Venture capital funds and private equity investors disbursed an estimated $1.3 billion in India in 2004, a growth of 49 per cent over the previous year, a study -- Strategic Review 2005 -- by National Association of Software and Service Companies said.
In 2001 and 2002, the VC/PE investments were $1,135 million and $1,050 million respectively. IT, ITeS, media and healthcare were the key sectors witnessing VC/PE investment activity last year.
The total value of capital under management in the India VC/PE pool is estimated to have increased from $3.1 billion in 2003 to $3.5 billion in 2004.
However the picture is not that rosy if compared with other Asian countries.
During 1995-2004, Indian VC/PE firms have invested around $4.8 billion (till the end of December 2004) barely 5 per cent of the total invested in Asia. In contrast China and Hong Kong accounted for nearly 40 per cent of all Asian investments, Nasscom said.
There are 83 firms in India though the top 10 firms account for over two-thirds of the total investments made. The share of India in total firms is about 12 per cent. However, the amount invested is low suggesting the industry is extremely fragmented, Nasscom said adding this is a crucial indicator for a small size firm translates into a small fund size.
A total of 46 investments were made in 2004 with a total funding of $1.3 billion with over 90 per cent of these investments were made in the existing and in more cases profitable companies. Forty-three per cent were in management buy-outs including the largest deal of $500 million where Oak Hill and General Atlantic bought GE's stake in Gecis.
About 27 per cent of the funding was for expansion of existing profitable companies, 28 per cent of the investments were in private investment in public equities where venture investors buy stakes in listed companies including companies like Moser Baer, Max India and Jubilant Organosys.
Nasscom said despite the hype surrounding the biotech sector, the investments made in the sector is below $70 million spread over nine firms. Semiconductor, another high-profile sector also failed here, attracting less than $100 million investments till date.In the media, large companies like UTV, Sony, Zee and Vijay TV got large chunk of funds.