Private Equity Terminology: A Practical Guide
Private equity has developed a vocabulary of its own. Conversations between businesses, investors, fund managers and advisers routinely use terms such as GP, LP, dry powder, capital call, carry, hurdle rate, MOIC, IRR, DPI and TVPI. For someone approaching institutional private equity for the first time, understanding this terminology can make the investment process considerably easier to navigate.
The terminology also reflects the structure of the asset class. Unlike an investment made directly in a listed security, private equity commonly involves investors committing capital to professionally managed funds, those funds deploying capital into businesses over time, active ownership during the investment period and eventual realisation through an exit.
Understanding the language therefore helps explain not only what private equity professionals say, but how private equity itself works.
GP, LP and the Private Equity Fund
A General Partner (GP) is the party responsible for managing a private equity fund. The GP typically develops the investment strategy, raises the fund, identifies opportunities, executes investments, oversees portfolio companies and ultimately seeks exits. In simple terms, GP Manages the fund: raises capital, sources deals, oversees portfolio companies, executes exits. Example: Mag Capital PE Fund is managed by a GP team of 6 investment professionals who source deals, negotiates terms and execute deals on behalf of investors, and sits on the boards of the companies it backs.
A Limited Partner (LP) is an investor that commits capital to the fund. LPs can include pension funds, sovereign wealth funds, insurance companies, endowments, family offices, institutional investors and other eligible investors. LPs generally provide capital without participating in the fund’s day-to-day investment management. Example: A pension fund commits ₹50 Cr to Mag Capital PE Fund as an LP, it has no say in which companies are picked, only in fund-level governance matters set out in the LPA.
The fund is the investment vehicle through which capital from LPs is pooled and managed by the GP. A fund will normally have a defined investment strategy covering factors such as geography, sectors, investment size, ownership approach and expected investment horizon. Example: Mag Capital PE Fund is a ₹500 Cr vehicle focused on mid-market Indian consumer businesses, with typical cheque sizes of ₹15–75 Cr.
The Limited Partnership Agreement (LPA) is a principal legal agreement governing the relationship between the GP and LPs. Among other matters, it can establish the fund’s economics, management fees, carried interest, capital-call mechanics, investment period, fund term, distributions and important governance provisions. Example: The LPA specifies a 2% management fee, 20% carry, an 8% hurdle, and a 10-year fund term with two 1-year extensions.
Commitments, Capital Calls and Dry Powder
An LP’s commitment is the amount of capital it agrees to provide to a private equity fund. Importantly, the entire commitment is generally not transferred to the fund on the first day. Example: An LP commits ₹20 Cr to the fund at close but transfers nothing on day one.
Instead, the GP makes capital calls, also known as drawdowns, when money is required for investments, fees or other permitted fund requirements. A capital call therefore converts part of an LP’s commitment into paid-in capital. Example: In month eight, the GP calls 15% of each LP’s commitment (say ₹3 Cr from a ₹20 Cr commitment) to fund a new acquisition.
The portion of committed capital that has not yet been called is generally referred to as uncalled capital. The term dry powder is widely used for capital available for future deployment, although its precise usage can vary depending on context. Example: A fund raises ₹500 Cr in commitments. Year 1, the GP calls ₹150 Cr to fund two deals, that’s paid-in capital. The remaining ₹350 Cr is uncalled capital, or dry powder, sitting with LPs until called.
The investment period is the period during which the fund is generally permitted to make new investments under its governing documents. In other words, it is the window (often 3‚5 years) during which the fund makes new investments. A private equity fund itself typically has a considerably longer fund life or fund term, allowing time not only to invest but also to manage and eventually realise (exit) portfolio investments. In other words, it is total lifespan of the fund, typically longer than the investment period, to allow for exits. Example: Mag Capital PE Fund’s investment period runs from 2026 to 2031; after that, the GP can only support existing portfolio companies, not add new ones, even though the fund term itself runs for 10 years to 2036.
