pe scenario in india
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Private Equity scenario in India . .
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IntroductionPE industry is about a decade old (1999) .
Benchmarks -2004 The total deal value crossed 1.45 bn USD. (for 1st
time)
2007 Peak deal value of 14 bn USD.
2010 Overtook China (in terms of deal value) for a short while
2012 It currently ranks 6th.
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4 sequential steps in PE
1.
•FIND
2.
•INVEST
3.
•HOLD
4.
•EXIT
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The million $ Q’s .
1.What determines the rate of return on Exit ?
2.Extent of influence of – Fund manager on the exit strategy.b. The sector on the exit strategy.c. Life of the fund.
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3. Which type of exit generates best return and why
4. Do ‘promoter preferences’ on Exit , matter ?
5. If yes , then how the conflict is resolved ?
6. Is there any connection between entry and exit type ?
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Uncontrollable
1. The factors that prevail in the system and are beyond our control.
2. Eg. Global economic slowdown in 2009 .
Controllable
1. The choice of sector .
2. Selection of firm.
3. How much to invest.
4. Entry strategy .
5. Type of exit .
6. When to exit.
Answers
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How Indian market was Risky for PE funds ?
• Political and regulatory uncertainty
• Weak corporate governance
• Family owned businesses
• Difficulties in exiting through IPO
• Compliance issues
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Returns from Indian PE
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Sensex return v/s PE return
2003-2010
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PE returns across Asia and other countries
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Positives of PE
• PE helped mid market companies deliver professional services.
• Direct impact on – business model , corporate governance , professional talent management of portfolio companies.
• PE enhanced company’s reputation with banker’s and capital markets.
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Conclusion
• The PE industry in India is as old as the life span of a typical PE fund.
• Nearly 30% of PE deals likely end up generating negative returns.
• High cost of entry.
• Positive future.