💸 Private Capital Markets: Untapped Opportunity?
Private Capital Markets are where the real money is. And it’s not that easy to access. But, is there a way?
While many of us participated in and won IPO lotteries last year, do you know who really created the majority of the wealth?Â
The ones who had invested in these companies much before they went public. The ones who identified the jewels well in advance.
20% of the total IPO amount in 2021 (Rs. 24,106 crores) went into the pockets of Private Equity and Venture Capital Investors. And 27% (Rs. 31,704 crores) went into the pockets of promoters of the company. Yes, 47% of the amount that we poured into the IPOs, was an exit opportunity for the real early investors.
And let’s not even get into how much wealth they created on the securities that they must have held on to, even after the IPO.
Wondering why you are not a part of this early-investor club? And is there a key to unlock it?
Turns out there might be. How do we know? Read on.
Private Capital Market: The Mystery
Listing on the stock exchange brings with it a lot of fanfare and drama. But not everyone wishes to be in the spotlight. And there’s a good reason for that.
Just like we grow from children to adults, companies also go through a lifecycle.Â
At each stage, it has a different set of needs. It is upon the investors and the promoters of the company to take care of these needs.
The early years are especially crucial. The company needs freedom to create a unique and robust business model. It needs to find itself by experimenting, by falling down, getting up, and falling down some more.Â
This is how legends such as Nykaa, Latent View Analytics, and Happiest Minds are made. And this is also how the early-stage investors earn a fortune.Â
But this is also why such companies don’t have the bandwidth to deal with the scrutiny that comes with public markets.
So when companies are in the ‘work-in-progress’ stage, they prefer raising money privately. And mostly from investors who would pour in a large sum.
While all of this makes sense, is there a way in which we, the small retail investors, get in on this growth action? And more importantly, how to figure out if a company is going to make it big in the future?
Identifying the Jewels
It’s very easy to look back and mourn over missed opportunities. But if you are a serious investor, it’s your responsibility to dive deep and understand the nuances of the business.Â
But how do you dive deep into these companies? Where will you get the information?Â
You see, the companies that are listed on the bourses are required to submit annual reports and other documents. That’s not a mandatory ask for companies in the private market. So not all companies disclose such information. This makes it harder to arrive at a decision to invest in them.
Even if you figure out a company you want to invest in, how the hell do you do it? Every transaction needs a buyer and a seller - where to get these sellers?Â
Where can you find the Private Capital Market?
Surprise! There are many places to find one.Â
ESOPs: What better investment than earning your way into the company when you are part of its growth story. But you will be limited to that one company only.
Private Placements: Want to buy shares from the promoters themselves? This route involves brokers, wealth managers, investment banks, yada, yada.
Portfolio Management Services (PMS): A category called non-discretionary PMS can invest upto 25% amount in unlisted shares. Sounds like the perfect deal. But only if you have at least Rs.50 lakh in your kitty.
Alternate Investment Funds: This vehicle first pools the investments and then takes the investment decision. Only drawback: You need to shell out at least Rs. 1 crore to avail this facility.Â
All of these methods have something or the other that makes a retail investor turn away. Isn’t there any butter-smooth process to analyze and invest in the private markets which won’t cost an arm and leg?
Yes. There is. Stay tuned, as we unveil the trump card in private market investments tomorrow!
Do share this with your friends via WhatsApp or Twitter. Spread the word. The revolution is on!
You can also listen to our stories because the Revolution ReadOn podcast is live!! Here: you can catch it on Spotify, Apple Podcast or Amazon Music, Google Podcasts, Gaana and Jio Saavn.
If you are coming here for the very first time: Don’t forget to join us on WhatsApp to get daily updates! 👇