Pre-Investment Due Diligence
The Pre-Investment Due Diligence is a comprehensive systematic investigation, verification and evaluation of the prospective project before funds are committed. Following factors warrant serious due diligence before committing investments into a Project:
- Long term commitment of capital
- Long gestation period without any committed return
- High cost of failure
- High probability of not achieving the projections and need of further finance
- Inexperience, ethical and legal misconduct of entrepreneurs
Due Diligence Activities
- Comprehensive analysis of business plan
- Sector & Industry Prospects assessment – Facilitation
- Assessment of market potential of the products/services- Facilitation
- Verification of financial projections and assumptions
- Realty check on the business volume projection assumptions
- Documents Verification – registration, incorporation, employment contracts, vendor contracts, material procurement contracts, environmental and civil compliances, labour compliances, patents, copyrights etc.
- HR policies, Compensation & Benefit Plan, , Talent Acquisition Policies, Employment Demographics etc.
- Background and reference checks of the top management/entrepreneurs/founders
- Corporate Governance
- Impact Assessment- Political, Competition & Technology- Facilitation
- Capital Structure and ability to service– Debt, Equity, Preference Shares, Agreement to future equity etc.
- Central Bank and Regulatory Authority Rules Compliance for Investments, repatriation of capital and dividends/interest
- Capital Market/Stock Exchanges/Security Market Regulator Rules for Promoter stake, Public holding, disinvestment, Listing
- Income Tax aspect on Investments, Dividends, Interest etc.
Post-Investment Due Diligence
The key points of inquiry during the Post Investment Due Diligence Test will be:
- Financial Performance – Actual vs Projected
- Liquidity
- Changes to the Capital Structure
- Any update or changes on the business interests of the key Principals/Founders
- Litigation or claims against company or associated individuals
- Pertinent labor issues – Facilitation
- Bribery or corruption-related concerns- Facilitation
- Regulatory issues that could impact the investment
- Major Commitments
- Partnerships
- Product addition/withdrawal
- Material market changes, Competition, Governmental policy changes- Facilitation
- Taxation Laws changes
The Due Diligence can be conducted either as regular ongoing monitoring or as focused/customized investigations as and when needed