Private Equity Firm Performance: An Empirical Evidence From India Using Benchmark Index

Abstract

The present study attempted to examine the comparative return performance of private and non-private equity firms in India. For this purpose, we have used deal-level data retrieved from venture intelligence for the period ranging from 2009 to 2019. To measure the return of private equity, we applied Return multiple, internal rate of return (IRR) and extended internal rate of return (XIRR). We have used the Nifty 50 benchmark index as a proxy for investigating the return generated by public market returns. Study findings revealed that private equity firms outperformed the benchmark Index return and open-up routes for global and domestic investors for further investment. We identified that most private equity deals exited via the M&A route; some also followed the IPO route to exit privately held firms. Results differ from prior studies advocating IPO as the prime mechanism private equity managers use for exiting. Further, returns measured under both routes outperformed the public market index Nifty 50. The study found that 84% (277 Deals) of deals provided a positive cash multiple in the last decade and outperformed the benchmark index. These findings are helpful for private equity firms and fund managers to make investment decisions in the Indian private equity market.