"The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years."
Utkarsh Joshi, Principal, The HR Fund for fundraising, investment strategy, operations, and governance aspects, Utkarsh has played a key role in managing the existing investments and operations of the fund while also scanning and analyzing potential investment opportunities.Utkarsh brings in the technical knowledge of valuation, capital raising, research, and financial modeling. Apart from human resources domain, he also commands expertise in sectors like financial services, food and beverage (F&B), real estate, hospitality, education, non-profit, and internet-based businesses, among others. Utkarsh started his career with a leading global major, Accenture, as Senior Software Engineer, where he worked in the areas of business intelligence and data warehousing, etc., and hence brings in the technical methodology and innovation spirit to his leadership activities at The HR Fund. After completing management studies from ISB, Hyderabad, he joined Cognizant Technology Solutions in 2007 as member of the business consulting unit which signified movement from a pure technology role to a functional consulting role.
The HR Fund is India’s first human resources (HR)-focused private investment company with an objective and vision to transform the HR entrepreneurship in India to a more organized and institutionalized industry. The fund’s unique strength lies in its dedicated focus on the HR sector, strong team with domain expertise, and wide-ranging network. The founders and investors of the fund are seasoned HR and business professionals with a track record of setting and scaling up HR businesses both in India and abroad. With a network spread across India, Singapore, and the United States, the company is a growth investor with functional expertise combining HR, technology, and finance. With increased usage of technology and innovative products across the HR spectrum, ventures in HR are turning into strong, stable, growth-oriented, and high-margin revenue businesses. Investors in the fund include some well-known and veteran HR sector specialists, CXOs, and entrepreneurs with a strong background in the space across several key industries.
Speaking with Yash Ved of IIFL, Utkarsh Joshi says “The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years. “
What is the scenario that you see for Indian HR product and services companies?
India’s human resource industry, dominated by talent acquisition in the form of recruitment, temporary staffing and executive search, has been growing at an estimated CAGR of 21% over the last four years and is now estimated at more than Rs 228 billion. (Report on Human resource solution industry 2012 by EY and Executive Recruiters Association).
Business friendly government policies and enhanced focus on creation of new jobs and development of relevant skills with maturing perception of several other human resource functions have been instrumental not only in strengthening the delivery by existing HR product and services companies but also encouraging several startups to venture with niche solutions to cater to growing demands by corporates. Increased hiring activities in the country would lead to increased need for other services in talent management, shared services, and related technologies for smooth and better servicing. Recent mergers and acquisitions (M&As) including traction of approximately $160mn in last few years and reports of companies like Teamlease and IKYA planning for initial public offers (IPOs) suggest a lot of scale and appetite for growth.
What outlook do you see for the global human resources outsourcing market?
According to reports, year 2013 has seen double investments in the HR technology space with approximately $34.5mn. Overall, in the last 10 quarters, almost $1 billion were invested in companies that solve real world problems faced in the HR and recruiting space. The successful IPO by Workday Inc. in 2012 and noteworthy acquisitions including those of SuccessFactors, Taleo, and Kenexa by SAP, Oracle, and IBM, respectively sparked interest in the HR space resulting in further mergers and acquisitions(M&As) and entry of new startups.
This momentum is expected to continue further leading to many international companies starting Indian operations or potential M&As with Indian players. The time is also ripe for many leading Indian companies to expand its global footprints especially in the Asian-Pacific region to start with. In line with global trends, the Indian HR market is set for high growth over the next few years, as a major chunk of large, medium and small businesses are expected to migrate from on-premise to software as a service (SaaS)-based HR products and services. The India cloud computing market is expected to reach $1.1bn by 2015, out of which SaaS alone is expected to be $650mn.
What are your investment plans?
The HR Fund plans to make two to three investments in the coming financial year with total investment base expected to be eight to ten investments across the next three years. The focus remains on niche solution providers in recruitment, HR technology, and learning & development sectors.
The HR Fund’s existing portfolio includes PeopleStrong HR Services Pvt. Ltd. (PeopleStrong) and People Matters. While PeopleStrong is a leading platform-based human resource outsourcing and HR technology company, People Matters is India’s leading HR knowledge and media platform. PeopleStrong has emerged as a preferred HR partner for large marquee clients and is taking an organic route to further growth and expansion. People Matters has achieved the distinction of becoming the single point of reference for any news and developments in the HR fraternity.
Which are the four segments that you are focusing on?
At present, The HR Fund looks forward to invest in growth potential organizations working in below areas
Recruitment or Hiring: With government of India’s increased focus on jobs and skills development and business friendly measures, the outlook for hiring looks positive, providing scope for new and competent recruitment companies to develop their business portfolio. There is a need for existing players to bring in innovative systems, technology, expand footprints, and be ahead of the competitors by implementing complaint measures. Recruitment market is moving beyond finding a suitable candidate to candidate engagement and right candidate experience ensuring a faster and uniform process. Corporates are increasingly outsourcing the entire recruitment functions to hiring companies, necessitating establishment of strong recruitment process outsourcing (RPO) capabilities.
Learning & Development: This integral function of the HR department has gathered increased attention over the years and corporates are increasingly partnering with solution providers to remain competent on productivity. Apart from innovative content for training, the key is also to align the training schedule, given the vast geographical and cultural spread that the organizations have. The need for learning and development spans across several processes of new employee induction, product training, sales training, and compliance training, among others. Monitoring and evaluation, subsequent reports, and re-training are also important.
Solution providers are not only employing innovative technologies like workstation-based training, use of mobile platforms like laptops, tabs and mobile phones, audio-visual and interactive content manual, real-time training but also things like gamification to engage the users in an interesting way and achieve desired results. Besides being effective, such solutions are a huge cost and time saver for corporates who do not have to employ trainers at different locations or fly the same trainer for a uniform training program. Such companies need innovative technological and creative systems to service the growing needs.
