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Dilution is an important consideration in private equity investment.  What it means is that what is the percentage of equity the promoter has to sell for the expected fund infusion by the private equity fund.


As mentioned in the valuation page, dilution and valuation are closely interlinked.


While it is an important consideration from the investee’s perspective, it is not the sole issue.  Again we find that most of the times the investee is obsessed, about the valuation issue, about the percentage of dilution.   The question is not what percentage is being parted with, but what the value of the remaining stake would be five years down the line.  One needs to take a balanced approach to all the issues involved.


If still there are imbalances in expectations of the investee company and PE funds, there are solutions like issue of preference shares, convertible debentures, etc., that can address the issue.


Having addressed the dilution issue, now let us focus on exit routes for the private equity investors.



Assist writing your business plan and presentations for investors, CMA data/ project report for banks/ Financial Institutions (FIs).

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Financoal Helath Check-up



Small and start-up companies do not have in-house financial expertise to periodically check their financial health…

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