Skip to main content

“Private Equity-backed cos. outperform their peers”: Study

PE/VC-backed companies fare better in terms of growth in sales & asset growth, a study by Venture Intelligence – under the guidance of Prof. Thillai Rajan of IIT-Madras - shows.

According to a new study by Venture Intelligence, a leading research firm focussed on Private Company Financials, Transactions and their Valuations in India, Private Equity (including Venture Capital) backed companies are growing significantly faster as compared to companies that did not have any PE-VC funding and also publicly listed companies that comprise market indices like Sensex, Nifty and CNX Midcap.

The Private Equity Impact study, first conducted in 2007, measures the impact of PE and VC funds on the Indian economy using quantitative and qualitative methods. This year, with advice and guidance from Prof. Thillai Rajan A of Department of Management Studies at IIT-Madras, the study revisited the theme of comparing PE- and VC-backed companies vis-à-vis those that did not have any PE/VC funding and other indices using quantitative and qualitative parameters.

Prof. Thillai Rajan, IIT-Madras who guided The Study

The PE Impact 2017 report was released at Venture Intelligence APEX, the annual conclave of the Indian Private Equity & Venture Capital industry, at Bangalore by Srivatsa Krishna, IAS who has earlier worked with the World Bank’s private sector financing initiative and has researched the PE industry in detail. The first copy of the report was received by Dr. G.S.K Velu, Founder of Trivitron Group, who has successfully raised and leveraged PE capital across several healthcare ventures. 

Dr. G.S.K Velu, Founder of Trivitron Group & Srivatsa Krishna, IAS 

Other Highlights of the Report:

In the six years between 2011 and 2016, PE-VC firms invested over $72 billion in Indian companies – over 6.5 times what Corporate India raised via Initial Public Offerings (IPOs) during the same period
PE investment is largely associated with smaller companies. The average size of PE funded firms in terms of revenues and assets are about one-sixth of all listed firms
Revenue growth of PE-VC backed companies are more than twice that of other benchmarks
PE-VC investment is associated not just with top line growth but also with growth in asset creation
PE-VC funded companies exhibit a more efficient working capital management as compared to listed peers
The profit growth of PE-VC funded companies is the lowest among the benchmarks indicating a predominant focus of such companies on long term growth, sacrificing bottomline focus in the short term
Lower asset returns, cash returns on capital invested and asset turnover in PE-VC funded companies indicate a focus on long term growth
PE-VC investments helps to increase the equity base to attract debt capital. PE-VC investors provide a degree of comfort to lenders as indicated in debt levels and costs 
The primary markets are characterized by significant volatility. PE-VC investors do continue to invest even in times even when there is a squeeze in conventional markets, thereby helping the companies to tide over the industry down cycles. As promoters of small-to-mid sized companies typically face limitations in terms of the quantum of equity contribution they can make, PE-VC investors step in to provide the long term funding require to catalyze growth.   
The report features case studies of four PE/VC-backed companies – Quess Corp, redBus, Vectus and Equitas Holdings. The entrepreneurs featured in the Case Studies attest the value added by PE-VC investors – beyond merely providing capital.
Founders of start-ups are often not well versed with “once in a lifetime of a company” processes such as IPO, M&A and so on. Since many PE-VC investors have prior experience in the financial services industry as well as in addition to working with other investee companies in their portfolio, they are able to help promoters steer through the complexities.  

“The PE Impact Study demonstrates how PE and VC firms adopt a long term perspective in their investment decisions. The presence of a PE / VC investor provides a kind of certification which, while broadening the equity base, also helps the investee companies access other sources of funding including debt capital. PE/VC investors also forge active partnerships with their investee companies to improve growth and business strategy, besides opening up new opportunities,” said Prof. Thillai Rajan. 

“The common thread that emerges from The Study is that PE-VC investment, when chosen and leveraged well, can help companies scale up rapidly and accelerate growth in several ways that add significant value to the Indian Economy,” said Arun Natarajan, CEO of Venture Intelligence.

