What Is Private Equity Investment and How It Impacts Your Portfolio

Do you know almost $100 billion of capital has been invested in the private equity market in India over the last 13 years? This revolutionary investment approach has restructured the growth strategy for many small and medium-sized businesses. In 2017, the volume of private equity investment was around $26.5 billion, and the momentum is expected to increase in the coming years. If you wish to learn more about private equity firms and investment structures, this write-up will give you detailed insights. You can cut through the chase by connecting with trusted private equity fund brokers at Stockify.

What is Private Equity?

Private equity is a new fund-sourcing approach where companies collect funds from private firms or accredited investors rather than traditional stock markets. The end goal of private equity investment is to boost the company’s financial performance so it can go public and get acquired by big entities.

Here is the graphic to give you a better understanding.

Private Equity

What Is Private Equity Investment and How It Impacts Your Portfolio

Do you know almost $100 billion of capital has been invested in the private equity market in India over the last 13 years? This revolutionary investment approach has restructured the growth strategy for many small and medium-sized businesses. In 2017, the volume of private equity investment was around $26.5 billion, and the momentum is expected to increase in the coming years. If you wish to learn more about private equity firms and investment structures, this write-up will give you detailed insights. You can cut through the chase by connecting with trusted private equity fund brokers at Stockify.

Private Equity

What is Private Equity?

Private equity is a new fund-sourcing approach where companies collect funds from private firms or accredited investors rather than traditional stock markets. The end goal of private equity investment is to boost the company’s financial performance so it can go public and get acquired by big entities.

Here is the graphic to give you a better understanding.

Private Equity

Types of Private Equity Firms

Private equity investors have a different range of investment preferences; thus, there are two types of private equity firms;

  • Active Investors
  • Passive Investors

Passive investors solely depend on the company’s management as they get the return on the revenue generated by the company. Active investors, on the other hand, provide operational support. Active private equity firms connect the companies with CFOs, CEOs, and other C-level executives for advice and consulting.

List of Private Equity Investment Options

Raising private equity funds has three crucial phases;

  • Pre-offering
  • Offering
  • Closing

Once the investors are convinced and the return on investment is explained, private equity firms flow capital through the following ways.

  • Buyout or leveraged buyout
  • Venture capital
  • Growth capital
  • Distress funding
  • Fund of funds
  • Real estate private equity

Learn more about the different classes of shares issued in the Indian market.

Private Equity Fund Structure

PE structuring usually takes place after final negotiations with investors. Structuring protects the investors from stock dilution in case the stocks are offered at a lower price than what investors have paid.Private equity firms dilute capital as shown in the graphic below;

Private Equity Structure

Benefits of Private Equity Investment

The benefits of private equity investment are manifold such as fee-saving and diversification of portfolio.

Untapped Opportunities

Private equity investments have huge untapped potential as they are not publicly traded, so you can generate a decent return quickly. Private equity is quite similar to buying unlisted shares in this regard.

Clear Accountability and Transparency

Unlike publicly traded companies, private equity investment increases transparency because the company’s management directly safeguards their investment. It becomes even better when you buy private equity funds through Stockify.

Reduced Market Risk and Better Diversification

Private equity investment provides access to large markets that could be more challenging to reach through public markets. Moreover, it opens the opportunities to the strategy versions with reduced liquidity to allow investors to diversify risk and improve investment. Stockify is one of India’s best unlisted share companies, offering unlisted shares, pre-IPO shares and private equity investment opportunities in top companies. Connect with our brokers to know more!

FAQ

Private equity is a type of capital investment offered to companies with a high growth potential (typically those that are not listed on a public exchange).

Private equity funds are usually managed by the general partners in PE firms. These companies earn a management fee of approximately 2% and may be entitled to 20% fund profits.

Yes, private equity investment can be a risky affair if you are not consulting with a professional private equity fund management company.

Private equity funds are exempt from Securities and Exchange Commission regulations, but PE firms remain subject to the Investment Advisor Act 1940.

Private equity adds value and renders financial support to companies. PE investors make money through company revenue as well they have equity shares.

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Piyush Jhunjhunwala
Piyush Jhunjhunwala
CA, CPA, Ex. PepsiCo, Reckitt, Coty
CEO & Founder
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Rahul Khatuwala
Rahul Khatuwala
Ex. Wipro & Finaco Founder
Co-Founder
Bangalore, India.