January 19, 2006
Chennai, India

Contact Information:

Arun Natarajan
Tel: +91-98410-10521
Email: arun@ventureintelligence.in

Private equity investments in India cross $2.3-B during 2005

While late-stage and publicly-listed companies cornered over 60% of PE investments during 2005, the Venture Intelligence India’s study shows that the year also witnessed a revival in early-stage investments.

Chennai, India: Private Equity and Venture Capital firms invested about US$2.3 billion in Indian companies across 147 deals during 2005, according to data from Venture Intelligence India (www.ventureintelligence.in), a division of TSJ Media. The amount invested, as well as the number of deals was significantly higher compared to the $1.6 billion invested across 68 deals during 2004. “Like in the case of the public stock markets, we are witnessing historically high investment levels in the PE industry as well,” said Arun Natarajan of Venture Intelligence India.

While late-stage and publicly-listed companies cornered over 60% of PE investments in 2005, early-stage companies re-emerged on investors’ radar screens during the year. In the last couple of years, whatever little early-stage funding that happened tended to be dominated by Indo-US cross border technology companies – companies which, while headquartered in the US, carry out a bulk of their R&D in India. 2005 marked a break from this trend, with purely India-based early-stage companies attracting more investor interest, the Venture Intelligence India study revealed. While the going was not easy for “seed stage” or pre-revenue companies as well as those seeking less than $2 million in capital, PE and VC firms provided $79 million in the first or second of institutional funding to 22 revenue generating (if not profitable) companies in 2005.

Source: Venture Intelligence India

With 44 deals worth about $474 million, the Information Technology and IT-Enabled Services (IT & ITES) retained its status as the favorite industry among PE investors. IT & ITES was followed by the manufacturing industry, with 26 deals worth about $366 million, according to the Venture Intelligence India data. (In fact, if automobiles and textiles were to be included under manufacturing, the figures would have been 40 deals worth over $522 million – thus overtaking IT & ITES in value terms).

"2005 is a year in which Private Equity has clearly established itself as a catalyst that can take Indian industry to the next level," said K.E.C. Raja Kumar, CEO of Bangalore-based UTI Venture Funds. "Companies across stages and sectors now have a clear appreciation of the value-add that Private Equity firms bring to the table. We will therefore not be surprised if the investment figures double during the current year," he added. UTI Ventures invested across various stages and sectors during 2005 from its second fund (the Rs 800 crore "Ascent India Fund") in companies like HBL Nife Power Systems (defense electronics), textiles companies Suryalakshmi Cotton Mills and Ambika Cotton Mills, Rama kirshna forgings (auto ancilliary) as well as in Naturol Bio-Energy, an innovative early-stage bio-diesel company.

Assisted by 24 investments in IT & ITES companies in the region, South India attracted 41% of all PE investments during 2005 (in value terms), narrowly beating Western India, which attracted 40% of the investment amount. Among cities, Mumbai topped with 37 PE investments worth $695 million during 2005, followed by Bangalore with 21 investments worth $368 million.

About Venture Intelligence India

Venture Intelligence IndiaVenture Intelligence India, a division of Chennai, India-based TSJ Media Pvt. Ltd., is the leading source of information on private equity, venture capital and M&A deals in India and Indian-founded companies worldwide. For more information, please visit www.ventureintelligence.in