Zhongyi ZHAO: Focus on Portfolio Companies’ Sustainable Growth
Sina Finance- The 6th Top Capital Summit for Asia-Pacific & 2010 Top Capital Investment & Investor Awards was sponsored by Top Capital in Beijing on 23rd June, 2010. Jiuding Capital’s Partner Zhongyi ZHAO said while discussing “the rise of RMB fund” investors should focus on enterprises’ growth potential on the market full of temptations.
He pointed out the withdrawal ways and channels should be confirmed before investment. The rapid development of RMB fund was caused by many reasons, one of which was the increasing development of Chinese capital markets and the constant improvement of systems. The implementation of reform of the assorted shareholders has removed the withdrawal barrier of A-share market and created good development conditions for China’s PE organizations.
The withdrawal ways and markets of investment funds would impact heavily on the rate of return. Various investment teams were different in investment and withdrawal. In the earlier days, investment was related to political environment and team operation. For example, the earlier investment teams in charge of funds were familiar with overseas capital markets, so that they often chose overseas capital market as their withdrawal channel. However, Jiuding Capital has been dedicated into Chinese capital market for years, so it usually took A-share markets as its major channel.
“Maybe you want to know how I choose when my project has to be withdrawn when it at a market bottom because of the highly cyclical period of A-share market.”
“I have to say the following two aspects will be considered. First, the top and bottom of the markets should be clearly figured out. However, it is very difficult to predict before investment. Moreover, the equity investment will last for a very long time, which often exceeds the operation time of capital markets which attracts us little attention.”
“Second, when making investment decisions, we pay much attention to the growth potential of the investees rather than capital markets because the higher or lower of the PE in secondary markets doesn’t impact much the rate of return if the enterprise’s profit is increasing. Therefore, the growth of an enterprise is the key element deciding the rate of return. Only when an enterprise is growing, its profit is guaranteed no matter it’s withdrawn from A-share markets or overseas markets, or even through MA.”
“I think it’s more important to attach importance to enterprises’ growth potential, which can make you focus on how to help the enterprise manage so as to grow rapidly. “
Asia-Pacific Submit, one of the most influential VC summit in China, has been widely recognized by domestic and overseas investors for five years’ operation. More than 150 persons from investment institutions, law firms and accounting firms attended the summit each year. In addition, it has been supported by governmental and academic organizations, and many leaders from NDRC, State Administration of Foreign Exchange, the Ministry of Commerce and so on attended or gave speeches.