Quick Tips

How private equity investments in Indian companies grew in Q3

The consumer technology, real estate, banking, financial services and insurance were the sectors which attracted more investors, representing 65% of the total value of operations. Investment in consumer technology grew 46% in 2015, to 6.9 billion dollars, while offers in banking, financial services and insurance (BFSI) doubled to 3.7 billion.

India has a huge young population, with increasing incomes and consuming more and doing more online. This makes it one of the most interesting countries to invest in private equityif you have a long-term investment horizon.

Private Equity Funds are the alternative to the doubt of selling a company or taking on the risks of continuing to operate it.

Private Equity Firms

A private equity firm is an investment management company that makes investments in companies through various strategies, such as lever purchases (LBO), by venture capital and growth capital. These companies often raise funds to increase purchasing power and the amount of investment options available to them.

Private equity firms use various approaches to make investments, including the purchase of existing investors, the purchase of the founder, the provision of capital for expansion and growth or the provision of recapitalization for a troubled business.

Private Equity Funds

A private equity firm obtains capital through a private equity fund valid redundancy. These funds are structured as limited partnerships, with limited partners that provide most of the capital and with the general managers that manage the fund.

Limited partners may include:

•  Endowment funds

•  Universities

•  Insurance companies

•  Wealthy individuals

•  Governments

•  Sovereign capital funds

•  Foundations

•   Pensions

•  Institutions

•  Large corporations

• Banks

•  Fund of funds

How does it work?

Private equity companies use their capital to invest or buy companies that may be more profitable. Once this is achieved, the company sells its stake to make a profit.

The objective is to find a company that can be improved by increasing efficiency or altering operations and then withdrawing the investment once the company has become profitable.

Companies that attract private capital

  1. Private companies — companies that do not sell shares in a public exchange.
  2. Companies in trouble — publicly traded companies that have been through difficult times and need to be restructured to be profitable again.

Companies that are targets for private capital investment

• Companies where costs can be reduced and including more efficiency

• Companies with hard assets that can be used as collateral for future debt

•  Companies with little or no debt and strong cash flows

•  Companies whose shares are undervalued

•  Companies in a proven and mature market with high margins

•   Companies with good management

•   Companies that have exit opportunities

•  Companies that have assets that can be sold

Private equity companies usually withdraw their investments in three ways:

• Initial public offering (IPO) – sale of shares to the public for the first time; the company takes its profits from the funds raised.

•   Merger or Acquisition – sale of the controlled company to another company.

•  Recapitalization – the controlled company uses income, debt or share capital to repurchase the private equity company’s participation and restore control to minority shareholders.

Leave a Reply

Your email address will not be published. Required fields are marked *

Verified by ExactMetrics