Executives at several large Indian private-equity firms say they and their competitors are starting to add operational experts alongside their investment professionals, with performance expected to come from asset management as much as from simply raising money and investing minority stakes in growth companies.

"We understand that other private-equity firms in India are adding operational expertise to their team," says Vishal Nevatia, a principal at the $1.5 billion India Value Fund (IVF) in Mumbai. "This business is now about creating efficiencies in companies. Before the financial crisis, for most companies in India, sales and business development just happened. Now there's a focus on sales, conserving cash and being profitable."

It seems that very few private-equity players in India have the experience required to work in such an environment. The industry now boasts around 400 players, including local arms of global firms, but more than 300 of these have been around for three years or less. And almost all of them have pursued a strategy of taking minority stakes in growth companies or investing money in public equities -- these are known as PIPE deals.

Such strategies hit a wall in 2009, with most such players having to write down losses, particularly in PIPEs.

IVF is a rarity with its focus on taking controlling stakes and operational expertise, designed to help mid-sized corporate entrepreneurs take their creations to a more institutionalised level. As a result, IVF uses minimal leverage. Also unusually for an Indian PE shop, it relies entirely on global foreign institutional capital, sourced from 30 sovereign-wealth funds, endowments and funds of funds.

Most atypically of all, it successfully closed its fourth fund in April 2009, at a time when hardly any other Indian PE shop could raise capital. The fourth fund began investing in January -- not only was it oversubscribed, but the team was not required to go on roadshows.

This is thanks to IVF's ability to generate steady net annualised returns of 25-30%, including last year, regardless of market conditions. Its portfolio ranges widely, from FM radio networks to hospital chains. The common factor is that they are already-profitable mid-sized companies in business segments without established leaders.

IVF was founded in 1999 by Gary Wendt, the man who built GE Capital into a financial powerhouse in the 1970s and 1980s, along with Nevatia and other Indian partners. Wendt left soon thereafter but the other partners carried on.

It is neither the oldest nor the biggest PE firm in India, but it is among the first generation of players in India's private-equity industry, which only began in 1997. Nevatia says it will be another five years until he and his partners can claim to speak with authority about private equity investing: the length of time to launch, manage and exit several funds over a variety of economic conditions and business cycles.

By that time, private equity will have become understood as an asset class among Indian limited partners, regulators and investee companies. From Nevatia's perspective, that includes an appreciation of the grunt work of building businesses, rather than hitching a ride on others' growth.