THE BASICS OF PRIVATE EQUITY

With its bright performance in 2010, Indian PE has re-emerged in good shape from the turbulent times of the global credit meltdown and subsequent economic retrenchment. Deal activity has rebounded more quickly than in other Asia-Pacific markets, the exit markets are healthier than ever and capital continues to pour into an expanding number of domestic and international PE funds.
Investment in P.E. firms adds value and managerial capacity in companies that are in need of rejuvenation and intend to compete in the global environment. Value addition is the main feature of investment.

What is Private Equity?

In finance, private equity is an asset class consisting of equity investments in companies that are not traded on a public stock exchange. Investments typically involve a transformational, value added, active management strategy.

Private equity is medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies.

Private equity provides long-term, committed share capital, to help unquoted companies grow and succeed.

Private equity is a broad term which commonly refers to any type of non-public Ownership Equity securities that are not listed on a public exchange.

At the start of a business, owners put some funding into the business to finance assets. Businesses can be considered for accounting purposes to be sums of liabilities and assets (also known as the accounting equation). After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business. Thus, in accounting terms, ownership equity is the remaining interest in all assets after all liabilities are paid.

Obtaining private equity is very different from raising debt or a loan from a lender, such as a bank. Lenders have a legal right to interest on a loan and repayment of