VC/ PE industry is at take-off stage in India: K V Kamath

PE Funds will remain a preferred choice for growth capital, says CII-KPMG report

Unveiling the CII-KPMG report - ‘Enabling Growth in Promising Indian Companies’ at the Conference on ‘Private  Equity and Venture Capital: Carve Outs and Spin Offs’ organized by Confederation of Indian Industry (CII), Mr. K V Kamath, Past President, CII and Non Executive Chairman, ICICI Bank Limited said that the VC/PE industry is at take-off stage in India and the flow of funds would have to be maintained as great opportunities lie ahead as the Indian growth story is strong.

He added, besides regulatory, the issue of people will remain a challenge. The industry is young, just 10-year old, and it has a long way to go. Every industry in India has immense talent but still, skill enhancement is less.

Mr. Gopal Srinivasan, Chairman, CII National Committee on Private Equity & Venture Capital and Chairman and Managing Director, TVS Capital Funds Limited said, we have about 8,000 members at CII of which maximum companies are of small and medium sized and can benefit from PE/VC. Moreover, about 86% firms listed on stock markets in India comprise of less than 3% of market capitalization on bourses. Hence, it is essential to liberalize the regulatory frameworks to increase the market capitalization of these firms. He further stated, this report will serve as a useful example of what is possible and inspire more companies with ambitious growth plans to boost their growth in collaboration with PE firms.

The study assessed the transformational impact of PE as PE is claimed to be ‘smart finance’, which comes with enabling fringe benefits like providing global access, funding new business models, creating fiscal discipline, enhancing corporate governance and inducting professional talent amongst others.

Speaking at the launch of the report, Mr. Vikram Hosanna, Executive Director, Transaction Services KPMG India said, the survey of several PE portfolio companies across different stages in the life cycle of a company and a wide spectrum of industries confirms why Private Equity is termed as ‘smart money’. The last 18-24 months have given PE funded corporates a great opportunity to appreciate the importance of having PE funds on board, whether it meant concentrating on the cash cycle, observing cautious optimism on growth aspirations, cutting the internal flab or divestment of non–core assets etc. 

He further added, PE funds have proved that they are great sounding boards for entrepreneurs and corporates with the added advantage of them having ‘skin in the game’.

The report finds that the three most important, transformational impacts of PE are on business model changes, corporate governance and professional talent management. Closely following these is the impact of PE on product development and helping find acquisitions or strategic partners.  Less frequent are financial recapitalizations, spin-offs, new technologies and improving efficiency.

The report further demonstrates that as companies are transformed into business leaders, the industries that they are part of are transformed and in some cases there is even a national level impact.