Monday, March 27, 2006

Private Equity as the Growth driver for Tomorrow...

Frankly, about three months ago, I had neither heard of the hoopla surrounding Private equity and nor could care less about it. To me, it was another of those jargon terms used by so many of my classmates and the rest of the business world for denoting some sort of investment. However, as is wont for any MBA student, you couldn't stay out of the loop of such buzz words, especially when placements were around the corner and everyone was arming themselves with dollops of gyaan on the business world.
So I started reading about it and was immdiately hooked on to the idea. I had always been interested in Consulting before I joined B schools, as I genuinely believed in the idea of helping businesses do better by monitoring, comparing, strategizing, analysing and optimizing. Even though these terms sound very bookish, I do think that they hold true potential in helping businesses, especially the small ones, evolve. Yet my Consulting summer was a disappointment. I realized that the consultant would always remain distant from his client's problems, and often, the task was limited to preparing a report full of details and jargons where the core of the issue was likely to get lost. That was not what I had in mind. And that was the main reason why I was not even considering Consulting as a career option during the placements.
On the other hand, Private Equity sounded so much like what I had in mind. To genuinely handhold the businesses as they tried to set a domain and grow in it. And whats more, with your money at stake, the issue of distancing also would be resolved. While the consultant has no responsibility or liability of the results of his recommendation, the PE analyst would stand to directly gain or lose from it and hence wouldn't just be more involved, but will also be taken more seriously by the employees. Also, the combnation of money and advice is what India's new entrepreneurs need to get going. Like all Indians, despite all the kickbacks we throw at it, I want to see India being reckoned as a Corporate Force and it is not just the MNCs coming from abroad that can help us achieve that. We need to complement foreign presence with that of our own.
Thats why perhaps, I digress from the philosophy of ChrysCapital's Ashish Dhawan, who has u-turned Indian PE into the concept of PIPE's (Private Investment in Public Enterprises). Don't the publicly listed enterprises already have sufficient funds at their disposal? Their information is publicly available and can be assessed by the investor at large or by the funding houses. They do not need assessment at the private level for raising capital, which small and new companies do. Smart private placing should identify opportunities that others cannot and target those seeds which have the potential to develop into new sprawling businesses rather than simply add a wing to the existing ones.
Of course, it is a matter of opinion, and PE firms are in business of making money. With the dot com losses, there are still many whose risk appetites do not allow them to undertake new/small ventures. And yet risk-taking is what Indians need most, what with our extremely conservative aptitudes towards uncertainty.

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