Venture Capital firms invested $543 million across 98 deals in India during 2007, according to a study by Venture Intelligence in partnership with the US-India Venture Capital Association. The amount invested during 2007 was slightly higher compared to 2006, which witnessed 94 deals totalling $500 million. ''With early stage investments accounted for about 66 per cent of all investments during the year, the resurgence in seed and first round investments has been a key highlight of 2007,'' said Arun Natarajan, founder and CEO of Venture Intelligence. Over 50 per cent of the VC investments during 2007 were below $5 million, including 23 per cent below the $2 million threshold, the US-IVCA/Venture Intelligence study showed. […]

Exits in the Indian private equity (PE) market in 2008 are expected to maintain the momentum they have acquired over the past two years. The recent volatility in the stock markets may put initial public offerings (IPOs) by PE-backed companies on hold in the short term, but this is not expected to impact net gains from overall exits during the year. In calendar year 2007, PE investors completed exits worth an estimated $1.5 billion (Rs5,910 crore) via strategic stake sales or secondary transactions. In addition, there were 14 PE-backed IPOs during the year. The numbers on exits were compiled by Mint from data provided by a Mumbai-based PE firm that did not want to be named, industry reports and independent data providers Thomson Financial and Four-S Services Pvt. Ltd. Last year, there were eight disclosed exits with ticket sizes more than $100 million against only one in 2006. Leading PE firms attribute last year’s strong exit run to soaring valuations and the ripple effects of the US sub-prime crisis. The majority of investors say that the fundamentals of the Indian economy are steadfast and companies will continue to expand. Anil Ahuja, managing director and co-head for Asia at London-based 3i Group Plc. said: “This year will see exits of investments made in 2005, which could be a bigger number than last year.” Sequoia Capital India managing director K.P. Balaraj added: “2008 will see more exits because PE and trade buyer capital is focused on India.” Seven of Sequoia Capital’s portfolio companies will be considering IPOs this year. […]

The Prime Minister’s Economic Advisory Council‘s report is, as these reports tend to be, a methodically compiled snapshot of the Indian economy at a point in time. Its recommendation that private equity flows be treated as portfolio flows though does appear a little odd. The government’s seeming obsession with classification stems from the fact that India’s foreign exchange reserves, in contrast to those of China and the oil rich economies, originates due to capital, and not trade, flows. These, the policymakers fear, are likely to be more volatile. However private equity, which India has been attracting in copious amounts, is hard to classify. In some cases private equity firms such as Blackstone, ICICI Ventures and Actis have taken over companies and are running them. All private equity firms, of course, eventually exit but the time horizons range from three to five years. Plainly, these cannot be characterised as portfolio flows. Even pre-IPO placements to FIIs are subject to one year lock-ins. […]

India has the most number of private equity (PE) funds operating amongst the BRIC markets, considered the emerging hotbed of PE action. According to Emerging Markets Private Equity Association (EMPEA) estimates, there are some 89 VC/PE firms managing 153 funds in Brazil, about 28 firms in Russia and 115 in China while India has over 160 firms. About 120 of these India-focused firms are either those who have raised money from outside India or are subsidiaries of non-Indian VC/PE firms. Experts opine that a growing economy, especially on the domestic side, increased entrepreneurial activity and the IT/ITeS effect is attracting newer investors to the country. The huge number of experienced techies returning to India and setting up companies has also increased the exposure of Silicon Valley venture firms to the country. […]

Mid-sized companies seeking capital to enter their next stage of growth now have the perfect platform, India’s first-ever Private Equity Fair (IPEF 2008), scheduled to be held at Mumbai on February 27, its organisers YEN Expo Pvt Ltd said here on Wednesday. IPEF 2008 will provide a B2B platform to companies to showcase their business and growth plans to 150 PE funds from India and abroad. A large number of cases are being reviewed by YEN and analysed by IIM-Ahmedabad. Out of these the best 25 companies will be short listed to participate in the fair. YEN and IIM-A will then work with these companies to make them “investment ready,” according to a release. Arun Chandrachud, CEO, YEN Expo, himself a senior investment banker formerly with Ernst & Young, said mid-sized companies find it difficult to attract private equity investors as they are unable to present their business plans in a format that is readily appreciated by a private-equity investor. […]