Private Equity | wealthymatters

helpstartup@rbi.org.in

January 24, 2016 Leave a comment

Today if you have an idea and a business plan, there is probably some or other way to raise money for it somewhere or the other in the world. The offshore sources from which startups in India are raising funds include individuals, private equity players and crowdsourcing

Cross-border transactions of resident Indians are subject to the regulatory regime provided by the Foreign Exchange Management Act, 1999 and businesses are supposed to know the law before raising capital. However ,the government observed that many of the startups are being promoted by very young and inexperienced individuals. Moreover, the amount raised by some of them run into only a few lakhs, making it difficult for them to hire law firms to ensure that they comply with FEMA.

So the RBI has now set up a dedicated helpline for advice on cross-border remittances which are subject to guidelines issued under the Foreign Exchange Management Act.The helpline is actually an email ID (helpstartup@rbi.org.in) through which the RBI will respond to queries and offer guidance/assistance to start-ups for undertaking cross-border transactions within the ambit of the regulatory framework.While seeking guidance, start-ups have to provide complete information to the RBI and mention the specific issues on which they need guidance in relation to the Foreign Exchange Management regulations so that the personnel attending the helpline can offer timely and effective information.

Filed under Entrepreneurship, Tool Kit Tagged with cross boarder transactions, cross border remittances, crowdsourcing, FEMA, Foreign Exchange Management Act, helpline, postaday, Private Equity, start-up finance, startups

New Millionaires-How Are They Making Their Money

August 20, 2014 Leave a comment

Filed under Entrepreneurship Tagged with financial crisis 2008, George Soros, greed, hedge funds, how new millionaires make their money, masters of the universe, postaday, Private Equity, sub prime crisis

Why Go Private?

March 28, 2014 Leave a comment

wealthymatters Being the promoter of a public company is seen as prestigious.So why do promoters sometimes opt to make their company private again?The simple answer is often the possibility of Private Gains.Public share holders and promoters often have vastly different perspectives on making money,vastly different time horizons when it comes to harvesting gains,vastly different risk perceptions and holding power.Here is an example:

In early ’13,Dell had a total market cap of about $22 billion. They also had about $11 billion in cash, which meant the stock market was valuing the entire business at $11 billion ($22 – 11). The company had a price-to-earnings multiple of about 8.5.

So the situation was that, if Michael Dell and private equity investors put in $2 bilion, used the cash on the company’s books and borrowed the remaining $9 billion, they could control the entire company without the hassle of having public shareholders.

The flexibility of not having public shareholders would enable Michael to do what has needed to be done for years, and that is massively streamline the company’s manufacturing and sales forces (probably through layoffs), re-focus the core PC business, grow the enterprise and consulting businesses, and make the company generally more Lenovo-like or IBM-like. Read more of this post

Filed under Alternative Assets, Entrepreneurship, Paper Assets, Theory, Tool Kit Tagged with Dell Buyout, going private, Michael Dell, postaday, private company, Private Equity, public company

The Privileges Of PE Investors

January 19, 2014 2 Comments

wealthymatters Imagine an initial public offering of shares from company,promising an average 15% return after five years of listing if the market returns are not higher. The question that will arise is whether it is an equity issue or a bond issue. By any definition it could be inferred as a sale of fixed income security and not equity.

It is investment into securities with such properties that has been happening for years and masquerading as private equity. Last week the Reserve Bank of India yielded to the long pending demands of the foreign private equity investors that the central bank legitimize put and call options in an equity investment contract. But the industry is still unhappy.

The issue is that such derivative contracts are legal so long as there is no assured return. Private equity investors say that this puts them at a disadvantage. But isn’t every equity investor at the same disadvantage? Is it not risk taking that gives such out sized returns? Equity investments are the riskiest form of investment and one could lose to the last paisa. But there is also an opportunity to earn many times the principal investment. This is one reason why the Securities & Exchange Board of India insists on the disclaimer ‘equity investments are subject to market risk’ on any public communication about an IPO or a mutual fund scheme. If this is the kind of risk that the less financially literate take in equity investment, then private equity investors are indeed a privileged lot with the assurances of the mandatory return clause.This is a way of guaranteeing risk free high returns. Read more of this post