Inside the deal engine room: VCs and PEs make the case for ERP as a governance variable
At an NTT Data Business Solutions India roundtable, a cohort of leading VCs and PE investors argued that the maturity of a company’s ERP and AI adoption, data quality and underlying processes is rapidly emerging as a priced governance variable in deals.
In a recent roundtable discussion in Mumbai, venture capitalists (VCs) and private equity (PE) investors emphasized the importance of enterprise resource planning (ERP) systems as a governance variable. Krunal Patel, Managing Director and Member of Board at NTT Data Business Solutions India, highlighted how the maturity of a company's ERP systems influences the level of confidence investors have in a company's financial information and their willingness to pay for it.
Miloni Bhatt from The Economic Times questioned what other variables investors might start factoring into deal valuations. Patel asserted that readiness, encompassing data integrity, growth authenticity, and founder intent, is becoming a crucial factor. He noted that NTT Data's due diligence process involves examining the system's "underneath" aspects after the investment has been secured, but often misses the importance of the processes and context.
Patel's teams have encountered cases where companies were not ready for the scale of investment, leading to conditional funding based on data granularity levels, such as SKU-level data.
Family businesses and institutional ownership were also discussed. Avendus Future Leaders Fund's Ritesh Chandra observed that some family-run companies may not have systems in place or may be operating on outdated systems. He warned that even if systems exist, their integrity is paramount, as outdated or poorly maintained systems can mask operational manipulation.
Chandra explained that his approach focuses on credibility and value creation rather than software features, offering a carrot-stick approach where the carrot is the potential investment of 3-5 crore INR, contingent on demonstrating data integrity and credible operations. Anjali Bansal from Avaana Capital extended the discussion to the founder's intent, asserting that governance begins with the founder's aspirations and not merely with highfalutin boards or ERP systems.
Written by urgent.news from Economic Times Tech's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
