Key Factors Considered by Private Equity Funds Amid the Recent Corporate Governance and Valuation Issues | India
Sidharrth Shankar and Vikram Raghani, both partners at JSA as well as co-chairs of the corporate practice at the firm, interview Mrinal Chandran, general counsel at India Resurgence Fund. In this discussion, the interviewers aimed to learn about the key factors considered by private equity funds concerning corporate governance.
Mrinal Chandran
For companies that are well governed and managed, ESG has become a prominent aspect in the modern investment ecosystem. The alternative space is evolving, and a lot of things have changed in terms of how funds are assessed. Investing is no longer just about the entry and exit, the multiplication and the opportunity. It is about risk reputation.
- How do you monitor?
- How do you govern these companies?
- What kinds of internal controls and internal audits are there?
- What are the systems set in place in these companies?
These are all value accretive. They are not “check the box for compliance” anymore. For example, if you have a process in terms of governance, it is not just about compliance. Building good, strong teams and good governance structures together show that the particular company is well operated.
Investors are actually willing to pay a premium for well-run companies. (Mrinal Chandran, 4:32 – 4:40)
With the road to renewables being so prominent on the global stage, and people’s awareness constantly growing on the matter, companies cannot avoid seriously addressing this issue, with or without appropriate legislation.
ESG is becoming very, very important. It is becoming central to the investment agenda. It’s no longer just a compliance item. (Mrinal Chandran, 16:59 – 17:09)
A vast amount of time is spent on ESG compliance during deals. Investors have ESG committees, and they require portfolios to form ESG committees upon investment entrance.
Governance has increasingly become a key milestone and a differentiator for the top-end funds. The funds that are really doing well and are able to raise “global money”, will have sound governance structures in place.
JSA
