RAR-604

WHAT IS EQUITY ?
Equity is the amount of money that a company's owner has put into it
or owns.
Equity, also called shareholders' equity or owners' equity for privately
held corporations, is the amount of money given to a company's
shareholders if all of its assets were sold and all of its debts were paid
off.
In the case of an acquisition, it is the value of the company's income
minus any debts that are not part of the deal. A company's book value
could also be its shareholders' equity.
Equity is one of the most common ways that analysts judge a
business's financial health.
The value of equity is determined from the balance sheet of the
company.
CONSTRUCTION EQUITY ?
Construction Equity means, with respect to a Construction Property, the
amount of equity required by the Agent to be invested by the Borrower or
any Subsidiary Borrower, as the case may be, for acquisition and
development of such Construction Property, from sources other than the
Construction Advances, before any Construction Advances will be disbursed
with respect to such Construction Property.
OR
Construction Equity means equity issued to fund
(a) all or a portion of a Capital Improvement,
(b) interest payments (including periodic net payments under related
interest rate swap agreements) and related fees on Construction Debt or
(c) distributions (including incremental Incentive Distributions) on other
Construction Equity.
EQUITY FINANCING ?
Equity financing refers to the
sale of company shares in order
to raise capital.
PUBLIC
Investors who purchase the
shares are also purchasing
ownership rights to the
company.
PRIVATE
Equity financing can refer to the
sale of all equity instruments,
such as common stock,
preferred shares, share
warrants, etc.
 PUBLIC EQUITY
FINANCING
this includes initial public
offerings, stock issues, and the
sale of company held equity on
the stock market.
Publicly listed stock tends to be
highly liquid, so even if it isn’t
accepted as part payment in a
transaction, the company could
potentially sell equity that it holds
to raise the required cash.
PRIVATE EQUITY
FINANCING
sometimes called a private
placement, this is essentially the
same as public equity financing
with one major difference: the
stock isn’t listed on a public
exchange.
That means that it is less liquid,
but also faces less of the
regulations that surround public
equity listings.
TYPES OF EQUITY FINANCING?
ANGEL INVESTMENT: Angel investors are high net worth individuals
who provide capital to startups or early-stage companies in exchange
for equity ownership. Angel investors typically invest smaller amounts
than venture capitalists and may offer expertise and mentorship in
addition to funding.

VENTURE CAPITAL: Venture capitalists are institutional investors who

provide larger amounts of capital to high-growth startups or early-
stage companies in exchange for equity ownership. Venture capitalists
may also offer strategic guidance, mentorship, and connections to
help the company grow.
TYPES OF EQUITY FINANCING?
INITIAL PUBLIC OFFERING :An IPO is a process by which a company
offers its shares to the public for the first time, raising capital from
individual and institutional investors. In an IPO, the company's shares
become publicly traded on a stock exchange, and the company
becomes subject to public reporting and regulatory requirements.

PRIVATE PLACEMENT :Private placement involves selling shares of the

company to a small number of accredited investors, such as
institutional investors, private equity firms, or high net worth
individuals. Private placement is typically used by larger companies
that need significant capital but do not want to go through the
regulatory requirements of an IPO.
 STAGES OF EQUITY FINANCING
SEED STAGE
This is the earliest stage of a
company's development, typically
before it has a product or service
ready for market. Seed stage funding
may come from the company's
founders, friends and family, or angel
investors who provide initial capital to
help the company get off the ground.
EARLY STAGE
At this stage, the company may
have a prototype or a minimum
viable product (MVP) and is focused
on developing and testing its
product or service. Early-stage
funding may come from angel
investors, venture capitalists, or
seed-stage investment firms.
 STAGES OF EQUITY FINANCING
GROWTH STAGE
At this stage, the company has a
proven product or service, and is
focused on scaling and expanding its
customer base. Growth stage funding
may come from venture capitalists,
private equity firms, or strategic
investors who can provide the capital
and expertise to help the company
grow.
LATER STAGE
At this stage, the company has a
well-established product or service,
a significant market share, and is
focused on maintaining its position
or expanding into new markets.
Later stage funding may come from
private equity firms, strategic
investors, or through a public
offering.
EQUITY FINANCING VS. DEBT FINANCING
EQUITY
No guaranteed returns.
Ownership and voting rights are given.
Comes last in recovering money
invested
Benefits from the performance of the
company
Riskier because of higher cost, as
investors require higher returns and
takes onwership
DEBT
Consistent interest payments returns
No ownership is given
Priority in case of bankruptcy
No losses from the poor performance
of company
Less Risky since investors don't
require high returns than the
principal + interest.

 PROS &
CONS
PROS CONS
No obligation to repay the money You have to give investors an
No additional financial burden on the ownership percentage of your
company company
Large investors can provide a wealth of You have to share your profits with
business expertise, resources, guidance, investors
and contacts You give up some control over your
A poor credit history or lack of a financial company
track record – equity can be preferable It may be more expensive than
or more suitable than debt financing. borrowing

DECIDING
FACTOR
If your creditworthiness is an issue, this could be a better option.

If you’re more of an independent solo operator, you might be better

off with a loan and not have to share decision-making and control.

Would you rather share ownership/equity than have to repay a bank

loan?

Are you comfortable sharing decision making with equity partners?

If you are confident that the business could generate a healthy

profit, you might opt for a loan, rather than have to share profits.
PROJECT

FINANCING
Method of finance employed for

meeting the cost of the project

Big-budget infrastructure

projects require funding from

multiple sources to be built

One of the ways to gather funds

is through equity financing

EQUITY PROJECT
FINANCING
Unlike debt financing, where investors lend money to the project

and expect to be repaid with interest, equity financing involves

taking a share of the project's profits in the future.

Two ways to use equity financing

Raising money by selling - initial public offerings are made which

gives retail investors a chance to invest

example -selling flats before an apartment complex is built

Special purpose vehicle (SPV) - it is a separate legal entity, which

makes it so that the shareholders don't receive a tangible assent but

a part of the companies future profits ,or dividends.

EQUITY PROJECT
FINANCING
Risk of Ownership - equity financing shifts the risk of loss to the

shareholders

The contribution made by the owners of the business, equity

shareholders

Enjoys the rewards & bears the risk of ownership

Liabilities are limited to capital contribution

Permanent capital

Does not involve any fixed obligation for payment of dividend

The cost of equity capital is high (dividends are not tax deductible )

The cost of issuing equity capital is high

THANK
YOU