Back in the 1990s, Private Equity in India was born. However, it did not see any major growth since 2007 or 2008. This was the time when India’s economy received a boost and it motivated the private equity firms from across the globe to set up shops right here in India. In 2012, the Security and Exchange Board of the country took up the responsibility of managing this industry of the country. As of 2018, almost eighty alternate investment funds were there.
What Private Equity firms do is that they typically manage the funds in behalf of their investors. It is a private group of investors. They make money through the purchase and sale of the ownership of private equity. They provide senior management directions to the companies in which they have invested. Here are some questions that are answered about Private Equity Firms that will help you get started with all these.
#1 which are the leading private equity players in India?
There are many Private Equity firms in India. However, you do not want to take risks when it comes to money. Therefore, it is advisable to go with those who are reputed and have a good record over the years. Here are a list of the top private equity players in India.
- ICICI Venture
- Chrys Capital
- Sequoia Capital
- India Value Fund
- Kotak Private Equity Group
- Baring Private Equity Partners
- Ascent Capital
- Everstone Capital
- Blackstone Group
These private equity firms have a good record over the years and most of them are trustworthy. All of these companies are the topmost candidates when it comes to Private Equity sectors.
#2 how much money is required to invest in private equity for a customer?
As alternative investment funds, private equity funds have acquired great popularity. To invest, you need to first review your options in private equity funds. In many cases, the funds only deal with customers who can provide a minimum of $250,000. This means that investing in Private Equity Funds are accessible only to wealthy individuals.
You need to analyze and review the strategy that the fund is using. If you do not understand how the fund is making money, then it is better that you do not invest in it and must aware of using finance to make a successful business !
#3 how is the money invested?
A private equity fund usually makes investments in companies, also known as portfolio companies. These portfolio company investments are actually funded by the capital that is raised from the limited partners or the LPs. This, however, maybe partially or substantially financed by debt. In some cases, the private equity investment transactions can be leveraged a lot by means of debt financing that is also known as leveraged by-out of LBO. The case of LBO financing comes in the scene in the case of commercial banks. These LBO funds commonly acquire most if the assets or the equity interests of the portfolio company. This is done though the newly created special purpose acquisition subsidiary which is controlled by the fund.
#4 how does the private equity company choose which company to invest on?
The ultimate goal of the private equity funds is to sell or exit its investments in the portfolio companies for a return. This return is known as the Internal rate of return or the IRR, which is in excess of the price paid. While choosing a company, the best place to start is by selecting a company that will benefit your very own business. That is why, you need to select only those private equity companies that meet all the requirements of yours and have the same preferences when it comes to investments as that of yours.
#5 what are the kind of returns in this investment?
In this sector, numerous venture groups have grown dramatically. This has increased the returns. Funds that have a higher sequence number that is established funds have performed better. However, rapid growth in capital under management is associated with the deterioration of performance. Private equity funds actually invest over a long cycle of seven to nine years. Returns are completely based on the performance of the funds and to analyze that, a lot of information is needed. This means when the money is out into the fund, how the cash was used, distribution of the cash and more. The key concept of measure the performance is the IRR.
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