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

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.