The term "Private equity" has become a jargon in the world of investment. As per the famous authors Gillian & Wright, "Private Equity is risk capital provided in a wide variety of situations, ranging from finance, provided to business start-ups to the purchase of large, mature quoted companies and everything in between."
In the simplest of words, it can be defined as the injection of funds, by a group or individual specialist investors into private companies with the sole objective of high returns on investment. The private equity and other pools of capital which are privately held are becoming increasingly popular as an alternative source of financing rather than the traditional banking systems which have run for a substantial period of time. This fund has become a source of investment in both the financial and the non-financial sector and has been even adopted by the investment bankers.
To provide an in depth comprehensive meaning of the term private equity, one needs to understand that the investment made by this method can take the form of either purchasing shares from an existing shareholder which can be a buy out as well if a controlling stake is acquired or there could be totally an inducement of fresh capital in a company which could call for investment in the new shares in the investee company.
So as can be seen, the concept of private equity basically floats around providing capital to companies. The strategy to do so might differ in each case. It is a win -win situation for both a trade bidder (he gets a pool of fund and transformational skills of PE fund) and the private equity funder (who gets an investment alternative for his funds and industry knowledge of the trade bidder).
The revolutionary industrialization in the field of private equity has given a rise to this profile in the world of investors and hence a number of them are focusing on this so called new industry.
However, despite the hype in this method of investment, history has records reflecting on the uncertain nature of the performance of the equity fund. This is basically due to the complexity and inadequacy of the data which is provided for research and the economic uncertainty attached to the fund. Also the key feature to notice in this fund is that despite the considerable challenges which are faced by the PE fund owners. The economic environment in which they operate has produced an unexpected small number of business failures which is backed by the private equity. On the contrary, many companies managing a portfolio have even benefitted from the involvement of private equity funds. This has a significant impact on the economy wherein the key turning factors are revenue protection, production efficiency, cost cutting and most importantly careful management of the working capital.
Private equity fund’s investments have been a significant part of India’s emerging market for about more than a decade now. In this time frame, India has witnessed a multitude of events which have shaped the investment climate in the country. India’s growing and global stature, which has within it an open economy coupled with positive indications of reforms , high return opportunities and a perception of values residing within the attire of the economy has encouraged more and more investments in the country.
All such aspects have been covered in detail in Book, Taxman’s Guide to Private Equity. It is available at Puja Law House/ Agarwal Law House, ITO in Delhi and all other Taxman Distributors or online at Taxman’s website or amazon.in.
It is important for professionals to know the progress we are making in the economic environment in line with the international environment.
For any more info on the book, I am happy to answer genuine queries at firstname.lastname@example.org