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External Commercial Borrowings (ECB):-
- External Commercial Borrowings refers to commercial loans availed from non-resident lenders with a minimum average maturity of 3 years.
- ECB Can be in the form of bank loans, buyers’ credit, suppliers’ credit, and securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares).
ECB can be accessed under
- Automatic Route
- Approval Route
Restrictions on End Use of Borrowed Funds:
The Borrowed fund can only be utilised for certain purposes which are subjected to FEMA regulations and ECB guidelines. The primary responsibility rests with the borrower and ECB raised/utilized and they should be in conformity with the ECB guidelines/RBI regulations/directions. Any violation of these would attract penal action under FEMA.
Private equity funds:
Private equity involves issue of shares by a company for the investment made by selected investors, into the company’s business by private equity firms and high net – worth individuals.
Private equity is medium to long-term finance provided in return for an equity stake in companies with potentially high growth.
Stages of Private equity:
- Assessment of need for Fund
- Approaching the Private Equity Fund/ Advisor
- Initial Enquiries and Negotiations/ Selection of PE Fund Advisor
- Business Valuation
- Preparing a Business Plan
- Due Diligence
- Term Sheet
- Shareholders Agreement
- Structuring the Deal / Final Negotiation and Deal Completion/ Execution of Legal Documents
- Exit Strategy.
- Preparation of documentation and advisory services on Business Plan
- Valuation of the Company
- Preparation & Planning of financial model & capital structure
- Appraisal & Negotiation of the terms of deal
- Advice on tax matters, legal and Regulatory issue