Performance of Private Equity Backed Initial Public Offerings: <i>Empirical Evidence from India</i>

Gohil, Raviraj; Vyas, Vijay H.

doi:10.3905/jpe.2015.18.4.056

Cited by 3 publications

(6 citation statements)

References 18 publications

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“…IPOs significantly underperform the market benchmark within the first year; however, they do not find underperformance thereafter. Their findings are in line with Gohil and Vyas (2015). They show that PE-backed IPOs show less underperformance than PE-backed IPOs within the first 180 days, as well as within 1 year.…”

Section: Literature Reviewsupporting

confidence: 91%

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Performance of IPOs of Indian Companies Backed by Private Equity

Drebinger¹,

Kumar

Hinrichs³

2019

Vision

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We examine 616 Indian initial public offerings (IPOs), including 116 IPOs backed by private equity (PE), between 2000 and 2016, to test whether PE-backed IPOs perform better than non-PE-backed IPOs in the short run as well as in the long run in terms of cumulative abnormal returns (CARs). We also examine the impact of the PE firm nationality on post-IPO performance. Consistent with the existing literature, we find underperformance for all IPOs, on an average, within 1 year. However, PE-backed IPOs have lower degree of underperformance than non-PE-backed IPOs. We also find that size, liquidity and leverage have a positive impact on the post-IPO performance after the financial crisis, whereas issue amount and capital issue year are negatively correlated to CARs before and during the crisis. We also find significant effects of PE firm nationality on CAR development. IPOs backed by India-dedicated PE firms perform best, while those backed by foreign PE firms perform worst and even underperform non-PE-backed IPOs. IPOs by foreign PE firms perform better if they co-invest with India-dedicated PE firms.

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Section: Literature Reviewsupporting

confidence: 91%

“…In contrast, Sehgal and Singh (2008) reveal a very high level of underpricing of Indian IPOs with initial returns of 99 per cent. According to Gohil and Vyas (2015), PE-backed IPOs are characterized by a lower degree of underpricing than non-PE-backed IPOs. However, the difference is not significant.…”

Section: Literature Reviewmentioning

confidence: 99%

Performance of IPOs of Indian Companies Backed by Private Equity

Drebinger¹,

Kumar

Hinrichs³

2019

Vision

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“…However, their sample does not distinguish PE sponsored issues. Similarly, Gohil and Vyas (2015) find that PE backed issues outperform non-sponsored issues. However, once again, they do not consider VC sponsored issues in their analysis.…”

mentioning

confidence: 77%

“…Their study does not consider PE backed issues. Similarly, Gohil and Vyas (2015) investigate PE sponsored issues and find that PE sponsored issues outperform non-sponsored issues, but they do not consider VC backed issues. We argue that since the primary aim of this study is to analyse the performance of all sponsored Indian IPO issues, it is imperative to include both VC and PE sponsored issues in the same sample.…”

Section: Sponsored Vs Non-sponsored Iposmentioning

confidence: 99%

“…Our paper contributes to the existing literature in the following ways: first, it fills the gap by providing econometric analyses on the performance of Indian IPOs based on sponsored vs unsponsored issues. To the best of our knowledge, Raghupathy and Thillairajan (2015) and Gohil and Vyas (2015) are the only ones who provide an analysis of VC and PE sponsored issues, respectively. However, Raghupathy and Thillairajan (2015) examine only VC sponsored issues and similarly, Gohil and Vyas (2015) investigate only PE sponsored issues in their study.…”

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confidence: 99%

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An empirical analysis of the performance of sponsored vs non-sponsored IPOs

Sivaprasad

Dadhaniya

2019

JAEE

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Purpose India is one of the largest IPO markets in the world. However, IPO research in the developing world is limited. The purpose of this paper is to test the performance of Indian IPOs based on sponsored vs non-sponsored issues. The authors classify the IPO sample into venture capital (VC) and private equity (PE) sponsored issues and non-sponsored ones and include key operating characteristics as performance predictors. Design/methodology/approach The dependent variable is the buy-and-hold abnormal returns. The study uses key operating characteristics such as market capitalization, net sales, earnings before interest, taxes, depreciation and amortization, depreciation and amortization, price-to-book, asset turnover and leverage. A cross-sectional analysis is applied to test the long-run performance. Findings Sponsored IPO issues convey favourable information to investors about future earnings and prospects of the firm. The findings indicate that sponsored issues and, in particular PE sponsored issues are perceived by investors as having a positive impact on the operational performance of firms that the PE firms are involved in relative to the constituents of the index and this superior operational performance over time also leads to relatively better performing share prices. There are significant differences in terms of market size, industry classification and key operating characteristics across the three groups of issues. Research limitations/implications This study has had to deal with much smaller samples of PE and VC when compared to similar studies conducted in the developed markets such as the UK and the USA. Further robustness tests on the market performance using factor models posed a problem due to limitation of the availability of these factors. Practical implications For the capital markets investors and policy makers, this research demonstrates the increasingly important role that PE and VC funds play in the investment landscape in India. It exhibits the increasing investor confidence in the Indian capital markets. Originality/value Using a sample of Indian IPOs comprising VC sponsored and PE sponsored issues, this study analyses the performance of Indian IPOs in an emerging market setting. This study, thus, contributes to the limited IPO research undertaken in developing markets.

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Private Equity Firm Performance: An Empirical Evidence From India Using Benchmark Index

Kumar

Firoz

2023

Global Business Review

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The present study attempted to examine the comparative return performance of private and non-private equity firms in India. For this purpose, we have used deal-level data retrieved from venture intelligence for the period ranging from 2009 to 2019. To measure the return of private equity, we applied Return multiple, internal rate of return (IRR) and extended internal rate of return (XIRR). We have used the Nifty 50 benchmark index as a proxy for investigating the return generated by public market returns. Study findings revealed that private equity firms outperformed the benchmark Index return and open-up routes for global and domestic investors for further investment. We identified that most private equity deals exited via the M&A route; some also followed the IPO route to exit privately held firms. Results differ from prior studies advocating IPO as the prime mechanism private equity managers use for exiting. Further, returns measured under both routes outperformed the public market index Nifty 50. The study found that 84% (277 Deals) of deals provided a positive cash multiple in the last decade and outperformed the benchmark index. These findings are helpful for private equity firms and fund managers to make investment decisions in the Indian private equity market.

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Performance of Private Equity Backed Initial Public Offerings: Empirical Evidence from India

Cited by 3 publications

References 18 publications

Performance of IPOs of Indian Companies Backed by Private Equity

Performance of IPOs of Indian Companies Backed by Private Equity

An empirical analysis of the performance of sponsored vs non-sponsored IPOs

Private Equity Firm Performance: An Empirical Evidence From India Using Benchmark Index

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