HR Technology and HR Analytics: Human resource departments are not behind other departments within the organization to embrace newer technologies and smoothen its several deliveries. It is no more seen as additional cost but a way to release the bandwidth for strategic functions by either incorporating the technology in-house or outsourcing it to competent players. Integration of technology platforms with existing ones or its modification, mobility, user friendliness, security of data, and integration with social media channels, etc. are the key selling points. Analytics and big data are also considered a way for the HR leaders to make inroads to the boardrooms and upscale to the level of strategic business partners.
Several small and medium companies are developing cloud-based technological platforms ensuring safety of data and working on customized solutions specific to industry, size and scale of company’s operations. Given the successful adoption of HR technology and analytics in the western world, HR and business experts consider them to be drivers of growth for HR functions in India. Increased innovation, research and development hold the key and hence need for investment in such companies.
What is the future of HR service sector in India and also about the industry?
The growing acknowledgment of contributions that various HR functions in companies across growth levels and industry sectors make has seen a paradigm shift in recent times. Organizations are aggressively working with competent HR solution providers to outsource the non-core and administration-oriented functions, thereby concentrating on strategic functions and partnering the business goals. Besides prioritizing strategic creativity and innovation to deliver HR roles, the increased adaptation of concepts like human resource shared services (HRSS), outsourcing, adoption of technological practices, analytics and social media to communicate with relevant stakeholders is facilitating the choice of HR leaders for business roles (CEOs), be considered for board positions, and venture into HR entrepreneurship.
The present HR space in India consists of a mix of freelancers, start-ups, small and medium players, as well as large Indian companies and multi-national companies (MNCs). The size of the HR space broadly categorized into temporary recruitment, permanent recruitment and other segments (non-core HR functions like payroll, interviewing, background verification, onboarding, training and induction, leave management, attendance management, and reimbursements applications, new age customizable software and technology solutions, etc.) Organizations are fast realizing the benefits of outsourcing non-core activities and focusing on enhanced value-added activities.
The search and recruitment market is expected to grow from Rs 29.5 bn in FY11 to Rs 62 bn in FY16 in low case at a CAGR of 15% and INR72 bn in high case at a CAGR of 20%. The temporary recruitment market is expected to grow from INR167 bn in FY11 to INR400 bn in FY16 at a CAGR of 19%. Recruitment process outsourcing (RPO) as a service offering is fast evolving significantly in India, wherein companies are increasingly adopting the outsourcing model to withstand competition. Besides focus on recruitment, HR solution space is concentrating on learning & development, and HR technology & analytics, among others.
What is the biggest challenge in India market?
The investment market is still in the nascent stage if compared to the west. The lack of dedicated structured platform for HR entrepreneurs in the country has been a key factor that has restricted the growth. Nonetheless, adoption of technology-based HR products and services has begun and there is substantial need for scaling up innovation, and research, etc. to service the growing needs. Corporates at different levels see the value associated with using HR products and services, presenting an untapped and underserved market as of now.
The HR Fund has domain experts to lead its unique functioning model including the identification process, equity infusion, mentoring, and growth chart for the investee companies. With notable growth & expansion and leadership position that both its investee companies (PeopleStrong and People Matters) have seen, it has become a fund of choice for entrepreneurs in the HR space in a short span. Though large sector agnostic funds are now also beginning to look at this space, The HR fund is an early mover in this space and has seen transactions gradually moving from HR services to HR products and more specifically towards technology. More importantly – the core network of the HR Fund consists of professionals who are veterans in the HR domain and have an in-depth understanding of the space. Our inputs at the board and strategic level, add a lot of value to all the companies that The HR Fund invests in.
What is the need for funding in the HR space?
The HR space has investment at all levels including seed fund, early stage, venture capital transactions, there are latest reports of planned IPOs by Teamlease and Ikya. Though the ticket size has remained small with respect to other industries, there is substantial scope for sustained returns for the investors and need for increased growth funds in the HR space, given the increased budget for HR outsourcing and other products and services.
The need for funding arises from the opportunity that exists. The Indian HR opportunity is huge and the market could still be considered to be in its nascent stage. Entrepreneurs in this space are still in the post seed, pre-venture capital(VC) stage and require growth capital to scale up for competitive advantages as there have been many international entrants in recent times. There is no dedicated setup with domain expertise which looks exclusively at this sector and the fund has systems in place to fill this gap.
In the last four years, nearly $160mn worth of transactions has taken place in the Indian market. Taking clues from global scenario of investments and mergers and acquisitions that follow, the Indian HR space would also lead itself to organic growth route, hence need for increased funds.
Who are your investors?
Investors in the fund include some well-known and veteran HR sector specialists, CXOs, and entrepreneurs with a strong background in the space across several key industries. The investors in the fund with rich experience across leading Indian and International brands are ardent about the evolving face of India’s HR industry, which is taking substantial clues from established global models and trends for growth and provide strategic direction to the fund.
At present, the fund has 23 investors who are senior professionals with HR, finance, and technology experience and dedicated approach to handhold potential businesses in the HR space to the next level of growth and expansion. The anchor investors in the fund include Dr. Santrupt Misra, CEO, Carbon Black Business and Director, Group Human Resources of the Aditya Birla Group; NS Rajan, Member, Group Executive Council and Group Chief Human Resources Officer at TATA Sons; Dr. Arvind Agrawal, President, Corporate Development and Group HR in the RPG Group; Pratik Kumar, President of Wipro Infrastructure Engineering and Member of Wipro’s Corporate Executive Council; and Govind Iyer, Managing Director, Egon Zehnder India, besides leading the private equity practice.