Why Do Big Enterprises In India Showing A Positive Attitude Towards Private Equity In Recent Times?

Going by the technical terms, private equity is basically venture capital. It is a general term used to describe all sorts of funds that can be extracted from a bunch of investors to acquire stakes in a company. 

PE fund in India is often associated with assets acquired to boost revenue generation and revitalization. The economic growth is on a high-note in our country and established firms are specifically interested in leveraging ‘PE’ funds for unprecedented growth.    

There is an age-old stereotype associated with the private equity firms, which is that these firms strip of the company from its best assets but that’s not actually true. On the contrary, PE firms work hard to generate value creation strategies by investing money on diverse range of companies.  

 
Some firms buy out the company outright, whereas some ask some of their board of directors to stay and take care of the assets on their behalf. These firms typically use strategies like buying out the founder, capital expansion, cashing out previous investors, and overtaking the struggling business. Sometimes equity firms also borrow additional money to enhance their buying power. Here the acquisition assets are used as collateral.

In past few years, there has been a popular rise in special kind of equity firm called the ‘search’ fund. Instead of pooling or investing money on a business, they invest on their would-be entrepreneurs who are capable of acquiring and running the business. This is one intelligent thing to do if business leaders wish to make things work in their favor. The growth capital in India is being raised in past few years as business owners are interested in leveraging facilities from these firms.  

Often dubbed as ‘esoteric’, Private equity is an investment in real economy. Enterprises have to make investments in venture capital if they wish to proliferate their business.