A lot of private equity exits are likely to happen in 2013-2014 which period will be a tipping point for the PE industry in India, said Mr Ashish Dhawan, Senior Managing Director, Chryscapital Investment Advisors (I) Private Ltd.
“2013-14 will bring about a better environment as the stock markets will improve after the current downturn,” he said.
Challenging times
Of the investments in the years 2006-07, only 10-15 per cent of them have culminated in exits. The minute the market becomes a little bit more stable these already ‘over-ripe' funds will take the opportunity and exit, said Mr Dhawan.
These are indeed challenging times, say investment advisors. Not only is it challenging to give support to the companies that one has already invested in but it is also challenging to raise new money.
The private equity front is changing in more ways than one. The role of the traditional private equity investor has undergone a huge transition, they said.
From being a hands-off strategic input provider to one providing operational assistance along with the strategic inputs, the private equity investor is juggling two roles with one hand.
“This transition can be seen in two parts — the mid-1990's to mid-2005 period and the post mid-2005 period,” said Dr Archana Hingorani, CEO and ED, IL&FS Investment Managers.
“The mid-90s tomid-2005 period was mostly about trying to identify sectors, new entrepreneurs and then sitting with them in a position of partnership. It was a period of strategic inputs and giving a lot of hands off strategic information to companies,” said Dr Hingorani.
Post the crisis period, private equity investors are participating in a whole lot of additional activities with the investee — right from helping in the business plans, getting the company to focus on some extra details, to cleaning up some aspects of the company and cutting off business wings that are not showing growth. “It is key to have a relationship where valuations are not that important,” said Dr Hingorani.
Most private equity investors don't see this extensive hand-holding as a burden, but as a requirement to generate their expected or estimated returns, she said.