Steven Wisch, founder and managing partner of private equity firm India Equity Partners, decided to focus on India because of the huge business potential that he saw in the country. During his first stint in India, Wisch, formerly a partner and managing director at Goldman Sachs, was struck by the quality of the entrepreneurs there, even though at the time it was “a very tough place to do business.”

In a conversation with India Knowledge at Wharton, Wisch discussed the lingering challenges and frustrations of the Indian market and what Indian companies and managers have to offer the world.

An edited version of the transcript follows.

India Knowledge at Wharton: Can you tell us why you decided to focus on India?

Steven Wisch: I was at Goldman Sachs for many years. In 1994, I moved to Asia, and I covered the whole region — India, China and everything in between. India, in those days, was a very tough place to do business in. In fact, I would say it’s probably the toughest country in the entire region. That being said, one thing I noted was [that] the entrepreneurs there were the best in all of Asia. I was impressed by that, and in the back of my mind I said India would be a great place to invest at some point. I wasn’t sure if it was going to be in my lifetime, but I knew it had potential.

After I left Goldman Sachs, I did some work in the not-for-profit sector. In 2002-2003, a colleague of mine suggested I go back to India. I went back and saw some very significant changes taking place and I reached the conclusion that India would have enormous opportunity, not just for the next couple of years, but really [for] the next decades and century.

India Knowledge at Wharton: So then you started India Equity Partners?

Wisch: I actually began with IREO, which is our real estate business. [There were] no foreigners doing real estate in India. It was mostly family-run businesses — there was no institutional capital. I went and met with a lot of developers and the returns that they were getting were just tremendous. And [then] I met my partner, Anurag Bhargava, who was trying to raise about US$25 million to do real estate [business] in India. I spent about six months with him and his team and then agreed to invest with him. He asked me if I would be an advisor and part-owner and help him raise the first US$1.6 billion of equity. We are full partners and we now have about 14 projects in India. We’re a fully-integrated development and operating company. A few years after that, I started India Equity Partners, which is a private equity business.

India Knowledge at Wharton: Can you tell us about your experiences in the real estate industry?

Wisch: … Initially, we did not want to allocate our capital to local developers and be at their whims and mercy. We wanted to be in control of our own processes: aggregating land, getting the approvals, doing the design, planning, construction, marketing and selling.

I think the biggest challenge is the time it takes to get things done in India. It’s frustrating. But there is tremendous movement of people into cities, and the rise of the middle class. Everyone wants to own real estate. We’re very focused on residential, to some extent hospitality, and commercial as well. [Growing IREO is] going to take longer than expected, but with patience [it] should do very well.

India Knowledge at Wharton: Was there any resistance from local managers when you tried to introduce Western-style practices into the market?

Wisch: One of the big issues I see with India, [is that] most promoters [and] entrepreneurs think that execution is easy. Putting systems, processes and procedures in place is something that is not typical. Most people in India like to do things by the seat of their pants. By the way, real estate is a challenging business anywhere in the world, including in the U.S. and many real estate companies are not professionally managed even [there], but I think that the bar is very low in India. Our standards, not just how we operate, but also the projects, the quality of what we do, is quite high. And I think the market is recognizing that.

India Knowledge at Wharton: Let’s switch to India Equity Partners. Can you tell us a little bit more about what your focus is? What has been your experience in the private equity industry in India and what lessons have you brought in from the U.S.?

Wisch: We focus exclusively on significant minority and majority stakes in businesses. Most of Indian private equity is a growth equity market — mostly minority stakes. We did some of those early on and we came to the conclusion that if you want to invest in small minority stakes, you might as well just invest in the public markets. We think that the real value is finding promoters who don’t just want your money, but also want us for the value that we bring. We have a very value added team where we help companies with their internal processes and procedures, strategy, acquisitions, [and] new customers financing. We have a group of [what we call] “platform CEOs,” — these are former CEOs of successful businesses in India. We bring them on board full time to help us find new acquisitions and we work with them to find the acquisitions and then manage them. When we do minority stakes, they’re significant minority stakes where we have a board seat and we are very much involved in the management of the business.

India Knowledge at Wharton: What do you feel are some of the unique management practices or unique lessons that the rest of the world can learn from Indian managers?

Wisch: One of the things that I was struck by in the 1990s, and which brought me [back] to India and continues to be the main reason [for my focus], is that the entrepreneurial talent in India is extraordinary. You’ll see some of the best managers in the world [here], very focused on cost. India was starved of capital for decades and managers got by with very little capital. So the focus on costs is very important [for them]. And I think that managers [in India] are very hard working.

On the other hand, I think that many of the managers haven’t branched out and brought [in] a big team with breadth and depth of management talent. And many companies are very hierarchical. The promoter walks in, everyone stands up. I think that will change slowly. Indian companies have a lot to offer the world. What is also striking is that Indian companies are not just successful in India, but unlike China, you see many [Indian] companies that have expanded globally.

India Knowledge at Wharton: Do you see Indian managers bringing that same cost focus to their operations abroad as well? Or do you see them adapting more to the kinds of circumstances they might face in different countries?

Wisch: I think that you get the best of both. There’s a lot that could be brought into India. As I said, management, processes and procedures are very important. But the entrepreneurial spirit, that work ethic that India brings, I think, will help these companies globally as well. We see that already in the technology sector and in many aspects of global companies already with Indian talent. I think that the best of those two cultures will come together and Indian companies will have a real influence on the world going forward.