Private Equity & VCAdvanced
IRR
Internal Rate of Return
The annual return that makes the present value of all cash flows equal zero.
Detailed explanation
IRR accounts for timing: getting money back sooner raises IRR. It is the headline return metric for PE and VC funds.
Formula
0 = Σ CFₜ ÷ (1 + IRR)ᵗ
Example
Invest ₹100 cr, receive ₹200 cr after 5 years → IRR ≈ 14.9%.
Why it matters
The standard yardstick for comparing deals and funds.
Key points
- Time-sensitive.
- Can be inflated by quick exits.
- Read alongside MOIC.
Related terms
More in Private Equity & VC
Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.