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How strategic capital infusion can benefit companies?

2017-09-05 17:56:06 | Legal Services
Strategic capital infusion helps to bring in strategic investors who thus also provide the much-needed resources and also share their vast experience.

In a competitive global scenario where however numerous businesses are thus set up and also wound up almost every other day, resources thus play an important role to also set one entity which is however apart from another.

However, More often than not, remaining open for the business and also shutting shop depends on one particular factor which is availability of resources for an enterprise to thus meet its goals, which is both commercial and also thus in terms of nurturing the requisite human resources that would thus also propel it further.

Also, Using creative liberty, adage “a stitch in time (saves nine)“ may thus also be modified, in this instance, to thus bring strategic capital infusion within its ambit.

The purpose of this article is to make the reader aware of the fact as to how strategic infusion can benefit the companies.

Namely, there are two ways by which capital infusion may however take place in a company which are the equity route or the debt route.

Thus, Under the equity route, the investor is however given a percentage of shares in lieu of the capital investment through the issue of the fresh shares. The class of shares that are thus issued to an investor may however either be (i) equity shares with the voting rights or the differential rights to dividend or voting; or (ii) preference shares, which thus also carry a preferential right which is however with respect to the payment of dividend and repayment, thus in the case of winding up.

Often, the investors generally purchase shares from the existing shareholders as well. Under the debt route, a company may however also issue debentures and may also choose to provide security, by thus encumbering its immoveable and the moveable property.

Of the numerous reasons as to why strategic capital infusion is thus often the game-changer, following are thus the three key points from an equity route perspective, thus briefly setting out the need and the justification for thus such infusion in companies.

Let’s Talk Capital

It is also no secret that the companies thus require capital. Capital is also required for the day-to-day activities, for some of the organizations thus also in order to even build an inventory. Also, Not every company, thus in its infancy stage, however meets its capital requirements on the basis of its revenue generated. There are thus some of the instances when external capital is however also required for the internal targets to be met. We have also seen the instances when proprietors of the infant enterprises have thus also brought in strategic or the financial investors thus at an early stage, selling to them a part of their shareholding so that the company thus also remains afloat, and also stays on-course to thus meet its targets in the long run.

It is thus also needless to say that the influx of investors however also brings with it the influx of investment — which however are the much-needed resources for an organization. The capital may also then be put to work, thereby ensuring that each rupee which is however invested into the company thus yields the desired result.

Nothing Beats Experience

Also, the thing which is about strategic capital infusion, by thus way of bringing in the strategic investors, is that with such investors come vast experience. More often than not, the investors in the new enterprises are also either retired entrepreneurs or the professionals who also have themselves been in the trenches of corporate resurrections for the companies or either as market trends reveal, are the investors who thus also invest in the new enterprises which is thus based on their valuation of the business model.

Additionally, the return on the investment which is also made by the investor is also now directly co-related with the fate of the investee company. This thus also ensures that the investor will also share the investors’ depth of experience to also help the company meet its targets, while at the same time, thus also ensuring that the investor thus gets more than the initial investment.

Market Synergy

In the business world, the people talk, and the reputations thus precede an individual. Getting the right strategic investment, also more so by bringing aboard investors, thus also brings in the much-needed market synergy for an enterprise. The fact that a company is thus able to bring in the investors also speaks volumes about its potential.

In turn, such publicity thus also results in more open doors for an enterprise to also further its business activities and also thus get more investment.

While the naysayers may thus also choose to dwell on the fact that the strategic capital infusion via the equity route will also dilute the shareholding of promoters and/ or current shareholders, there is thus no doubt that such investments will thus benefit the company in the longer run.

Enterprises thus thrive better when there however exists a stream of resources that are however coming in and the promoters would thus also do well to see that there are benefits of such investments which is thus in the long run.

This article has been contributed by Simmi Setia, Content Writer at LegalRaasta, an online portal for Section 8 Company Registration, Nidhi Company Registration, IEC Registration, Fssai License, File ITR Online, Copyright Registration, Patent Registration, Trademark Registration.

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