The conflicts are,
increasingly, becoming more acrimonious, even farcical, less
professional and more personal. They are shining an ugly light on
promoter quality and business practices, which were never of the highest
order in India, and unfavourable regulations. “Promoters
have used regulatory hurdles against PE investors,” says Sanjeev
Krishan, executive director of audit and consulting firm
PricewaterhouseCoopers. “This is one reason why the number of active PE
funds has come down in India.”
… A consultant with a multinational accounting firm who has done due
diligence for PE firms highlights one of the ways in which promoters add
gloss. “Promoters have access to cash through their family circles,” he
says, not wanting to be named. “They route this cash via
fictitious companies to show as genuine payments for sales done. The
cash comes into the company, but it is just to boost sales and
profitability, and paint a rosy picture.”…In recent conflicts, “promoters have come out poorly,” adds the
consultant quoted above. “Controls are just not there. Few people
control the entire operations and they resist change.” Rituraj Sinha
bristles when such observations are made in a sweeping way. “All promoters cannot be tarred with the same brush,” says Sinha, group
chief operating officer, Security and Intelligence Services (India). “PE
funds are in the business of investing and identifying well-run
businesses from the bad ones. Therefore, the onus is on them.”
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