February 27, 2010 Leave a comment
We understand that Globalization means sourcing resources from places, where we get them in the right amount, at the right rate and in the right quantity; this in turn results in efficiencies.
Now let’s analyze India-Japan Private Equity-Venture Capital (PE/VC) viewpoint using this principle. A General Partner invests time, capital, talent and energy in the enterprise and optimizes its performance, if required restructures it. The result is a better enterprise with improved revenues, efficiencies, bottom lines and off course better valuations. Post this they sell their stake in the enterprise through various exit strategies; IPO, sale in secondary markets and sale to a strategic investor to name some. In today’s globalized world the PE transactions need not be limited by boundaries and in many cases it’s happening so, however if we look at the Japan-India PE activities we do not see much happening on this front.
Japan has always been a technology power and being a developed nation and high per capita income has the capital to invest, however due to shrinking domestic markets does not have much promising investment opportunities, if the invested enterprises aim only local consumption. Also the Limited Partners from Japan these days are turning a bit reluctant. India on the other hand has an increasing customer base, incomes, investment opportunities, HNIs, Institutional Investors and companies looking for advanced technologies.
If these two nations can bring about a proper synchronization between all these resources and needs of them, it would be a win-win situation for both the nations. Not to forget India and Japan share a lot common in their cultures and this can help them in doing businesses successfully. However today if we see the portfolio of any big PE/VC firm in Japan or India they have negligible cross investments.
This disparity could be looked in four ways; I would discuss more about it in my next writing.