Multiple on Invested Capital

Ask a private equity manager "how did that fund do?" and the first answer is often a multiple — "2.3x". That number is usually the Multiple on Invested Capital.

It divides everything the investments are worth — the cash already realised plus the value of what is still held — by the capital that was put to work. It ignores time entirely: a 2x in three years and a 2x in nine years show the same MOIC.

The workbook defines it as "an investment metric to assess performance of private equity investments", calculated by dividing total returns, i.e. realised and unrealised value (the same numerator as TVPI) by total invested capital. Because the numerator is shared, MOIC and TVPI converge: once all the capital calls are met, total invested capital equals total paid-in capital, and TVPI equals MOIC.

Where MOIC sits in the family of multiples. The workbook builds the paid-in multiples in order — PIC multiple, DPI, RVPI and TVPI — and places MOIC immediately after TVPI because the two share a numerator:

• TVPI = (cumulative distributions + residual value) ÷ paid-in capital
• MOIC = (realised + unrealised value) ÷ total invested capital

When every capital call has been met, the denominators coincide and the multiples are the same number. The end-of-chapter sample question tests exactly this: "The MOIC of an AIF is the aggregate of its DPI and RVPI when all the capital calls are met" — which follows from MOIC = TVPI and TVPI = DPI + RVPI.

A valuation warning. The workbook adds that a consistently large MOIC to RVPI ratio should give investors and managers a red flag and "perhaps encourage them to revisit the underlying asset valuations".

Where it is disclosed. The SEBI common PPM template requires, in Section VI (Track Record of Manager), for each previous fund: investment strategy, size, number of investments, amounts deployed, Gross IRR, Gross MOIC, DPI, RVPI, TVPI and a description of portfolio companies and exits.

MOIC = (Realised value + Unrealised value) / Total invested capital

When all capital calls are met:
Total invested capital = Total paid-in capital  ->  MOIC = TVPI = DPI + RVPI

Illustrative figures. Sahyadri Private Equity Fund I, a Category II AIF, has drawn its full commitments of Rs 750 crore, so every capital call has been met.

MOIC = (540 + 1,035) / 750 = 1,575 / 750 = 2.10x
DPI  = 540 / 750           = 0.72
RVPI = 1,035 / 750         = 1.38
TVPI = 0.72 + 1.38         = 2.10x  = MOIC

The track record table in the manager's next PPM shows Gross MOIC 2.10x alongside DPI, RVPI and TVPI.

A careful distributor points out two things to Mrs Kulkarni, the prospective investor. First, Rs 1,035 crore of the Rs 1,575 crore is unrealised — two-thirds of the multiple is a valuation, not cash. Second, the multiple says nothing about time; the Section VI table also shows Gross IRR precisely because a 2.10x over five years and over ten years are very different results.

Chapter 6 (Risk and Return — Investor and Fund Perspective) introduces MOIC within 6.6.6, alongside TVPI, and one of the chapter's sample questions turns on MOIC equalling DPI + RVPI once all capital calls are met. Chapter 9 (Legal Documents and Negotiations — Investor Perspective) lists Gross MOIC among the track-record disclosures required in Section VI of the SEBI PPM template. Expect a true/false on the MOIC–TVPI identity and a disclosure question on what a PPM track record must show.

• MOIC and TVPI share a numerator but not, in general, a denominator. MOIC divides by total invested capital; TVPI divides by paid-in capital. They are equal only once all capital calls are met.
• MOIC ignores time. It is a multiple, not a rate of return; pair it with IRR.
• The PPM track record asks for Gross MOIC — before fees, expenses and carry — and separately for Gross IRR. Do not read it as the investor's net result.
• The red flag is a consistently large MOIC-to-RVPI ratio, which the workbook says should prompt a second look at underlying valuations.
• Unrealised value is an estimate. The workbook stresses, for RVPI, that residual value depends on the valuation methodology — and that estimate sits inside MOIC too.
• MOIC above 1 does not mean the investor made money after fees. Net and investor-level measures can be materially lower, as the worked case in 6.8 shows for IRR.