Private equity investors face an exit conundrum

Foreign private equity investments have made a considerable contribution to India’s economic growth. Through their role of providing “enabling capital” – funds injected into a company at a critical juncture – private equity investors often facilitate the development of a company’s product line, finance its capital expenditure, boost its scale of operations and aid the diversification of its business activity.

These investors do not come into a company to take control of it. A typical private equity fund would prefer to have a predetermined timeline, generally three to five years, for exiting the company with a return on its investment.

Within this time, the fund attempts to add value to the company and help it realize its true potential. A private equity investor, therefore, commonly aims for a timely exit with a handsome return on its investment.

Siddharth Hariani is a partner at the Mumbai office of Phoenix Legal, where Hemant Krishna V is an associate. They can be reached at siddharth.hariani@phoenixlegal.in and hemant.krishna@phoenixlegal.in