A fund’s vintage year identifies the period in which a fund begins its investment life, although the convention used to assign vintage can vary. Vintage is particularly relevant when comparing funds because economic and market conditions can differ substantially between investment periods. Example: A “2020 vintage” fund is benchmarked against other 2020-vintage funds, not against a 2015 fund, because entry-market conditions differed materially.
Management Fees, Carry and the Hurdle Rate
Private equity fund economics commonly contain two important components: management fees and carried interest.
A management fee is typically an annual fee for running the fund and paid for managing the fund and supporting its operations. Its calculation and the capital base against which it is charged are governed by the fund documentation and may change over the life of a fund. Example: On a ₹500 Cr fund, a 2% annual fee generates ₹10 Cr to cover the GP’s team, overheads and deal costs.
Carried interest, is typically GP’s share of profits commonly shortened to carry, represents the GP’s agreed share of investment profits, subject to the economics established in the fund documents. Example: If the fund generates ₹300 Cr in profit above return of capital and hurdle, the GP’s 20% carry amounts to ₹60 Cr.
A preferred return or hurdle rate is a return threshold that may need to be achieved before the GP becomes entitled to carried interest under the agreed waterfall. In other words, it I sthe minimum return LPs must receive before GP earns carry. Example: With an 8% hurdle, if the fund only returns 6% in a given period, the GP earns no carry, LPs are paid first.
A catch-up is a subsequent stage in certain distribution waterfalls under which distributions are allocated disproportionately to the GP until the intended profit-sharing arrangement has been reached. Example: After LPs receive their 8% preferred return, the next tranche of proceeds goes 100% to the GP until its cumulative take reaches 20% of profits distributed so far — only then does the 80/20 split apply.
The distribution waterfall determines the order in which investment proceeds are allocated between LPs and the GP. Structures vary, including whole-of-fund and deal-by-deal approaches, making the underlying LPA important when interpreting fund economics. Example: A fund returns ₹1,000 Cr on ₹500 Cr called. LPs get their ₹500 Cr back plus the 8% hurdle, the GP catches up, then the remaining profit splits 80/20 — the GP’s carry cheque comes only from that last tranche.
Portfolio Companies, Deal Types and Ownership
A business in which a private equity fund has invested is generally called a portfolio company. Example: ” Mag Capital PE Fund owns four portfolio companies, including a Bangalore-based logistics business.”
A buyout usually involves acquiring a controlling or substantial ownership position in a business. Where debt is used alongside equity to finance an acquisition, the transaction may be described as a leveraged buyout (LBO). Example: A fund buys 70% of a manufacturer for ₹200 Cr, funded with ₹80 Cr of equity and ₹120 Cr of acquisition debt — an LBO.
Growth capital or growth equity generally refers to capital invested into established businesses to support expansion, capacity creation, acquisitions, market development or other growth objectives, often without the characteristics of a traditional control buyout. Example: A fund invests ₹40 Cr for a 25% minority stake in a fast-growing consumer brand to fund new manufacturing capacity.
A minority investment leaves the existing shareholders with majority ownership, whereas a control investment gives the investor sufficient ownership or rights to exercise control. Example: A 30% stake with only information rights is a minority investment; a 60% stake with board majority is a control investment.
A platform investment is commonly the principal business around which a private equity investor intends to build a larger group. Subsequent acquisitions made by that platform may be called add-on, bolt-on or tuck-in acquisitions, depending on the context and degree of integration. Example: A fund buys a regional diagnostics chain as its platform, then tucks in a smaller pathology lab in a neighbouring city to expand coverage.
A roll-up strategy involves combining multiple businesses in a fragmented sector to create a larger enterprise with potential benefits from scale, integration or consolidation. Example: Acquiring eight independent gyms across a city and merging them under one brand and back office to gain scale economics.
