17 months.
So demand is not a constraint, even though prices have gone up, it becomes so expensive. I know who’s buying it, but it’s being sold. Nonetheless, right? Offers are getting consumed.
Nonetheless, you know, warehousing, warehousing is full nonetheless. So demand is not a constraint. Capital is not a constraint.
The biggest constraint is delivery. So if you can own that piece, so you own, you own the capital, you own the ecosystem. But the constraint of delivery is very important.
We saw that firsthand during COVID. We were stressed about ensuring the projects complete, the money was sitting in the escrow. Customers are waiting for delivery.
And unless the delivery happens, you will not get paid back. And the contractor would not show up. And he would not pick up our calls.
And I said, this is not happening. We need to be able to control outcomes, because that is the risk factor we never thought will happen. We never thought that if you’re paying contractors, they will not come to the site, they will not deliver, we will have a problem or constraint of supply.
So that’s really when I realised that if you can control that, we can obviously scale up. The second thing is also creating an ecosystem, we believe in creating something which is far more enabling. Now we have common clients, right? We have the same counterparty, the same developers, we have the same people that we and then we have our own order book.
So when lending 2000 crores in private credit, I’ve effectively delivering 4-5000 crores of of effectively GDV on the ground. When I’m doing that, they also need a contracting companies, again, they’re all stuck. So I said, what if I can own one, provide it to my own investee book, accelerate this, and therefore unlock value for one of the oldest construction company in India, you know, an 80 year old company with a strong legacy.
So then it became a very strong win win where you can cross pollinate lines, you can cross pollinate order books, you can cross pollinate the new things that are getting built on the ground, which we are seeing, we’re witnessing, we’re investing into and bringing the same solution for this company to construct, build and deliver. So therefore, there was a very large synergy between our companies, which I saw. And of course, the good part was that I’ve known them for 15 years.
So there’s a lot of familiarity about this company, what it did, how it performed, what were its strengths, etc. And therefore, there was a unique God given opportunity, when the promoter said, you know what, I’m willing to exit, you know, I’m 92. And I said, well, then this is a God given signal, let’s not let it go away.
And so we put in a lot of effort to work this, come up to a price that made sense, you know, be a part of the entire structure, you know, and get the buying of the management because they were the ones who’ve been running this company for the last 35-40 years, and get their buying, have a management led buyout, enable them, give them the opportunity to now scale to what is the potential of this company is again, very, very exciting. So we’re builders by definition. And if our capital and intelligence can actually work in favour to unlock value and solve one of the biggest constraints.
And by the way, we’d be surprised that constraint is even bigger in the UAE. At least in India, people tender, when a loader went for a development, they tendered and company won the bid. But in the UAE, there’s no tender.