A Perspective

Statutory Warning: The views expressed herein are solely those of the author and do not necessarily reflect those of the Private Equity fraternity.

Nikhilesh Goel
Nikhilesh.goel@gmail.com

Parental Guidance: Those whove come only for atte ttendance can walk out now. Here on it gets really boring.

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Income Sales Other Income Change in Stock Total Income Expenditure Cost of Goods Sold Gross Profit (GP) GP % SG & A EBITDA EBITDA % Depreciation Write-offs Extra-ordinary Income Financial Charges PBT PBT % less: Provision for Taxes less: Other Provisions PAT PAT% Dividend

Sources of Funds Shareholders' Funds Share Capital Reserves & Surplus Net Worth Loan Funds Long Term Debt WK Debt Unsecured Loans Deferred Tax Liability Total

Application of Funds Fixed Assets a. Gross Block b. Less: Depreciation c. Net Block d. Capital WIP Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans & Advances Total Current Assets Current Liabilities & Provisions Current Liabilities (incl. Creditors) Provisions Total Current Liabilities Net Current Assets Misc. Expenditure Total

Private equity is a broad term which commonly refers to any type of non-public Ownership Equity securities that are not listed on a public exchange public The primary sources of equity capital are promoters contribution, private equity and public markets The source of Equity is linked to the phase in the life of the firm Private equity is a medium term finance provided in return for an equity stake - Private Equity is the most appropriate form of equity in the growth phase PE firms provide strategic inputs to the company, which enhance the value of the company and hence their stake
Different Forms of Equity Promoter's Equity Private Equity Public Markets

VC

PE

PIPE

Start-up

Growth

Maturity

Value of the Firm

Risk

Promoters Equity

Private Equity

Public Markets

Life of the Firm (In years)

Entrepreneur/ Business

Investment Banker/Advisor

Private Equity

Discussion/Meeting with the promoters

Business and Legal DueDiligence

Documentation and Disbursement

Monitoring & Value Addition

Exit

Proposal Received

Term Sheet Submitted

Valuation Negotiations

Venture

Distressed

Growth

Stage

Sector Focus

Secondary

Late-Stage/ Buyout

Hedge Fund Model

Social Focus

Focus

Prop Books

Geography Focus

Growth Capital Corporate debt is an underdeveloped asset class in India especially for SMEs. Long tenor bank loans for SMEs is still developing Excessive dependence on the Promoter In most private cos., a lot of functions are handled by the Promoters/Promoter Group. This leads to inadequate time devoted towards strategy and business development. Strategic direction Private companies continue to need greater strategic direction to achieve global competitiveness should that be by increasing operational efficiencies, identifying collaboration partners and or seeking new growth areas (organic/ inorganic)? Human resources Talent retention more challenging for smaller companies Stress on ESOPs Corporatization Do you think, behave, report like a public company? Up the IPO-quotient

Strategic Guidance - PE firms can help companies by being their in-house Strategy and Corporate Finance resource Financial Planning - Assisting companies raise equity or debt, and more importantly working towards an eventual IPO Business growth - Securing additional business for their investee companies, through customer introductions Human resource development - PE firms can help in recruitment of right talent. Market Agnostic - Available in weak public markets Anchor Investing

Business Growth Anchor Investing

Human Resource management

Strategic guidance Financial Planning

Private Equity

Market Agnostic

Corporatisation Private Shareholding

 Challenging work - Eclectic mix of all management verticals Best-in-Breed peer group - Where is Al Gore, Arun Sarin, Sanjay Nayar, Vindi Banga Retain your entrepreneurial spirit - Run multiple businesses at the same time Sector agnostic knowledge - Be the Oracle, Unwaba, er..whatever.. ..whatever.. Partnership - I am allergic to bosses! Its all about the money, honey! - And they say only a smile was worth a million bucks

which way I ought to go from here? That depends a good deal on where you want to get to, said the Cat