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VCs invested $700mn in India during 2006

The government on Friday announced that Venture Capitalists poured in $700 million of investments in India during fiscal 2006 as compared  to $800 million of UK and $820 million of China from across the globe and hoped that such investors number will multiply particularly in case of India in years to come.

Stating this at ASSOCHAM organised Global CXO & VCs Conclave 2007, Chief Economic Advisor, Ministry of Finance, Dr. Ashok K Lahiri said that venture capitalists and private equity holders could have great potential for parking their surpluses in the Indian companies especially in large and medium sized segment.

He said that before 2000, VCs had hardly any investment in India which started picking up from 2000 to 2003 and by the end of 2006, the investment volumes have grown significantly, showing the strength of Indian economy and in future such worthwhile investments would multiply.

Releasing the Paper brought out by ASSOCHAM on Indian PE/VC Market Firing on all Cylinders – Liquidity all round’,  Dr. Lahiri indicated that increasing enthusisam for globalisation coupled with government initiatives for further liberalisation of its regulatory environment towards private investments inspired VCs and Private Equity holders (PEs) to raise capital overseas for its heavy placement in start ups companies in India.

The Paper indicated that that VCs such as Intel, CISCO, Motorola, Sequioa Capital, Oak Investment Partners, Matrix Partners, Trident Capital, Sherpalo Ventures, Bessemer Venture, Walden International, Canaan Partners, International Finance Corporation, Norwest Venture, Gabriel Venture, Draper Fisher Jurvetson have successfully generated US$ 400 million to invest in India as its market has developed  appetite for innovations and entrepreneurship across various industry verticals. PEs conglomerates comprise Warbugs Pircus, General Atlantic, Carlyle, 3I, Temasek, Kohlberg Kravis Roberts, Blackstone, Goldman Sachs, Providence Equity, Macquire and Francisco Partners.

ASSOCHAM Paper has forecast that the number of such VCs would more than double in US alone and multiply many fold among the economies of scale for India in the year 2007 and 2008 as corporates, private equity holders and VCs across the globe are growing enthusiastic to invest in India  to realise the potential of its booming financial markets.

However, it is also partially driven by regulatory aspects (e.g. cumbersome delisting regulations) as a result of which conducting public to private transactions is not easy. Furthermore in Western markets Buy-Outs funds typically raise any where between 50-80% of the overall deal value in the form of loans (“leveraged finance”) which is secured against the targets balance sheet.

It also points out that several foreign PE/VC firms such as Warburg Pincus, CDC Capital, Baring Private Equity Partners, Draper International, HSBC Private Equity entered the country. The PE/VC activity roughly started in 1996-97 and gained momentum in 1999 and 2000, on account of overall boom in Information technology, Telecom and Internet sector.

Speaking on the occasion, West Bengal IT Minister,  Dr. Debesh Das demanded that central government should provide broadband services to rural poor to access them technological innovations through learning exercises to enable them become part of technological revolution.

Without easy availability of broadband services, the benefits of ITEs and BPO revolutions would not percolate down to rural masses and hence the revolution will have no meaning to uplift rural poor for their economic growth, he said.
Source : Indiainfoline

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