Sorry, this file type is not permitted for security reasons. PE FUND TERROR IN BUSINESS WORLD
Just after Cafe Coffee Day owner has gone missing and may person have committed suicide after Huge pressure from PE Fund lenders and investors, business owners are shocked by the news and are having sleepless night.
In a letter written by CCD owner to the company’s board, he said that he was under pressure from a private equity firm as well as from lenders and income tax authorities.
“I fought for a long time but today I gave up as I could not take any more pressure from one of the private equity partners forcing me to buy back shares, a transaction I had partially completed six months ago by borrowing a large sum of money from a friend,” Siddhartha purportedly said in the letter.
There was tremendous pressure from other lenders and lot of harassment from income tax authorities. “This was very unfair and has led to a serious liquidity crunch,”
PE Fund provide Huge funds and will lure Business Person owner from existing Debt loans. They will show owner of company picture where their brand will be on TV and huge branding with Brand Ambassador, media & Print.
And slowly after PE Funds amount invested in Business have exhausted, they will Target for New PE Fund in company and after 7 years they will ask owner for IPO or PE Fund owner will sell their stake in Market to any person.
PE funds have investments ranging from generally seven years, during which time they help an investee company grow and make money on an exit.
Control, they won’t get involved in the day-to-day running of the business, after 7 years they work towards the exit vide ways:-
IPO: The company goes public, and the private equity firm sells its stake in the process.
Repurchase: You repurchase the private equity company’s stake and take back control of your business.
Secondary Sale: The private equity firm sells its stake to another PE firm or financial investor.
Competitor Sale: The business is sold to a competitor or other company.
Advantages of Private Equity are as follows:- Large Amounts of Funding, Active Involvement, High Returns of Company
Disadvantages of Private Equity are as follows:- Dilution/Loss of Your Ownership Stake, Loss of Management
For Indian Business owners, it is requested to please take Precaution and judge your own capability and review your decision many times before going for Foreign PE Funds.
After CCD act any business owners who has been backed by PE funds will find sleepless nights, it’s a huge concern where I think government of India should make some Rules for restriction of funds from PE in India.
Savan R. Somani
GM -Finance & Accounts
*Author is GM Finance in a Private Company