Introduction PE 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 while2012 It currently ranks 6th.
4 sequential steps in PE 1. •FIND 2. •INVEST 3. •HOLD 4. •EXIT
The million $ Q’s .1.What determines the rate of returnon Exit ?2.Extent of influence of –Fund manager on the exit strategy.b. The sector on the exit strategy.c. Life of the fund.
3. Which type of exit generates bestreturn and why4. Do ‘promoter preferences’ on Exit ,matter ?5. If yes , then how the conflict isresolved ?6. Is there any connection betweenentry and exit type ?
Uncontrollable Controllable1. The factors that prevail in the 1. The choice of sector . system and are beyond our control. 2. Selection of firm.2. Eg. Global economic slowdown in 3. How much to invest. 2009 . 4. Entry strategy . 5. Type of exit . 6. When to exit.
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
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.
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.