Private Equity: Submitted By, Mangesh Nilve

PRIVATE EQUITY
Submitted By,
Mangesh Nilve
12/08/21 1
Definition
According to BANCE 2004
“Investing in no-publicly held securities

through a negotiated process.”
12/08/21 2
Private Equity Firms
The typical private equity firm is organized as a partnership or

limited liability corporation.
The PE firm raises equity capital through a PE fund.
Most PE funds are “closed-end vehicles in which

investors commit to provide a certain amount of money to
pay for investments in companies as well as management
fees to the private equity firm.
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Continue
The PE funds are organized as limited partnerships in which
the general partners manage the fund and the limited partners
provide most of the capital.
Limited Partners- institutional investors, insurance cos,

wealthy individuals.
General Partner- PE Firm
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History
The seeds of the private equity industry were planted
in 1946 when the American Research and
Development Corporation (ARD) decided to
encourage private sector institutions to help provide
funding for soldiers who were returning from World
War II. While the ARD had difficulty stimulating any
private interest in the enterprise and ended up
disbanding, they are significant because this marked
the first recognized time in financial history that an
enterprise of this type had been formed.
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Example
Before Google went public, it still had a lot of investors. Their
money was considered private equity until Google’s IPO
(initial public offering).
ICICI Venture is one of the largest and most successful

private equity firms in India with funds under
management in excess of USD 2 billion. Its investment
focus areas span across private equity, buyouts, real estate
and mezzanine financing. It has several "firsts" to its credit
in the Indian Private Equity industry.
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Types of Private Equity:
Leveraged buyout
Venture capital
Growth capital
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Leveraged Buyouts
A leveraged buy-out is an acquisition of a public or private
company in which the takeover is financed predominantly by
debt with minimum equity investment.
The acquisition is carried out by a specialized investment firm.

These firms are referred to as private equity firms.
The firm buys majority control of the company it has acquired.
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The debt includes a combination of bank loans, loans
from other financial institutions and high-yield bonds.
Assets of the acquired company act as collateral for

the debt and interest and principal obligations are met
through cash flows of the refinanced company.
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Venture Capital
Venture Capital is a type of private equity capital
typically provided to early-stage, high-potential, growth
companies in the interest of generating a return through an
eventual realization event such as an IPO or trade sale of
the company.
Venture capital investments are generally made as cash in

exchange for shares in the invested company.
12/08/21 10
Growth capital
Refers to equity investments, most often minority

investments, in more mature companies that are
looking for capital to expand or restructure
operations, enter new markets or finance a major
acquisition without a change of control of the
business
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Continue
Venture capital typically comes from institutional

investors and HNW individuals and is pooled together by
dedicated investment firms.
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These companies are likely to be more mature

than Venture Capital funded companies, able to
generate revenue and operating profits but unable to
generate sufficient cash to fund major expansions,
acquisitions or other investments.
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Structure
Three major types of participants
Investors
Intermediaries
Issuers
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Investors
The number and variety of groups that invest in
private equity have expanded substantially to include
a wide range of different types of investors.
Institutional investors with long-term commitments

to the asset class provide the vast majority of the
capital in private equity funds.
12/08/21 15
Intermediaries
The growth in the private equity market over the past
three decades is largely attributable to the emergence
of private equity funds that raise and invest funds
from investors.
Four-fifths of private equity investments flow through
specialized intermediaries, almost all of which are in
the form of limited partnerships.
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Issuers
Issuers in the private equity market vary widely in
size and in their reasons for raising capital.
Private equity is one of the most expensive forms of

finance, issuers generally are firms that do not have
an alternative source of financing such as a bank loan,
private placement or the public equity market.
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The Indian Case
In India, Private equity is reasonably young, dating back to
the mid-1990s. The environment heated up in the end of
the ‘90s with the IT boom, with companies investing (and
getting their fingers burnt) with their investments. In
recent years, there has been a resurgence of these firms,
with India’s stock markets booming and sectors like the
life sciences, infrastructure and most recently, real estate
being growth stories for the future. Global firms such as
Warburg Pincus, Blackstone and the Carlyle Group have a
presence in India while Indian players like ICICI Venture
and ChrysCapital also have a large presence.
12/08/21 18
Conclusion
It is obvious that this type of investment is for the
corporate world. Strong companies have a more
effective way of dealing with risk, and the initial
investment is also very large when talking about
private equity. The most active investors into private
equity funds, making up 40% of all total investments,
were public pension funds, banks, and financial
institutions. Other big players in the equity fund
market include funds of funds.
12/08/21 19
THANK YOU
12/08/21 20

Private Equity: Submitted By, Mangesh Nilve

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PRIVATE EQUITY

“Investing in no-publicly held securities

The typical private equity firm is organized as a partnership or

The PE firm raises equity capital through a PE fund.

Most PE funds are “closed-end vehicles in which

Limited Partners- institutional investors, insurance cos,

General Partner- PE Firm

ICICI Venture is one of the largest and most successful

The acquisition is carried out by a specialized investment firm.

The firm buys majority control of the company it has acquired.

Assets of the acquired company act as collateral for

Venture capital investments are generally made as cash in

Refers to equity investments, most often minority

Venture capital typically comes from institutional

These companies are likely to be more mature

Institutional investors with long-term commitments

Private equity is one of the most expensive forms of

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