Companies who are backed by venture capital funds and private investors are likely to grow faster than those who have raised funds through other methods, says a new study undertaken in India.
The research, by Venture Intelligence, found that both venture capital and private equity funds have played an active role in changing India’s corporate landscape over the last six years. India’s growing start-up sector has been boosted by $72 billion worth of investment from these areas between 2011 and 2016, over 6.5 times that raised by Initial Public Offerings in the same period.
The survey analysed key parameters including Revenue Growth, Asset Growth, Profitability and Returns, Capital Structure, Asset Turnover, Working Capital Management and Interest Coverage to find that those companies who are backed by venture capitals funds have grown faster. PE-VC funded companies also exhibit a more efficient working capital management, when compared to their listed peers.
Professor Thillai Rajan, who conducted the research, said: “PE/VC investors also forge active partnerships with their investee companies to improve growth and business strategy, besides opening up new opportunities.”
“The PE impact study demonstrates how PE and VC firms adopt a long-term perspective in their investment decisions. The presence of a PE/VC investor provides a kind of certification which, while broadening the equity base, also helps the investee companies access other sources of funding including debt capital”, he added.