Presented by
Pooja Adhikari
What Is Private Equity?
• Private equity is an alternative investment class and consists of capital that
is not listed 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.
• Institutional and retail investors provide the capital for private equity, and
the capital can be utilized to fund new technology, make acquisitions,
expand working capital, and to bolster and solidify a balance sheet.
• Private Equity firms purchase an existing company and help them to
develop and expand. The primary strategy of this entity is Venture Capital,
Mezzanine Capital, Leveraged Buyout, and Growth Buyout.
Private equity market in India
• Private equity market investments in India are at a record high, with
private equity and venture capital in the country crossing the $232.4
billion mark in 2020, as per EY sources.
• Last year alone witnessed private equity investments worth $62.2 billion,
including $26.5 billion private equity investment in Jio and Reliance Retail
despite the pandemic related uncertainties, according to multiple media
reports.
• India remains a fertile land for emerging businesses, inviting capital, funds,
and massive stimulus programs in pharmaceuticals, telecom, banking,
healthcare, IT, financial services, and e-commerce.
Parameters Venture Capital Private Equity
Meaning These are small investments It is the investments to those
used to grow the company in firms which are not listed on
their primary stage any public stock exchange
Investment Stages Initial stage Later stage
Fund Invested In a large number of firms In a few companies
Industries Industries such as high All Industries
technology, energy
conservation, etc. that need
initial investments
Focus on Management Skill Corporate Governance
Risk Involved High Low
Capital Required For operations growth It is required for business
expansion and growth
How does private equity work
• A group of private equity investors or a private equity firm raises a capital
pool by forming a private equity fund.
• The fund is then invested in a particular company or a group of companies
that promise growth.
• The idea is to inject immediate capital into financially distressed
companies or companies that require funds for expanding or for regular
operations.
• However, since the company shows potential to override its financial
setbacks, an influx of capital can help them get back on track. This is
where private equity investors jump in.
• Ultimately, private equity investors aim to gain returns from their
investment in the company as their operations improve and the company
starts making money.
• They might provide advice to the company’s management and help draft
strategies.
• After the company overturns its fortunes, the private equity investors can
exit with their returns.
• Thus, private equity investments allow high net worth individuals to tap
into the potential of equity markets. Private equity is also a great
investment option for investors with extra corpus to diversify their
investment portfolio and venture into a highly profitable asset class.
Additionally, private equity investment allows a few investors to be a part
of companies that show promise, growth, and potential
Top 5 Private equity firms
• The Blackstone Group Inc (New • ICICI venture fund management
York City) • Kotak private equity group
• The Carlyle Group (Washington • Chryscapital
D.C.)
• Sequoia Capital
• KKR & Co. (New York City)
• India value fund
• CVC Capital Partners
(Luxembourg)
• Warburg Pincus (New York City)