The Effect of Private Equity on the BFSI Sector in India: <i>A Logistic Panel Data Analysis</i>

Dhankar, Raj S.; Malik, Kunjana

doi:10.3905/jpe.2015.18.3.072

Cited by 7 publications

(5 citation statements)

References 7 publications

(7 reference statements)

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“…In India, VCs are not able to exit their investments due to a lack of availability of exit options (Dhankar and Malik, 2015). Another problem is with respect to the long time consumed in scaling investments and providing returns (Mustafa, 2019).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Determinants of exit options of venture capitalists: evidence from India

Gupta

Arora

2023

JIBR

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Purpose A critical aspect in venture capital (VC) exiting is the choice of exit mode. This study aims to predict if venture capitalists (VCs) can take the venture capital undertaking public by identifying the impact of investment attributes, market timing and macroeconomic conditions on the choice of mode of exit for VCs. Design/methodology/approach The study uses logistic regression on a sample of 632 Indian VC-backed firms where VCs exited during the past two decades via initial public offers (IPOs) and other routes, including strategic sale, secondary sale and buyback. Findings Results suggest that growth stage investments, larger syndication size and a larger number of IPOs increase the probability of exiting through IPOs, whereas investments in the information technology and information technology-enabled services industry have a higher likelihood of being exited through other routes. Region and gross domestic product are found to be statistically insignificant in predicting the likelihood for a particular mode of exit. Practical implications The results have practical implications for VCs as knowledge regarding the influence of investment attributes, market timing and macroeconomic conditions can help them in deciding their exit strategy vis-à-vis mode of exit and can maximize their potential gains. The results also have implications for the potential investors, primarily the public at large and acquirers. Originality/value The determinants of VC exit options remain an unexplored area in the Indian context. To the best of the authors’ knowledge, the study is the first of its kind that has used investment attributes, market timing and macroeconomic conditions to predict VC exit options in India.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Determinants of exit options of venture capitalists: evidence from India

Gupta

Arora

2023

JIBR

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“…Kulkarni and Prusty (2007) analyzed the growing interest of PE investors in India's port sector and their investment strategies; Tripathi (2016) examined the preference of VC/PE funds for investment stage while considering the fund characteristics, infrastructure subsector, geographic location and investment duration. Dhankar and Malik (2015) studied, using logistic panel data analysis, the effect of PE investment in companies belonging to the BFSI sector in India. But none of these studies focused on market-wide or firm-specific factors driving PE investment in different sectors of the economy.…”

Section: Firm-specific Drivers Of Pementioning

confidence: 99%

“…However, in our sample the dependent variable has five categories based on five different economic sectors. Dhankar and Malik (2015) perform binary logistic regression to study the effect of PE on the company pre and post investment. Likewise, Huyghebaert (2010) employ ordered (binary) logistic regression to find whether institutional affiliation of PE funds influence their investment choices.…”

Section: Firm-specific Drivers Of Pementioning

confidence: 99%

“…Our choice of variables is similar to Osborne et al (2012) who investigated the preferences of PE investors in target companies based on debt to equity (D/E) and ROE. Dhankar and Malik (2015) examined the effect of PE, using DTAs and equity to total assets, on the company. A couple of studies focus on identifying the determinants of value creation in PE in businesses; however, very few focus on investigating the drivers of PE in a company.…”

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confidence: 99%

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Determinants of private equity investment across sectors in India

Neerza¹,

Tripathi

2019

J of Advances in Mgmt Research

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Purpose -The purpose of this paper is to explore country-specific and firm-specific factors responsible for attracting private equity investment across sectors in India. Design/methodology/approach -The analysis involves three macroeconomic variables (rule of law, net FIIs and interest rate) across six sectors. Also, three firm-specific variables (ROE, DTA and EBITDA margin) for 89 companies with private equity across five sectors. OLS, Prais-Winsten, multinomial logit and probit regression models have been used for analysis. Findings -The findings show that while rising foreign investments drive PE activity in energy and engineering and construction is one sector, strong legal structures and rising interest rates are the drivers of PE activity in the healthcare sector. In firm-specific analysis, though the profitability and leverage effect is invisible in the industrials and healthcare sectors, it is quite significant in IT and telecom is one sector and commodities sector. Research limitations/implications -Results are subject to limited data on private equity in different sectors. There is a lack of data for comparison on companies belonging to certain sectors like real estate, infrastructure, etc. A limited literature is available for reference purpose. Research findings may serve as preliminary criteria for private equity investors seeking investment in India. Originality/value -The value of this research is in the identification of most relevant macroeconomic and firm-specific factors for private equity investors seeking investment across sectors in India.

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“…Private equity (PE) and venture capital (VC) investors have been a vital part of India’s growth story since a long time. Dhankar and Malik (2015) in their study empirically proved how companies backed by PE have consistently shown better performance compared to other companies in terms of high performance, job creation, growth and tax revenues. From 2005–2020, there has been an investment of US$20 mn by the PE and VC industry in India.…”

Section: Introductionmentioning

confidence: 98%

COVID-19 and the Indian Private Equity Industry: Time to Use the Dry Powder

Malik

Sharma²,

Kaur

2020

Vision: The Journal of Business Perspective

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The article throws light on the impact of the pandemic on the major funding industry for the country, that is, private equity (PE) firms. About 59% of the FDI comes via this route, and growth of major sectors is impacted by their investment. Last few years, there have been discussions about dry powder availability with the PE firms. This is the time to create opportunity in crisis for both the parties (the investors and the target firms). As seen during the 2008 crisis, many deals which materialized gave huge benefits to the investors. The article motivates the industry not to take a backseat and make the best out of the situation.

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The Effect of Private Equity on the BFSI Sector in India: A Logistic Panel Data Analysis

Cited by 7 publications

References 7 publications

Determinants of exit options of venture capitalists: evidence from India

Determinants of exit options of venture capitalists: evidence from India

Determinants of private equity investment across sectors in India

COVID-19 and the Indian Private Equity Industry: Time to Use the Dry Powder

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