Entry Valuation and Transaction Economics
Enterprise Value (EV) represents the value attributed to the operating business irrespective of how it is financed. Example: A company generating ₹50 Cr EBITDA, valued at 12x, has an EV of ₹600 Cr.
Equity Value represents the value attributable to shareholders after taking account of relevant debt, cash and other agreed adjustments.
The relationship is often conceptually expressed as:
Equity Value = Enterprise Value – Net Debt, subject to transaction-specific adjustments. Example: A target has an EV of ₹800 Cr (say 10x EV/EBITDA on ₹80 Cr EBITDA), ₹150 Cr of debt and ₹30 Cr of cash. Equity Value = 800 − 150 + 30 = ₹680 Cr — that’s what the buyer actually pays shareholders.
An entry multiple is the valuation multiple at which the investor enters the investment. Common examples include EV/EBITDA, EV/Revenue and, where relevant, earnings-based multiples. Example: Paying ₹600 Cr for a business with ₹50 Cr EBITDA reflects a 12x EV/EBITDA entry multiple.
EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortisation and is widely used as an operating-profitability reference in transaction analysis, although its usefulness depends on the business and the adjustments applied. Example: A company with ₹120 Cr revenue, ₹45 Cr operating costs before interest, tax, depreciation and amortisation reports EBITDA of ₹75 Cr.
Adjusted EBITDA incorporates agreed adjustments intended to present a more representative view of underlying earnings. Because such adjustments can materially affect valuation, their basis deserves careful scrutiny. Example: Reported EBITDA is ₹45 Cr; after adding back a ₹5 Cr one-time litigation cost, Adjusted EBITDA becomes ₹50 Cr — the figure used to apply the valuation multiple.
Net debt generally represents interest-bearing debt less relevant cash, subject to the definitions agreed for a transaction. Example: ₹120 Cr in loans minus ₹20 Cr cash on hand gives net debt of ₹100 Cr.
Working capital adjustments, debt-like items, cash-like items and the concept of cash-free, debt-free transactions are also important when translating an agreed enterprise valuation into the equity consideration ultimately payable. Example: In a ₹600 Cr cash-free, debt-free deal, the buyer pays ₹600 Cr adjusted for the actual net debt and working capital position measured at closing, not the headline EV figure verbatim.
Term Sheets, Due Diligence and Investment Approval
A term sheet records the principal commercial terms contemplated for an investment. Depending on the transaction, it may address valuation, investment amount, ownership, governance, investor rights, exit provisions and other material terms. Example: A four-page term sheet outlines a ₹40 Cr investment for a 20% stake, one board seat, and standard investor protections, ahead of definitive agreements.
An Investment Committee (IC) is the decision-making body within an investment firm that considers whether a proposed transaction should proceed. The investment team will typically prepare an Investment Committee Memorandum (IC Memo) presenting the investment thesis, business analysis, risks, valuation, transaction structure and expected returns. Example: Before transferring funds, the deal team submits a 30-page IC Memo covering thesis, financials, risks and expected returns to the IC for sign-off.
Due diligence (DD) is the detailed investigation conducted before completing an investment. It may include:
- financial due diligence;
- commercial due diligence;
- legal due diligence;
- tax due diligence;
- operational due diligence;
- technology due diligence;
- environmental or regulatory diligence where relevant.
Example: A six-week DD process uncovers a ₹3 Cr tax contingency, which is then factored into the purchase price negotiation.
Quality of Earnings (QoE) analysis examines the sustainability and composition of reported earnings and is particularly relevant when EBITDA forms an important basis for valuation. Example: A QoE review finds ₹8 Cr of reported EBITDA came from a one-time insurance payout — that amount is stripped out before applying the valuation multiple.
Shareholder Rights and Governance
Private equity transactions frequently involve contractual rights beyond the percentage of shares owned.
Board rights may allow an investor to appoint one or more directors or observers. Example: An investor holding a 25% stake is granted one board seat out of five.