Pointing out that the findings of this report differed from those released by various leading consulting firms, Srivatsa Krishna cautioned the Indian Private Equity industry on the various risks it was facing as also the risks it was opening itself too, some by its own sins of omission and commission. 

The full report can be downloaded from www.ventureintelligence.com/peimpact.htm

About Venture Intelligence

Venture Intelligence, a division of Chennai, India-based TSJ Media Pvt. Ltd., is India’s longest serving provider of data and analysis on Private Company Financials, Transactions and their Valuations in India. For more information, please visit http://www.ventureintelligence.com

About Prof. Thillai Rajan 

Prof. Thillai Rajan A is currently a Professor in the Department of Management Studies at the Indian Institute of Technology Madras. He is also an international research affiliate at the Coller Institute of Venture at Tel Aviv University, Israel, and an Associate at the Mossavar-Rahmani Centre for Business and Government, Harvard Kennedy School, Harvard University. His teaching and research areas include Private Equity and Venture Capital, Corporate Finance, Project and Infrastructure Finance, and Public Private Partnerships. A more detailed profile can be viewed at https://home.iitm.ac.in/thillair/



Popular posts from this blog

VC Interview: Shailendra Singh of Sequoia Capital India

In a recent interview to Venture Intelligence, Shailendra Singh discussed some of the firm’s newer investments in the early stage segment including in the online payments space, the progress at a few existing portfolio companies and the active role the firm is playing in helping its portfolio companies scale and succeed in India and globally. Prior to joining the firm in 2006, Singh was a strategy consultant at Bain & Company in New York and before that, an entrepreneur in the digital media industry.

Venture Intelligence: How does Sequoia go about identifying potential early stage investments in India? Is there anything different you are doing today than, say, a couple of years back?

Shailendra Singh: There is a lot more focus on technology investing and early stage investing. In general, as you might remember a few years ago, we were doing primarily growth investing but in the past 18-odd months, we have had a very strong focus on early stage and that’s continuing. In terms of how…

KPMG Tops League Table for Financial Advisor to Private Equity Transactions in H1 2018

The transaction advisory unit of KPMG claimed the top position in the Venture Intelligence League Table for Transaction Advisor to Private Equity deals in the first half of 2018, advising deals worth $1.7 Billion. KPMG acted as the financial advisor to NHAI in the $1.5 Billion investment by Macquarie to operate 9 highway projects under the toll-operate-transfer (TOT) model. Ernst &  Young (which advised the $730 million asset sale by Indiabulls Real Estate to Blackstone) and Kotak (which advised the Vishal Megamart - Partners Group deal) accounted for the second and third spots respectively.
The Venture Intelligence League Tables, the first such initiative exclusively tracking transactions involving India-based companies, are based on value of PE and M&A transactions advised by Transaction and Legal Advisory firms.
Arpwood Capital (which advised the $760 million investment by Temasek in the $2.1 Billion Schneider Electric buyout of L&;T Electrical and Automation business) …

SAIF, Kedaara Capital bag 2 awards each at Venture Intelligence APEX’18 PE-VC Awards

Mumbai, India, March 6, 2013: Kedaara Capital and SAIF Partners bagged two awards each as part of the Venture Intelligence “Awards for Private Equity Excellence” (APEX)event organized by Venture Intelligence. SAIF Partners bagged the VC Exit of the Year – 2017 Award (for the part exit from Paytm/One97 Communications) and the New Fund Raise of the Year – Venture Capital - 2017 Award. Kedaara Capital won the Best Private Equity Firm – Special Situations – 2017 the New Fund Raise of the Year – Private Equity - 2017.
The event opened with a Fireside Chat with V Vaidyanathan, Founder & Executive Chairman, Capital First interviewed by Sesh A.V, Managing Director, Basiz Fund Services

Snapshots of the awards ceremony:

Sesh AV, Managing Director, Basiz Fund Services presents the Venture Capital Investment of the Year award to Ramesh Radhakrishnan, Partner, Artiman Ventures.

Nagaraja Prakasam, Board Member, Sattva Consulting presents the Impact Investor of the Year award to Varun Saini, Progr…