Factor affecting private equity in india

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Factor affecting Private Equity in India Presented by: Hadia Lakdawala Vinay Singh Tomar Twinkle Shah Presented to: Prof. Mittal Dattani Center for management studies Ganpat University

Transcript of Factor affecting private equity in india

Page 1: Factor affecting private equity in india

Factor affecting Private Equity in India

Presented by:Hadia LakdawalaVinay Singh TomarTwinkle Shah

Presented to:Prof. Mittal DattaniCenter for management studiesGanpat University

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Flow of presentation Introduction Literature review Research methodology Analysis Findings Conclusion Bibliography

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Introduction

Private equity is capital that is not noted on a public exchange.

Private equity is composed of funds and investors that directly invest

in private companies, or that engage in buyouts of public companies,

resulting in the delisting of public equity

Private equity comes primarily from institutional investors and

accredited investors, who can dedicate substantial sums of money for

extended time periods.

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Types of Investment in Private Equity

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History of Private Equity Venture capitalists often relate the story of Christopher Columbus.

In the fifteenth century, he sought to travel westwards instead of

eastwards from Europe and so planned to reach India. His far-

fetched idea did not find favor with the King of Portugal, who

refused to finance him.

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History of Private Equity Finally, Queen Isabella of Spain decided to fund him

and the voyages of Christopher Columbus are now empanelled in history.

The founder of ARD (American Research and Development Corporation ) was General Georges Dariot, a French-born military man who is considered "the father of venture capital

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Private Equity in India

The first origins of modern Venture Capital in India can be traced to the setting

up of a Technology Development Fund (TDF) in the year 1987-88.

The first phase was spurred on soon after the liberalization process began in

1991. Government had recognized the need for venture capital as early as

1988.

That was the year in which the Technical Development and Information

Corporation of India (TDICI, now ICICI ventures) was set up, soon followed by

Gujarat Venture Finance Limited (GVFL).

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Private Equity in India In 1996, the Securities and Exchange Board of India (SEBI) came

out with guidelines for venture capital funds has to adhere to, in order to carry out activities in India.

This was the beginning of the second phase in the growth of venture capital in India.

The Indian Venture Capital Association (IVCA), is the nodal center for all venture activity in the country. The association was set up in 1992 and over the last few years, has built up an impressive database.

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Funding Risk

Liquidity Risk

Market Risk

Capital Risk

Risk in investment in Private Equity

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Factor influencing Private Equity Investment

Profile of the Respondents' Firms

Size of the Firm in which investment is to be made.

Growth Potential of the Product in the Market

Expected Returns against investment

Valuation of Firm

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Factor influencing Private Equity Investment

Management

Past Success

Expertise in their field

Assurance

Regulatory Framework

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Literature Review For our Literature review we have selected 95 research papers

which are further categorized in 3 different segment

18 papers defining Private Equity Investment

37 papers Factor Affecting Private Equity Investment Decision For Individual Investor

40 papers Factor Affecting Private Equity Investment Decision For Fund Managers

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Research MethodologyPrimary Objectives:

This research focused on number

of factors that highlights the

factors which the private equity

investor keeps in mind while

taking decision about investing

in any of the venture.

 

Secondary Objectives  To analyze the factors which

affect the perception of

investor

To investigate the factors that

influences the private equity

investor’s decision while

investing the funds.

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Model for Private Equity Investment Their are 2 models in this research which helps us to

determines what factors affect the individual investor and fund managers for taking the investment decision for private equity.

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Factors considered by

individual

Risk and

retruns Entry and Exit barriers

Past experienc

e:

Legal Framewor

k

Management of the companyFinacial

condition of the compan

y

Economic

Factors

Nature of investme

nt

Growth rate

other Factors

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Factor for Investment decision of

Fund Managers

Heuristic Behaviou

rProspect theory

Herding Behaviou

r

Corporate Governan

ceSituation

of the capital market

Finacing cost

Risk and return

Finacial analysis of any

company

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Process of Private Equity

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Company Analysis

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Finding for Model The model here represents the factors which the fund managers

and the individual investor would consider before investing in any investment.

The model is mainly comprises of the following : Heuristic behaviour, Prospect theory, Herding behaviour, Corporate governance, Situation of the capital market, Financing cost, Financial analysis of any company. These factors influence the behaviour of the fund managers for the purpose of investment.

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Finding for Model While the factors that affect the behaviour of individual

investor which is as follows: Risk and returns, Entry and Exit barriers, Past experience, Legal Framework, Management of the company, Financial condition of the company, Economic Factors, Nature of investment, Growth rate, Other Factors.

The model helps to analyze the factors which would be required by the investor for considering the investment

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Finding for Process The process of private equity is consists of 10 steps and the most important

step in this process is the due diligence because this include various checking

on the purpose of the other investment.

The process of private equity includes the following :

› Signing a Non-Disclosure Agreement (NDA)

› Initial due diligence & Management Presentation

› Deal Alert (first review with Investment Committee)

› Non-Binding Letter of Intent (LOI) or First Round Bid

› Further due diligence with management

› Building an Internal Operating Model

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Finding for Process Preliminary Investment Memorandum,

Final Due Diligence and process up to submit a binding bid,

Update and Final Investment Committee Approval,

Final Binding Bid and Signing.

The process is simple and it takes a lot of time to execute.

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Conclusion of Model

The model helps in identifying the factors for the decision making process

of the investors. These factors are considered by any fund manager before

considering the investment decision. Although for every different

individual different factors are considered by them. This model determines

the factors and helps the individual to take a decision for the purpose of

investment.

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Conclusion of Process

This process helps us to understand that how the simple

process of private equity is taking place and how it works. The

process is simple and easy to understand and it comprises of 10

steps and it is a time consuming process as they deeply

evaluate the prospect which comes for the purpose of private

equity.

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Conclusion of Company Analysis

Most of the venture firms are investing in Early Stage and Growth stage of

the companies.

Most of the private equity firm invests in Debt financing, Recapitalization

of Equity structure, Buyouts, Mezzanine and PIPE deals.

Most the Venture capital firms prefer to invest in Infrastructure , Financial

Services, Healthcare, Consumer and Techno driven companies comprises of

E-Commerce, IoT and Technology

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Conclusion of Company Analysis Most of company investment in the range of USD 5 – 15 Million in early

stage venture capital and some are investment very less i.e. 50 K – 300 K

also.

Companies register their fund with the Regulatory authorities to make

investment in other companies.

Every company has their own process in selecting the venture or companies

where they want to invest.

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Bibliography

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