The Risk Associated with Private Equity Funding in Indian e-Commerce Sector
In India, most of the investments in the service sector are made in the form of private equity (PE), with the e-commerce segment being the largest receiver. Altough this has allowed the sector to grow, it does not favour the interests of young start-ups, as PE investors merely seek for short-term profit opportunities.
After acquiring stakes in newly established companies, PE firms re-sell them after short time with premium rates. Despite being harmful, this remains the easiest option available for start-ups to access funds: receiving loans from banks is difficult, especially due to their lack of collaterals. In this situation, the Indian Government is taking steps forward to protect and encourage entrepreneurship by providing funds to allow the growth of start-ups. Yet, there is still room for new policies to allow the sustainable growth of newly-established companies without the need of turning to private equity financing.