Private Equity

(Fuelling growth and innovation through strategic capital infusion)

Overview

Private equity (PE) refers to capital investment made into companies that are not listed on a stock exchange. These investments are typically made by private equity firms, venture capitalists, HNIs, or institutional investors with the intent of generating high returns through business growth, restructuring, or eventual exit via IPO or acquisition.

Private equity serves as a major enabler of business expansion, innovation, and restructuring in India. It plays a critical role in bridging capital gaps for companies across various stages — from early-stage startups to mature businesses seeking growth capital. In return, PE investors usually acquire a significant ownership stake and may participate actively in strategic decision-making.

Key Benefits

·       Access to Capital: Enables companies to fund expansion, acquisitions, or R&D without incurring debt.

·       Strategic Support: Investors bring industry expertise, networks, and governance oversight.

·       De-risking of Founders: Promoters may partially monetise their holdings and share business risk.

·       Valuation Upliftment: Often leads to revaluation of the company, aiding future fund-raise or IPO.

·       Improved Governance: With investor involvement, governance structures are strengthened.

·       Flexibility in Structure: Investments can be structured as equity, convertible instruments, or preference shares.

Applicable Laws & Regulatory Framework

Private equity investments in India are governed by:

·       Companies Act, 2013

·       Foreign Exchange Management Act (FEMA) – for FDI

·       SEBI Regulations – if the investee company is listed or intends to list

·       Income Tax Act, 1961 – capital gains, transfer pricing, etc.

·       RBI Guidelines on Pricing and Sector Caps for Foreign Investments

·       Shareholders Agreement (SHA) & Share Subscription Agreement (SSA) – legally enforceable investment terms

Eligibility / Ideal For

Private equity is suitable for:

·       Growth-stage companies with proven revenue models

·       Early-stage startups with scalable potential (via venture capital)

·       Mature businesses looking for operational or market expansion

·       Distressed companies undergoing strategic turnaround

·       Founders looking for partial exits or dilution for strategic partnerships

Procedure

1.     Investor Identification

Companies engage with investment banks, advisers, or pitch directly to PE firms for funding.

2.     Preliminary Discussions and NDA

Non-disclosure agreements (NDAs) are signed to initiate discussions and share financials.

3.     Due Diligence

Comprehensive legal, financial, and business due diligence is undertaken by the investor.

4.     Term Sheet Signing

A term sheet outlining commercial terms, valuation, investment structure, and key rights is signed.

5.     Definitive Agreements

Legal agreements including SSA, SHA, and any promoter-related covenants are executed.

6.     Filing & Approvals

Necessary filings with ROC, RBI (in case of FDI), or other authorities are completed.

7.     Fund Infusion & Share Allotment

Upon completion of conditions precedent (CPs), funds are infused and shares issued.

8.     Post-Investment Governance

Investor representatives may join the Board or advisory panel, participate in major decision-making, and define exit strategy.

Timelines

A typical private equity transaction may take 3 to 6 months, depending on:

·       Complexity of capital structure

·       Stage of the company (startup vs. established)

·       Nature of regulatory approvals

·       Speed of due diligence and negotiations

Early-stage investments may be quicker; however, large-ticket or cross-border PE deals can take longer.

How LTC Helps

Law to Corporate provides comprehensive legal and strategic assistance in private equity transactions, including:

·       Investor readiness assessment and documentation

·       Drafting and reviewing term sheets, SHA, and SSA

·       Advising on FDI compliance, sector caps, and RBI filings

·       Coordinating due diligence and negotiation support

·       Structuring exits and advising on IPO/strategic sale

·       Ensuring legal, financial, and tax compliance throughout

Our team ensures that your business attracts the right capital on the right terms — enabling sustainable growth, while protecting the interests of promoters and stakeholders