Private equity and venture capital funds have exited from 160 companies through either IPOs or merger and acquisition routes between 2004 till the first half of 2007, according to a research firm.
“From January 2004 to June 2007, PE and VC investors have made investments in 706 companies in India for an estimated $17 billion while they have made exit from 160 companies in the same period through IPO or merger and acquisition route so far,” Arun Natarajan, Founder and CEO of Venture Intelligence, the research firm that tracks venture capital and private equity investment in the country said.
Incidentally, a very large majority of the exits were successful, meaning they resulted in Private Equity investors and VCs making money on their original investment.
Exiting from the investee company is an important feature of private equity and VC investment, as it not only determines the returns for the investors in that fund but also determines the ability of the fund managers to raise funds in future.
According to Natarajan, PE and VC investors started making successful exits from 2004 onwards at an increased pace when the companies like Patni, Biocon and NDTV launched their IPOs.
Before that there used to be only one or two large exits in a year.
In fact, many VCs lost money around the year 2000. Some VCs had reportedly sold back their stake to the promoters at less than the cost while some had to write off their investments, he said.
Normally a venture capital investor stays invested in a company for six to eight years while private equity investors would like to make an exit in 3 to 5 years, he added.
As per his estimates, there are about 100 active players in the market with 30\35 VCs and about 60 odd private equity investors.
While VCs invest in a company at a very early stage and when the company is small, PE investors invest at later stage.
Source: Asian Age