VG Siddhartha’s tragic case - Inside out analysis of role PE investors play

With the sad demise of VG Siddhartha, also called as Coffee King of India, questions are being raised on the relationship between private equity investors - who have been a lynchpin in furling India's growth - and entrepreneurs. In a letter to the board of CCD, Siddhartha talks about the mental pressures he faced as his private equity investors were forcing him for a share buy-back.

Renuka Ramnath, founder of Multiples PE and a veteran in the industry, shares her perspective on such critical issues. As a part of the fraternity, Renuka feels PE investors are seasoned professions, and it will be prejudging to hold prejudice against them, on the backdrop of this sad event.

PE investors, she adds, have a fiduciary responsibility towards multiple stakeholders - LPs, entrepreneur and the company, and even employees in that company. In pursuing this responsibility, there will be constant debates and discussions around business plan, risk and returns. Investors in big and successful corporates, such as Apple, constantly and at times publicly have these conversations.

Renuka also sheds light on the transparency in PE deals, calling for need to have better boards to protect shareholder interest, good governance and better disclosures to shareholders.

In a dynamic business environment there are situations in which entrepreneurs are not well intentioned to protect other shareholder and investors interest. At times like this, Ramnath feels that there is a need to call out bad governance.