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December 04, 2009

"Sushil ji or Hi Sushil?"

In an article for The Economic Times, Jaspal Singh Sabharwal of Future Capital, provides some interesting views on how Private Equity firms can deal better with promoters of Indian SMEs.

On why SMEs?

In India, if you want to invest in a cricketer, go to the Ranji trophy venue (equivalent of junior league in football). Stop chasing the established international players because they are just too expensive and you won’t be able to influence the outcome. Imagine if you had put in your money on Sachin 20 years ago.

On PE-SME Alliances
A successful PE-SME alliance calls for very high degree of caution and due-diligence. First thing first - companies should get into PE alliances only when they need to, when going it alone will take too long or cost too much or when one is seeking very specific capabilities. Too many PE alliances are built on the assumption that a good business case will compensate for differences in values, style or culture. A good business case is not really good until the softer factors are folded in, even more in the case of family run businesses. Secondly, for any partnership to endure, cultural adaptation must take place and it is often more difficult to define.

...Imagine a 30-year-old investment banker calling a 55-year-old head of an Indian business by his first name—Hello Sushil! How are you doing? Shri Sushil Gupta is Sushil ji for the entire world and these unintentional gestures wreak havoc on the relationship (unintended consequences).

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports. Email the author at