FAQs
About the private equity industry
| What is private equity? |
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In financial parlance, there exist a number of asset classes broadly categorized on their risk and return characteristics. The primary asset classes are debt, gold or commodities, real estate and equity. The equity asset class can be further categorized into three main sub categories namely venture capital, private equity and public equity.
At a generic level, venture capital refers to equity investments in companies in the early stage of their growth and public equity refers to equity investments in listed companies which have achieved significant size and scale. In comparison to both, the private equity refers to the stage of equity investments in companies that are between the venture capital and the public equity stage. In essence, private equity refers to investments in relatively mature, primarily unlisted companies requiring capital to accelerate their growth.
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What differentiates private equity from other asset classes? | |
Private equity captures companies in the phase of their growth when product risk, management risk and financing risk have been mitigated to a large extent. The company has reached a stage where its products and services are being actively used by customers, the company has been able to attract and build a strong managerial team and the company is relatively stable and has the ability to tap banking channels to meet its normal financing needs.
While the company is relatively stable, it requires long term capital to scale up and grow in size. Private equity investment managers screen such companies with significant growth potential and provide them capital. Each private equity investment is backed by a strong investment thesis which plays out over a 3 to 5 year time horizon. Each investment is preceded by extensive business, legal and financial due-diligence and post investment the investment managers exert significant influence on the company through shareholder rights and board positions.
Private equity, by its nature, provides exposure to undiscovered / unlisted companies and sectors. It invests during the growth phase of the companies with longer investment horizons to capture the maximum upside. It engages actively with its portfolio companies to generate superior returns. All these factors collectively make private equity a very attractive asset class.
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What is the history of private equity in India? | |
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Private equity in India has matured over the last decade. Companies looking to raise equity capital today realize and appreciate the significant advantages coming from private equity funds. The last few years have seen a quantum growth in the number of private equity investments in India. The total value of private equity investments stood above Rs. 50,000 crore in 2008, not only has there been an increase in the number of private equity investments in India, but there has also been an increase in the number of private equity exits, thus indicating the growing maturity of the Indian private equity market.
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About Reliance Private Equity
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What is Reliance Equity Advisors (India) Limited (or "Reliance Private Equity")? | |
| Reliance Equity Advisors (India) Limited is the private equity advisory arm of the Reliance ADA Group. It is a wholly owned subsidiary of Reliance Capital. Reliance Private Equity manages third party, India focused private equity funds. Currently Reliance Private Equity is managing the Reliance Alternative Investments Fund - Private Equity Scheme I.
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How is Reliance Equity Advisors (India) Limited different from other private equity advisory firms? | |
One of the key differentiators of Reliance Equity Advisors (India) Limited is the combined network of relationships and experience of its team and of the Reliance ADA group. The team carries significant investment and operating experience and has long standing relationships across industries which would benefit all stakeholders across the private equity investment lifecycle of investment entry, investment management and investment exit.
Investment Entry - The private equity team's understanding of the Indian business environment and industries across various sectors, coupled with the strong industry relationships that its senior members have developed over the years, will help maximize the generation of consistent, high quality deal flow. This proactively generated deal flow will compliment the deal flow that would be created through the team's network of bankers / intermediaries and other private equity partners. The Sponsor's network may also be leveraged to the advantage of the Fund to create a proprietary deal flow.
Investment Management - The private equity team has extensive experience of engaging with promoters and senior management teams in their prior assignments. The team intends to monitor portfolio companies by providing strategic guidance and assistance in identifying new growth and consolidation opportunities and other inputs at the board level. The team will also tap its network to get experienced independent directors on the boards of its portfolio companies.
All senior members of the team have had extensive operational experience and this truly sets them apart from other private equity advisory firms. Not only is this intended to ensure that there will be an in-depth appraisal of the financial and execution risks related to potential investment opportunities, but it will also help the team to engage with portfolio companies post investment on key operational matters.
Investment Exit - The private equity team has significant experience and access to markets both in India and overseas and intends to leverage this for portfolio exits through strategic sale or public markets. The Sponsor also has a strong presence in the Indian capital markets which could be leveraged. |
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What is "Reliance Alternative Investments Fund - Private Equity Scheme I"? | |
| The Reliance Alternative Investments Fund - Private Equity Scheme I (or "Fund") is a unit scheme of the Reliance Alternative Investments Fund (the "Trust") which is a SEBI registered venture capital fund. It is an India focused, late stage, sector agnostic private equity fund with an emphasis on fast growing sunrise industries such as, but not limited to, pharmaceuticals, healthcare, logistics, financial services infrastructure ancillaries and education. The Fund is seeking to raise upto Rs. 2,000 crore in a series of closings with an option to accept capital commitments of upto Rs. 1,000 crore in excess of the target amount of Rs. 2,000 crore.
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What kind of investments will the Fund undertake? | |
The Fund will focus on a range of investment opportunities across growth and consolidation capital, minority investment, buy-in / buy-out and acquisition financing in India. The Fund generally intends to look at opportunities with a target holding period of 3 to 5 years and average investment size in the range of Rs. 100 crore to 300 crore.
The Fund targets to build a portfolio of 12 to 15 companies to provide adequate portfolio diversification and also ensure adequate time for the investment managers to work with the portfolio companies.
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What is the term of the Fund? | |
| The Fund has a total term of six years, extendable by upto two years. Capital calls would be made on investors over the first four years. Exits from the Fund are possible from the fourth year onwards.
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What are the possible exit routes for the investments undertaken by the Fund? | |
A key criterion for the Fund is exit visibility even before undertaking an investment. The Fund would adopt suitable exit mechanisms, in consultation with the promoters of the portfolio companies, including public market exits through IPO, sale to financial / strategic investors or buyback by the company / promoters.
In fact, the large investment ticket size of Rs. 100 crore to 300 crore, in companies with established revenue and profitability track record, would ensure that exits are more predictable.
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How does the Fund address conflict of interest issues with the Reliance ADA Group? | |
Reliance Private Equity manages third party funds and has a fiduciary responsibility towards its Fund investors. However, the Fund may be subject to certain conflicts of interest and to address them it has developed a detailed process of dealing with them on an arms length, non-exclusive basis.
In the event of a conflicted transaction, including a transaction where the Fund proposes to make an investment in any of the Reliance ADA Group entities, Reliance Private Equity is required to obtain the prior approval of the Advisory Committee before it can proceed with the conflicted transaction.
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Who are the investors in the Fund and how can I invest in this Fund? | |
The Fund is accepting capital commitments from large, reputed Indian financial institutions and corporates.
The subscription offer for investment into the Fund has been exclusively opened for a short period to a select group of investors. Resident Indians, including individuals, HUFs, body corporates, trusts, partnership firms and companies can invest in the Reliance Alternative Investments Fund - Private Equity Scheme I. NRIs (Non Resident Indians) and PIOs (People of India Origin) cannot invest in the Fund.
For further details please contact us.
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How can I introduce an investment opportunity to the Fund? | |
| Please contact us at + 91 22 3095 7200 with your investment opportunity and we will be happy to get back to you.
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