IRR Calculator India — FY 2025-26

Calculate the Internal Rate of Return on any investment. For India. Uses current FY 2025-26 data.

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Initial investment (Year 0)

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Total upfront cost

Cash flow Year 1

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Cash flow Year 2

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Cash flow Year 3

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Cash flow Year 4

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Cash flow Year 5

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Hurdle rate / cost of capital (%)

Minimum acceptable rate of return

IRR in Indian Business — How Investors, VCs, and Private Equity Think About Returns

## Why investors speak in IRR When a VC says "we target 30% IRR," or a real estate developer promises "25% IRR," they mean the annualised return that makes NPV = 0 on all the cash flows. IRR is the lingua franca of investment returns because it: 1. Accounts for time value of money 2. Is scale-independent (% return, not absolute) 3. Is comparable across projects of different sizes and durations ## IRR benchmarks in India (2024) - **Startup venture capital**: Target IRR 25–40% (reflecting high failure rate) - **Private equity (growth stage)**: Target 18–25% - **Real estate development** (plotted land/villas): Projected 20–30% (often overstated) - **Listed equity** (Nifty 50): Historical 12–14% CAGR - **SME expansion** (equipment, outlets): Acceptable 15–20% - **Debt instruments**: Bank loan rate + 3–5% risk premium ## The reinvestment rate problem IRR implicitly assumes that interim cash flows (year 1, year 2 returns) are reinvested at the same IRR. For high-IRR projects, this is unrealistic. Example: A project with 30% IRR and large Year 1 cash flows assumes you can reinvest those flows at 30% — usually impossible. MIRR with a realistic 12% reinvestment rate would give a lower, more honest return figure. ## For real estate developers reading this Promoted IRRs on real estate projects often assume: - Full capital invested upfront (actual cash calls are phased) - Optimistic exit valuations - No holding period delays Ask developers for the XIRR (Excel IRR for irregular cash flows) and verify exit cap rate assumptions independently.

Common questions — India

What is IRR and how is it calculated?

IRR is the discount rate at which the net present value of all cash flows (initial investment + all future returns) equals zero. It's solved iteratively — there's no simple formula. The Newton-Raphson method converges quickly to the answer.

Should I accept an investment if IRR > cost of capital?

Yes, generally. If IRR (24%) > cost of capital (14%), the investment earns more than it costs to fund. However, be cautious: (1) Higher IRR with lower NPV may mean smaller absolute value creation. (2) IRR assumes reinvestment at the same IRR rate — not always realistic.

What are IRR benchmarks by investment type?

Private equity targets: 20–30% IRR. Venture capital: 30–40%+ target. Infrastructure projects: 12–18%. Real estate development in India: 18–25%. Listed equity expectation: 12–15% long-term. Bank loan rate (hurdle for debt-financed): 10–14%.

What is MIRR and why is it sometimes better?

MIRR (Modified IRR) fixes IRR's reinvestment rate assumption. Instead of assuming interim cash flows reinvest at the IRR, MIRR uses a more realistic reinvestment rate (usually cost of capital or risk-free rate). For projects with high interim cash flows, MIRR often gives a more realistic picture.

What if IRR can't be calculated?

If cash flows don't change sign exactly once (all positive after initial investment), there may be multiple IRR solutions or no real solution. This calculator handles standard cases (negative outflow, positive inflows). For non-conventional cash flows, rely on NPV instead.

IRR Calculator India — FY 2025-26

IRR in Indian Business — How Investors, VCs, and Private Equity Think About Returns

Common questions — India

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