Family offices are in the best position to prescribe sector-specific asset investment strategies on estimating the risk profile of small and mid-level business enterprises.
Family-owned enterprises and family businesses in India form a core segment of the Indian economy, will play a key role in assuring its sustainable growth trajectory over the years.
Micro and Small Medium Enterprises (MSMEs) form a massive component of family-owned businesses, have been the growth engines of the Indian economy, and have contributed immensely to the country’s socio-economic development.
The COVID-19 pandemic of the outbreak and constant nationwide lockdowns had a debilitating impact on the financial health of small and mid-level businesses in the country.
A tremendous number of MSMEs faced many challenges in maintaining the operational momentum of their businesses, faced with the prospect of reducing cash flows and restricted access to liquidity.
It is also a known fact that banks and other financial institutions have a risk-averse attitude when providing well-to-do working capital to small businesses.
The Foreign institutional investors and portfolio investors have also illustrated a marked preference to invest their funds in large businesses with operational scale and global market outreach.
2016 expediting the resolution of stressed assets with a strong ‘buy low and sell high’ potential, their acquisition can help in the capital raising capabilities of small businesses and facilitate inorganic growth opportunities for them, with the Insolvency and Bankruptcy Code (IBC).
The prevailing market environment presents an exceptional opportunity for family offices to extend their investment pool for acquiring such assets and identify stressed assets with high turnaround potential.
Family offices of local entrepreneurs who are also successful in managing their nucleus businesses and are looking for diversification can leverage the untapped potential of stressed assets to develop their asset basis and pursue artificial growth opportunities.
“Indian businesses have an eccentric nature of running them hands-on, and owners usually run all departments themselves and take help of the professionals to sustain the operation and growth.
They always lead from the front to be its business viability, production, engagement with key customers, and liaison with governmental work or crises management.
These are more relevant when businesses are small to mid-size, and the affordability of contracting with a high-performing professional team is limited.
When such businesses go into the adversity, they tend to find it hard to salvage their business with typical third-party on financial investors or global capital,” replies Brescon & Allied Partners LLP of Managing Partner Nirmal Gangwal.
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