What PE Firms Have Learnt From Investing in India

Some of the globe’s top Private Equity firms have gone in losses by raising Private Equity funds in India, reason being administration issues in investee companies. On top of so many unsuccessful investments made between the years 2005 and 2008, the private equity investors were not even given adequate and their due post-investment rights. The matter further worsened because of poor reporting to private equity funds in India as well as investee firms’ languid attitude towards investing in systems, procedures and controls.

So what are the lessons that Private equity firms have learnt by investing in India? Top professionals from the field list some out for us:

Know your company
Prior to investing, make sure that the performance of a company is in line with what’s projected by it. The executive might cite excellent results and share price might also seem to go up just before the PE investment is made, however there is no guarantee if the speculated evaluations are stable or even accurate.
Sadly, many PE firms have seen share price falling by almost 50 per cent during the investing year. So knowing your company becomes very important before jumping into an investment. There’s a change in the way PE firms approach deals now. Besides going through an extensive report of the investee company’s background and checking up on its key managerial personnel, they have also started emphasizing on the need for regular report backs, well-defined internal audits and controls review on a regular basis.

Read quarterly performance properly

Although PE firms take a lot of interest in the day-to-day operations of the companies funding through private equity, quarterly reports are a more accurate source of getting a glimpse of the firm’s performance. If the results in that report don’t look good or if the auditors are showing the red flag, then it’s time to take appropriate action.

Exit when things go bad

Many PE firms take years to get out of their investments even when things are not going the right way in a company. Experts say exiting at the right time is essential as waiting for things to get alright again could mean further losses.

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