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Journal cover: Journal of Indian Business Research

Journal of Indian Business Research

ISSN: 1755-4195

Online from: 2009

Subject Area: Regional Management Studies

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Venture capital and private equity in India: an analysis of investments and exits


Document Information:
Title:Venture capital and private equity in India: an analysis of investments and exits
Author(s):Thillai Rajan Annamalai, (Department of Management Studies, Indian Institute of Technology Madras, Chennai, India), Ashish Deshmukh, (Department of Management Studies, Indian Institute of Technology Madras, Chennai, India)
Citation:Thillai Rajan Annamalai, Ashish Deshmukh, (2011) "Venture capital and private equity in India: an analysis of investments and exits", Journal of Indian Business Research, Vol. 3 Iss: 1, pp.6 - 21
Keywords:Equity capital, Financing, India, Investments, Venture capital
Article type:Research paper
DOI:10.1108/17554191111112442 (Permanent URL)
Publisher:Emerald Group Publishing Limited
Acknowledgements:The authors would like to gratefully acknowledge the financial support provided by the Indian Council of Social Sciences Research and IIT Madras for this research. They would also like to acknowledge the support of M.B. Raghupathy and V. Vasupradha for this research.
Abstract:

Purpose – The venture capital and private equity (VCPE) industry in India has grown significantly in recent years. During five-year period 2004-2008, the industry growth rate in India was the fastest globally and it rose to occupy the number three slot worldwide in terms of quantum of investments. However, academic research on the Indian VCPE industry has been limited. This paper seeks to fill the gap in research on the recent trends in the Indian VCPE industry.

Design/methodology/approach – Studies on the VCPE transactions have traditionally focused on one of the components of the investment lifecycle, i.e. investments, monitoring, or exit. This study is based on analyzing the investment life cycle in its entirety, from the time of investment by the VCPE fund till the time of exit. The analysis was based on a total of 1,912 VCPE transactions involving 1,503 firms during the years 2004-2008.

Findings – Most VCPE investments were in late stage financing and took place many years after the incorporation of the investee firm. The industry was also characterized by the short duration of the investments. The type of exit was well predicted by the type of industry, financing stage, region of investment, and type of VCPE fund.

Originality/value – This paper highlights some of the key areas to ensure sustainable growth of the industry. Early stage funding opportunities should be increased to ensure that there is a strong pipeline of investment opportunities for late stage investors. VCPE investments should be seen as long-term investments and not as “quick flips”. To achieve this, it is important to have a strong domestic VCPE industry which can stay invested in the portfolio company for a longer term.



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