KYI: Know Your Investment

What do PIPE Funds do?

PIPE Funds are investment vehicles that focus on
purchasing equity or debt of publicly listed companies
through private placements. These investments are
typically made in the form of common or preferred
shares, convertible securities, or debt, and are often
utilized by companies seeking capital for growth,
restructuring, or other strategic initiatives.

Why Invest in PIPE Funds?

Investing in PIPE Funds allows investors to capitalize on the
potential undervaluation of public companies, with the added
benefit of structured deal terms that may offer advantages
over traditional public market investments. PIPE investments
can also provide quicker access to capital for the issuing
company, making it a mutually beneficial arrangement.

Private equity in India has come a long way and is set to further consolidate gains

Source: Bain Report India Private Equity 2023

Learn More

PIPE funds are privately sourced funds from investors, usually reserved for public equity investments – which refers to the practice of private investors means buying shares of publicly traded stock at a cost less than the going rate for the general population. Such sales are not executed through the stock exchanges. 

Investors in PIPE, purchases a company stake and the company in return receives a capital to grow its business. The PIPE transactions give access to a capital at a lower cost than other underwritten offerings. This also increases institutional investments in the company, and improve the public float of securities. 

PIPE transactions facilitate the easy funding of projects for small and medium-sized firms. PIPE transactions require less documentation and administrative work than secondary (public) issues. There are fewer rules for PIPE funding than there are for secondary issues. Additionally, funding a problem through PIPE takes a lot less time than funding a secondary issue. Because of the share price discount, companies choose PIPE even when the capital inflow is lower.

  • Investors in PIPE deals usually look at a medium to long term with average holding period of three years.
  • Opportunities are much higher in smaller companies, with more growth seen in small sizes
  • Premium can go 50% higher than market. 
  • Most common industries for PIPE- healthcare, life services, BFSI, Energy, Manufacturing, Technology, Consumer, Real Estate, Media, Metals & Mining, Automotives, Telecom.
  • Since they are public domain companies, a lot of time and cost is saved by the investor because Due Diligence is fast.

  • As the price of the stocks is already set between the investee company and the PE firm, the investee need not worry about the offering being undersubscribed.
  • PIPE transactions are fast, and not as complex and time consuming as a fresh public issue of shares usually is, for a company. In a PIPE deal, a company sells recently issued shares to investors at a predetermined price; the investors may then convert the shares into future shares.
  • PIPE deal investments are made in a publicly traded companies, and hence already under the scanner of the regulatory bodies, following regulatory obligations. Hence due diligence is already done, saving both the time and cost of the PE firm.
  • Businesses that prefer to keep their dealings private can use PIPE transactions, which preserve confidentiality regarding the acquisition price.   
  • The dilution is much less with PIPE deals, because it is made to private investors. 

  • In contrast to the influence possessed by private equity investors, PIPE investors will not be granted a board seat or a voice in the company's business choices.
  • The majority of PIPE transactions provide investors flexibility by providing short-term liquidity through the resale registration process. There are, however, some transactions that have a minimum lock-in time for the selling of securities.
  • The burden of payment of transaction fees is on the investor which is made from the investment only and which extends to the tune of 1 percent of the total investment made in the company.

Unlike Category I and II, there is no pass-through status for Category III. This category is taxable at the fund level. Category III AIFs are taxable at the highest income tax slab level (42.7%) at the fund level. The returns given to investors are after deducting the tax.

Primary Offerings

Alchemy Capital Management Pvt Ltd

Category: AIF Private Investment In Public Equity Fund

Minimum Investment:

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Category: AIF Private Investment In Public Equity Fund

Minimum Investment: 10.00

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Office No. 106A, B-Wing Kanakia Wall Street,
Andheri - Kurla Rd, Chakala, Andheri East,
Mumbai, Maharashtra - 400093

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