Corporate Governance, Growth Capital Seen As Twin Upsides Of PE Play (India)

by Reghu Balakrishnan, for the VC Circle, May 10, 2010

A KPMG survey of portfolio firms says PE capital helps raise their profile and credibility.

Improvements in corporate governance structures and access to capital in the growth phase have been identified as the areas of significant impact made by the contribution of private equity investments in Indian companies.

A KPMG India Survey of Portfolio Companies 2010 says, investee companies believe that PE is an excellent source of capital to build new and innovative business models and also the best long term source of funding for growing businesses.

PE funding not only helps raise the profile of the investee company but also strengthens the credibility of the promoters. This is particularly useful at the time of making a public issue, the survey said. PE investments transformed the company and the business environment as well.

One of the less-understood benefits of PE investment is enhancement of reputation. The investee companies are usually too immature to access equity capital from capital markets and too small to tap debt capital. PE enables a financial base which allows access to bank finance. And, PE capital from a reputable firm is worth much more than the money. It adds value such as better terms of finance, quality of recruitment, client and vendor relationships and perceptions of better competitiveness, the investee companies believe…(continue reading)

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