Past Reports

however, accounted for only 17% of the total exits in the sample. Put together, the exits through capital markets
accounted for 50% of the sample. The highest average returns were seen in the strategic sale route, and this accounted
for 18% of the sample. The trends in India seem at variance to those observed in other leading markets, where returns
obtained from investors in the public markets or public offering were superior to those offered by other options. The
least returns were observed in the buy-back route, indicating that this would not be the preferred option.
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
19.30%
15.83%
26.76%
9.26%
24.33%
0.00%
IPO
Public market
sale
Strategic sale Buy back Secondary
sale
Figure E6.4: Average VCPE returns (rupee nominal) by exit type
An investor can exit in a single stage or gradually over many stages. Figure E6.5 provides the average returns by the
number of exit stages. Single stage exits accounted for bulk of the sample (62%). However, it can be seen that whenever
the exits have been from more than one stage, the returns have been higher. Structured and innovative exit routes
seem to be provide better return prospects than conventional routes.
25.00%
23.14%
20.00%
17.69%
19.31%
15.00%
10.00%
5.00%
1 2 More than 2
Figure E6.5: Average VCPE returns (rupee nominal) by number of exit stages
Summary
In summary, our analysis substantiates the need for higher returns from VCPE investments for the asset class to be
attractive to LP's. Growth in commitments would continue to be muted till the track record or prospects for better
returns improve. While the responsibility for providing returns lies with the VCPE firms, the promoters and
entrepreneurs of the investee companies should also realize the need of LP's to obtain returns commensurate with the
risk taken by them.
•
Notes
1 See for example, Bob Zider (1998), How venture capital works, Harvard Business Review, Nov-Dec 1998.
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