Reserved matters are decisions requiring specified shareholder or investor approval. Example: Any new debt above ₹10 Cr, or a change of CEO, requires investor sign-off even though the investor holds only 20% of the company.
Information rights provide investors with agreed access to financial, operational and other company information. Example: The investor receives monthly MIS packs and quarterly board reporting as a contractual right.
Pre-emption rights can give existing shareholders the opportunity to participate in future issuances before securities are offered elsewhere. Example: Before issuing new shares to a third party, the company must first offer existing investors the opportunity to maintain their ownership percentage.
Anti-dilution provisions seek to protect investors against certain subsequent issuances at lower valuations, although their structure varies considerably. Example: If the company raises its next round at a lower valuation, the investor’s earlier shares are repriced or adjusted to soften the resulting dilution.
Tag-along rights may allow minority shareholders to participate in a sale initiated by controlling shareholders. Example: If the founder sells a 60% stake, the minority investor can “tag along” and sell its shares on the same terms.
Drag-along rights may enable qualifying shareholders to require other shareholders to participate in a sale, subject to the agreed contractual provisions. Example: If the fund finds a buyer for 100% of the company, it can drag a small remaining minority shareholder into the sale.
A Shareholders’ Agreement (SHA) typically records many of these governance, ownership, transfer and exit rights between shareholders. Example: The SHA signed at closing consolidates board rights, tag/drag provisions, information rights and transfer restrictions in one binding document.
IRR, MOIC and Measuring Investment Returns
Two of the most frequently discussed private equity return measures are IRR and MOIC.
Internal Rate of Return (IRR) is a money-weighted measure that incorporates the timing and magnitude of investment cash flows. Consequently, receiving proceeds earlier can materially affect IRR. Example: ₹100 Cr invested returning ₹250 Cr after three years is roughly a 36% IRR.
Multiple on Invested Capital (MOIC) compares the value generated by an investment with the amount invested. A 2.0x MOIC, for example, broadly indicates that value equivalent to twice the invested capital has been generated, subject to whether the measure is being quoted on a gross or net basis and the precise methodology used. Example: ₹100 Cr in, ₹250 Cr out is a 2.5x MOIC — whether that took three years or seven, MOIC alone doesn’t say.
The two measures answer different questions. MOIC focuses on the multiple of capital, while IRR incorporates the time over which returns are generated. Private-market performance therefore should not ordinarily be assessed through a single metric in isolation. Example: Deal A: ₹100 Cr in, ₹250 Cr out after 3 years → 2.5x MOIC, IRR ≈ 36%. Deal B: ₹100 Cr in, ₹250 Cr out after 7 years → same 2.5x MOIC, IRR ≈ 14%. Same multiple, very different return quality.
Gross returns are generally measured before certain fund-level fees, expenses and carried interest, while net returns seek to represent returns attributable to investors after applicable fund economics. The distinction should always be understood when comparing reported performance. Example: A gross 2.5x MOIC may become roughly a 2.1x net MOIC to LPs once the 2% management fee and 20% carry are deducted.
DPI, RVPI, TVPI and NAV
At the fund level, LPs frequently evaluate additional measures.
DPI — Distributions to Paid-In Capital measures cumulative distributions made to investors relative to the capital they have contributed. It therefore focuses on value that has actually been returned. Example: LPs have contributed ₹500 Cr and received ₹200 Cr in distributions so far — DPI of 0.4x.
RVPI — Residual Value to Paid-In Capital compares the remaining unrealised value of investments with paid-in capital. Example: The remaining portfolio is marked at ₹450 Cr against ₹500 Cr paid-in — RVPI of 0.9x.
TVPI — Total Value to Paid-In Capital combines realised distributions and remaining unrealised value relative to paid-in capital.
