An Empirical Analysis of Relationship between Private Equity Investments and Exits in India

Dr Amulya M,Saranya S

doi:10.31033/ijemr.9.6.19

Abstract

During the last decade the growth in the private equity industry in India has been phenomenal, especially in the recent five years. Private equity industry has become the prime interest area for many researchers and academicians in India. Private equity industry in India is burgeoning area of research, which inherits many explorations and untapped potential areas of research. One such untapped area of research is the empirical research is relationship between Private equity investments and exits in India. The research question which has leaded the study is that Private equity industry being in its transition stage, does the performance and opportunities created by the early starters has proven the potential and invites more investors and investments? In this line, this study is an attempt to assess the interrelationship and causal effect in the relationship using VECM (Vector Error Correction Model) and Granger causality model. The results of the study confer that existence of long run causal relation between Private Equity Investments and Private Equity Exits. Thereby, the study emphasis the impact of private equity exits on private equity investments in India. Private Equity Exit opportunities for the investments made plays crucial role in attracting Private Equity investments in India.

Highlights

Private equity investment is well defined by its inherited name, Private equity investments refers to the investments made in privately held firms in the form of equity investments rather than debt form
The aim of this paper is to extend the knowledge deeper into the relationship between private equity investments and exits
The results of the granger causality test confer the presence of unidirectional causality relationship between private equity investments and private equity exit, that is flowing from Private equity exit to private equity investments

Summary

Introduction

Private equity investment is well defined by its inherited name, Private equity investments refers to the investments made in privately held firms in the form of equity investments rather than debt form. Private equity is the major investment supportive avenue to the potential entrepreneurs as they share their business risk and return with the investors and are not burdened with the pressure of immediate repayment of interest or principal. Private equity investments are made in novice, high risk and high growth potential firms. Private equity investments are made for unspecific time period. Private equity is a renowned form of financial support, especially for the startups at its early stages of crucial development. Private equity is a multi staged financial support. Private Equity provides financial assistance at various stages of venture development

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Conclusion