Private equity in India: A force for good?

Abstract

Harold Bierman, Jr. in his book on Private Equity1 defines it as “the common stock of a corporation where that common stock is held by a relatively few investors and is not traded on any of the conventional stock markets”. Wikipedia defines it as “private equity is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange”. Another common definition seen across secondary sources is “Private Equity is medium to long-term finance provided in return for an equity stake in potentially high growth unquoted companies”. Guy Frasser-Sampson, in his book on the subject, spells out the confusion in defining the term. According to him, Private Equity could mean any of the following: • Any equity investment in a company not quoted on the stock exchange • Investing equity in a public company and taking it private • Investing in a particular instrument (say convertible debt) in a public company, in which case the company could remain public, but the instrument remains private In addition to these, Private Equity could also refer to acquiring a division of a large public/private firm and taking it private.