Conceptually:
TVPI = DPI + RVPI Example: A fund has called ₹500 Cr. It has distributed ₹200 Cr cash (DPI = 0.4x) and holds unrealised value of ₹450 Cr (RVPI = 0.9x). TVPI = 0.4 + 0.9 = 1.3x — a decent headline number, but the 0.4x DPI shows most of that “return” hasn’t actually been paid out yet.
NAV — Net Asset Value represents the value attributed to the fund’s remaining investments and other net assets at a particular point in time. Example: The fund reports a NAV of ₹450 Cr for its unexited portfolio companies as of the latest quarter.
These measures are particularly useful because a fund can report substantial unrealised value while having returned relatively little cash. DPI therefore provides a different perspective from TVPI or IRR, especially before a fund has fully realised its portfolio.
Co-Investments, Secondaries and Continuation Vehicles
A co-investment allows an LP or another investor to invest directly alongside a private equity fund in a particular portfolio company, rather than obtaining exposure solely through the pooled fund. Example: A fund commits ₹30 Cr for a controlling stake in the portfolio company, but the deal actually needs ₹50 Cr of equity in total. Rather than the fund alone stretching to write the full cheque, the GP invites one of its LPs, say an insurer that had committed ₹10 Cr to the fund to co-invest an additional ₹20 Cr directly into that same company, alongside the fund’s ₹30 Cr.The insurer now has two separate exposures to the same deal:
Its share of the fund’s ₹30 Cr (via its pooled fund commitment)
A direct ₹20 Cr stake it holds outright in the portfolio company
The secondary market enables existing private-market interests to be bought and sold. An LP-led secondary generally involves an LP selling its interest in one or more private equity funds to another investor. Example: An LP needing liquidity sells its ₹20 Cr fund stake to a secondaries buyer at a negotiated discount or premium to NAV.
A GP-led secondary is initiated by the fund manager and can involve restructuring ownership of one or more portfolio assets. Example: The GP moves its best-performing portfolio company into a new vehicle rather than selling it at fund-end, giving existing LPs the choice to cash out or roll forward.
A continuation vehicle (CV) is a new investment vehicle into which an existing portfolio company or group of assets may be transferred. Existing investors may be offered liquidity or the opportunity to continue their exposure, while new secondary investors provide capital to the continuation vehicle. Example: A portfolio company still growing fast in year nine of a ten-year fund is moved into a CV, with new secondary investors funding it and existing LPs choosing to exit or stay invested.
Continuation vehicles have become an increasingly important mechanism for managing private equity assets when a GP wishes to retain ownership beyond the original fund’s expected holding period while offering liquidity options to existing investors.
Exits, Realisations and Liquidity
Private equity ultimately depends on converting investment value into realised proceeds.
An exit or realisation is the process through which an investor monetises all or part of an investment.
Common routes include:
Strategic sale — sale to a corporate or industry buyer. Example: A PE-backed logistics company is sold to a larger listed logistics player looking to expand its network.
Secondary buyout — sale from one private equity sponsor to another. Example: Fund I sells its stake in a portfolio company to Fund III of a different PE firm at a higher valuation.
IPO — Initial Public Offering — listing shares on a public stock exchange. Example: The portfolio company lists on the NSE, and the fund sells part of its stake in the IPO while retaining the rest under a lock-in.
Partial exit — sale of only part of an investor’s holding. Example: The fund sells 40% of its 60% stake in an IPO, retaining 20% for further upside.
The difference between realised and unrealised value is fundamental. Realised proceeds have actually been received through distributions or exits, while unrealised value remains dependent on the valuation and future realisation of investments still held.
Other Private Equity Terms Worth Knowing
Several additional expressions frequently appear in private equity conversations.
AUM — Assets Under Management: the assets or capital managed by an investment firm, subject to the methodology used. Example: A firm managing four funds totalling ₹2,000 Cr in commitments reports ₹2,000 Cr of AUM.
Fund size: the total commitments raised for a particular fund. Example: “Fund II closed at ₹500 Cr.”
