The first private equity (PE) fund focusing on knowledge-based companies has been established through a memorandum of understanding (MoU) signed at the Financial Industry Exhibition (FINEX) underway in Tehran.
The primary goal of the fund is to foster the growth of the knowledge-based economy by attracting public capital, revitalizing semi-active or inactive tech firms through empowerment, value creation and listing on the capital market, IBENA reported.
The MoU was signed by the Innovation and Technology Development Fund, with Roshd Khahan Javan Investment Company as operator, Pishgaman Yazd Farda Company, and Atieh Rafah Hamkaran Mehr Iranians Institute.
The agreement calls for creating the conditions for the establishment of the first knowledge-based private equity fund managed by a research and technology fund. After completing the necessary legal procedures and obtaining the license, the fund will aid knowledge-based and tech companies via the capital market.
As such, it will focus on sectors such as pharmaceuticals and medical equipment, fintechs and insurance, big data and communications, clean energy, AI and robotics, food and agriculture, electronics and microelectronics.
A PE fund is a pooled investment scheme used for investments in equities. Institutional and retail investors provide the capital for the private equity, and capital can be utilized to fund new technology, expand working capital and bolster balance sheets.
Among the advantages of private equity are easy access to alternate forms of capital for entrepreneurs and companies and less stress of quarterly performance. The pluses, however, are offset by the fact that private equity valuations are not the function of market forces.
Iran's Securities and Exchange Organization, the stock market regulator, passed rules and a charter for private equity funds in Nov. 2018.
Private equity funds have the option of investing in non-public companies. Regulations allow private equity funds to support public companies not yet listed, those listed on Iran Fara bourse's SME market and businesses that have failed to meet listing eligibility.
Iran has an estimated 7,000 knowledge-based companies and 1,600 startups. The government has welcomed the entry of startups in the bourse and says it will support them given their inherent role in the economy.
Authorities are in the process of revising rules to help attract knowledge-based companies to the bourse.
The revision of regulations is expected to encourage much-needed innovation and economic growth. Efforts are aligned with the goal of creating a transparent and investor-friendly environment in the stock market and upholding the interest of shareholders and stakeholders alike.
One objective is to streamline the process for knowledge-based companies and help them offer shares to the public on the condition that they meet the necessary requirements and uphold high norms of financial reporting. With key measures in place, investors can and will have confidence in the governance and financial transparency of listed companies.
