Due Diligence: Don’t Miss these

The usual checklist of due-diligence before recommendation for deals/investments involves a series of checks in accounting, actual check of inventory/bank balance and letters from vendors etc. However, the potential target must also be evaluated on certain qualitative parameters like the business model and environment, macroeconomic and social consideration and fit in the portfolio for the acquirer.

Below is a list of a few important considerations

Business model and environment

  • Is there any venture like businesses that has promising high growth?
  • Any Intellectual Property that can be leveraged for new streams of revenue?
  • Will the current management team continue?
  • Is there major re-structuring of business required?
  • What is the prospect of the business – Is this a declining industry?
  • When is the next level of large capital investments required for the current growth figure?
  • Credit ratings of the business
  • Evaluate investments made by the company in other businesses?

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Pre-owned Truck Finance: a way to generate both social benefits and financial returns

The business of financing pre-owned trucks has given stellar returns and attracted investments from both private equity and Development Finance Institutions (DFIs)1. It still has immense potential in a large and growing, but highly unbanked economy like India. The higher risk in providing capital to the unbanked single truck owner, who does not have access to credit from institutions is compensated by the higher interest spreads due to ability to raise capital cheaply from DFI, securitization of portfolios and the satisfaction of doing social good by lending at rates lower than that provided by private/individual financiers.

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