First close: the first formal closing at which a fund accepts investor commitments and can generally begin operating under its fund documents. Example: A first close at ₹200 Cr allows the GP to start investing while fundraising continues.
Final close: the closing after which the fund generally stops accepting new commitments. Example: A final close twelve months later brings total commitments to ₹500 Cr, after which no new LPs are admitted.
Fundraising: the process through which a GP raises commitments from LPs. Example: The GP spends 14 months meeting pension funds, family offices and insurers before reaching its ₹500 Cr target.
Deployment: putting committed/called capital to work through investments. Example: By year three, the fund has deployed ₹300 Cr of its ₹500 Cr across six deals.
Portfolio construction: determining how fund capital is allocated across investments, sectors, geographies and other exposures. Example: The GP allocates no more than 15% of the fund to any single sector to keep the portfolio diversified.
Concentration: the degree to which a fund’s value is dependent on a relatively small number of investments. Example: If one portfolio company represents 30% of a fund’s total value, the fund carries meaningful concentration risk in that single position.
Follow-on investment: additional capital invested into an existing portfolio company. Example: A portfolio company needs ₹10 Cr more to fund a factory expansion, and the fund writes a follow-on cheque from its reserve.
Reserve: capital retained for future requirements, including potential follow-on investments. Example: The fund earmarks ₹50 Cr of its ₹500 Cr specifically as reserve for follow-on rounds.
Exit multiple: the valuation multiple achieved or assumed when an investment is sold. Example: A company bought at 8x EBITDA is sold three years later at 10x EBITDA — the exit multiple is 10x.
Multiple expansion: an increase in the valuation multiple between entry and exit. Example: A company entered at 8x EBITDA and exited at 11x EBITDA three years later — three turns of multiple expansion on top of any EBITDA growth.
Operational value creation: improvement in the underlying business through revenue growth, margins, efficiency, management, strategy or other operational initiatives. Example: The fund helps a portfolio company renegotiate supplier contracts and digitise its sales process, lifting EBITDA margin from 12% to 16% over two years.
J-curve: the pattern sometimes observed in private equity where early fund returns may initially appear negative because fees and investment costs arise before portfolio value creation and exits become evident. Example: A fund calls ₹50 Cr in Year 1 for fees and its first deal, with no exits yet — reported IRR is negative. By Year 5, first exits land and IRR turns positive. This is normal, not a red flag, but worth explaining upfront to a first-time LP.
Understanding the Language Behind the Capital
Private equity terminology can initially appear complex because it brings together fund structures, corporate finance, transaction execution, governance, valuation and investment-return measurement. The individual expressions, however, become considerably easier to understand once viewed as parts of the same investment lifecycle.
LPs commit capital. GPs manage that capital. Capital calls fund investments. Portfolio companies are acquired or funded. Investors seek to create value during the holding period. Performance is assessed through measures such as IRR, MOIC, DPI and TVPI. Eventually, exits and distributions convert investment value into realised returns.
For businesses considering private equity capital, familiarity with these terms can also improve the quality of discussions with prospective investors and advisers. Understanding not only valuation but also fund structure, investment horizon, governance, return expectations and exit considerations provides a more complete perspective on how institutional private equity investors approach an opportunity.
Lifecycle Explained with Example
Let’s walk the entire lifecycle through one consistent ₹100 Cr example, so the numbers connect end to end instead of jumping around.
The setup
A GP raises a ₹100 Cr fund. LPs (say, a couple of family offices and an insurer) commit the ₹100 Cr — but don’t hand it over yet. That’s the commitment.
Capital calls
Year 1: GP finds a deal and calls ₹30 Cr from LPs to fund it. That ₹30 Cr becomes paid-in capital. The remaining ₹70 Cr is uncalled capital — dry powder waiting to be deployed as more deals come along.
