The questions are being asked
that how equity investment in general will help the new entrepreneurs. In our
country, there is very low penetration of equity concept with both investors
and entrepreneurs. There are large numbers of successful small business
entities in India having a turnover of more than INR 50 crores, especially in
eastern parts of India, which are fully controlled by the promoters. Even the
large corporates and PSUs have very high stake of the promoters leading to low
efficiency and accountability to the public shareholders. If one can see the
performance of corporates in Stock Markets, the companies having low stake of
promoters and MNCs reward much more to public shareholders than the family
controlled ones.
If more money flows in stock
markets and more people start investing in equities, it will slowly become easy
for the larger number of entities from market. This will help many small and
medium enterprises to scale up and deepen the market. Already, we are observing
that small-caps and mid- caps are performing better than large-caps in long
term. There are funds specifically designed for investment in small-caps,
mid-caps. Most of the small-caps are picked up by fund managers early and they
make big gains, when these scripts become popular with general investors. Though
returns are good in these funds, but there is greater volatility due to
liquidity issue.
If the existing big corporates
will start seeing the threat of them being overtaken, they too will start to
dilute their holdings to scale up offering more opportunities to common equity
investors.
If there are more investors in
the market willing to take risks and investment in small-cap and mid-cap funds
rise, the days of funds specifically designed to act as angel investment will
see the day.
For this to happen, general
public need to understand equity.
This is applicable for both entrepreneurs and
investors.
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