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Private Equity Trends In INDIA

Submited to:Mrs. Pallavi Dawra Faculty PCTE

Submitted By:-

Abhishek Walia Lovish Goel Vipan Kumar Yogesh Bhatt Yogesh Rana

Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity

Private equity funds tend to have much longer investment horizons than funds that hold publicly-traded securities. securities issued by private companies (as well as private placements from public companies) are highly illiquid, since they are not traded in public securities markets. The opportunities for resale to another party are highly limited, with possible contractual and regulatory constraints adding to the difficulties.

Some private equity funds tend to act as partners in managing the companies that they back, rather than being merely passive investors

The largest private equity firm in the world today is TPG, based on the amount of private equity directinvestment capital raised over a five-year window TPG Capital Goldman Sachs The Carlyle Group Kohlberg Kravis Roberts The Blackstone Group

Leveraged buyouts Venture capital Growth capital Mezzanine capital

Venture capital is a broad subcategory of private equity that refers to equity investments. It is made, typically in less mature companies. For the launch, early development, or expansion of a business. Venture investment is most often found in the application of new technology, new marketing concepts and new products that have yet to be proven Venture capital in India IDBI ICICI

Growth Capital refers to equity investments in mature companies. They are looking for capital to expand or restructure operations, enter new markets or finance a major acquisition without a change of control of the business. In this minority investments is there. Companies able to generate less profits but are not sufficient for further acquisition. By selling a part of company to privte equity owner and shares risk

Examples a)Indian capital Growth Fund -It is an investment company -Long term investment is there

b)Intel capital ,the development arm of INTEL taking stake of $12m in Irish Technology Firm. c)New Silk Route .

Mezzanine capital refers to subordinated debt or preferred equity securities that often represent the most junior portion of a company's capital structure that is senior to the company's common equity. Used by small companies that are unable to acess high yield markets. It allows such companies to borrow additional capital beyond the levels that traditional lenders are willing to pay through bank loans.

Basic forms used in Mezzanine Capital a)Subordinated Notes B)Preferred Stocks

Terms used in Mezzanine Capital - Cash Interest - PIK - Ownership

Leveraged buyout, LBO or Buyout refers to a strategy of making equity investments as part of a transaction in which a company, business unit or business assets is acquired from the current shareholders typically with the use of financial leverage.

1. ICICI Venture- raised funds to about $3 billion over the last decade. 2. Sequoia Capital- formerly known as WestBridge Capital Partners raised funds to about $2 billion 3. India Value Fund 4. Kotak Private Equity Group- Kotak's pumped $1.4 billion in the infrastructure and health care sectors.

5.Baring Private Equity Partners 6. Blackstone Group- invest as much as $1.5 billion in Indian infrastructure

PE has emerged as a major investor class in India in a decade and investments under this category have grown significantly in last few years. India ranked among the three private equity destinations in emerging economies. PE has picked up significantly in year 2010-11, according to Rajiv Memani, country managing partner,Ernst & Young. Seminar on Emerging trends in PE organised by IACC in which he said in the last 5 years PE investment tuned to $37 billion.

In the past 5 years more than 1500 deals took place covering industries as telecom, infrastructure , real estate , financial services , health care , consumer products , IT , education etc. In the first three quarters of 2010 total PE was more than $5.6 billion against $3.5 billion in 2009. Infrastructure continued to attract significant PE accounting for nearly 30% of deal value in the 3rd quarter of 2010.

In terms of deal volume , technology attracted highest deals in current quarter. Leading PE players include SBI infrastructure fund IDFC Private equity Morgan Stanley Infrastructure Partnres Baring Private equity partners Olympus Capital holding

Seed stage Financing provided to research, assess and develop an initial concept before a business has reached the start-up phase. Start-up stage financing for product development and initial marketing. Expansion stage financing for growth and expansion of a company which is breaking even or trading profitably.

Replacement capital Purchase of shares from another investor or to reduce gearing via the refinancing of debt.

PE helps a company to prepare for stock market listing (IPO) as the exit route of investment. It opens up enormous opportunities for companies to raise funds. PE helps those companies which cannot raise money from the market. By private equity company get money from the investors.

The management receives carried interest, a portion of the profits, so managers and their staff are motivated to produce good results to investors. By utilizing a team of researchers the private equity firm is able to identify most risks that would not otherwise be found

Difficult to access for small & medium investorsprivate equity Limited Partnership funds may only be marketed to institutions and very wealthy individuals. Competition from China- China is a direct competitor of India and most of the private equity investors, eyeing the Asian region, draw a comparison across both the countries to decide where their money should be parked.

It is a lengthy process since private equity managers conduct detailed, legal, environmental and management due diligence. Entrepreneurs have to give up some of their companys shares to a private equity investor, i.e. control. The private equity managers have control over the timing of a sale of the business. Lack of promotion in investment