The deal itself
The ₹30 Cr goes into buying a company with:
- EBITDA of ₹10 Cr, valued at 8x → Enterprise Value = ₹80 Cr
- Company has ₹10 Cr debt, ₹5 Cr cash
- Equity Value = 80 − 10 + 5 = ₹75 Cr
- Fund puts in ₹30 Cr equity, rest funded by acquisition debt (an LBO)
That business is now a portfolio company. The fund gets a board seat, information rights, and standard investor protections (tag-along, drag-along) via the SHA.
Fees along the way
On the ₹100 Cr fund, a 2% management fee = ₹2 Cr a year, paid regardless of how the deal performs, to run the GP’s operations.
The exit
Three years later, EBITDA has grown to ₹14 Cr (operational value creation), and the fund sells at 10x (multiple expansion from 8x) → Exit EV = ₹140 Cr. After debt paydown, the fund receives ₹90 Cr for its ₹30 Cr investment.
- MOIC = 90 / 30 = 3.0x
- Held for 3 years → IRR ≈ 45%
Waterfall — who gets what
Of the ₹60 Cr profit (₹90 Cr − ₹30 Cr):
- LPs get their ₹30 Cr capital back
- LPs get their 8% preferred return first
- GP catch-up until it holds 20% of profit distributed so far
- Remaining profit splits 80/20 LP/GP — this is where the GP’s carry actually comes from
Let’s run the actual math
Step 1 — Return of capital
LPs get their ₹30 Cr back first. (₹60 Cr profit left to distribute.)
Step 2 — Preferred return (8% hurdle)
8% compounded on ₹30 Cr over 3 years ≈ ₹7.8 Cr to LPs.
(₹52.2 Cr profit remains.)
Step 3 — GP catch-up (100% to GP)
Catch-up does not mean that GP gets everything from here, it stops the moment the GP’s cumulative share hits 20% of profit distributed so far.
Solving for it: if catch-up = C, the GP needs C = 20% of (₹7.8 Cr preferred + C).
i.e. C ≈ ₹1.95 Cr
So now LPs have ₹7.8 Cr, GP has ₹1.95 Cr i.e. GP’s share = 1.95 / (7.8+1.95) = exactly 20%. Catch-up is done.
Step 4 — 80/20 split on the rest
Remaining profit = ₹60 Cr − ₹7.8 Cr − ₹1.95 Cr = ₹50.25 Cr, split 80/20:
- LPs: ₹40.2 Cr
- GP: ₹10.05 Cr
Final tally
| Particulars | LP | GP |
| Capital back | ₹30 Cr | – |
| Preferred return | ₹7.8 Cr | – |
| Catch-up | – | ₹1.95 Cr |
| 80/20 split | ₹40.2 Cr | ₹10.05 Cr |
| Total | ₹78 Cr | ₹12 Cr |
Check: GP’s total carry (₹12 Cr) / total profit (₹60 Cr) = exactly 20%
Fund-level scorecard (with this as the only exit so far)
- Paid-in capital across the fund: ₹30 Cr called
- Distributed back to LPs: ₹90 Cr → DPI = 3.0x
- No unrealised value left in this deal → RVPI = 0
- TVPI = DPI + RVPI = 3.0x
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Disclaimer
This article forms part of Insights — The Magnet Knowledge Series and is intended solely for general informational and educational purposes. It does not constitute investment, financial, legal, tax, regulatory, real estate or other professional advice, nor does it constitute an offer, solicitation, recommendation or assurance in relation to any investment, transaction, product, service or return.
Any information, views, examples, calculations, illustrations, scenarios, projections, estimates or references to valuations, yields, returns, interest rates, financial performance, market conditions or other quantitative or qualitative measures contained in this article are general or illustrative in nature. They should not be interpreted as actual, assured, promised or indicative future outcomes. Actual circumstances and outcomes may differ materially depending upon applicable facts, assumptions, market conditions, commercial considerations, regulatory requirements and other relevant factors.
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