An Empirical Analysis of VCPE Exits: Evidence from Indian Infrastructure Sector

Abstract

The choice of exit between IPO and M&A is an inevitable decision faced by venture capital and private equity (VCPE) investors. This article examines the exits of VCPE funds from their portfolio companies in the Indian infrastructure sector. The analysis covers the influence of VCPE investors’ characteristics in terms of stages of financing and origin of funds on their choice of exit route. The article also explores the influence of syndication and board representation devices as controlling mechanisms on the exit route. The findings suggest the type of exit can be well predicted by the size of the investment, the duration of investment, and the extent of syndication. This article highlights the growing importance of VCPE for the infrastructure sector in India and makes the case that more exit options should be facilitated in order to promote further investment in the sector.