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.
Evalueserve's chairman Alok Aggarwal said the regions that have traditionally received large amounts of VC/PE funding include US, UK, Canada, Germany, France, Nordics (i.e., Sweden, Finland and Denmark put together) and Taiwan. With the 2007 investment figures of $13.5 billion, India will leapfrog into the top seven regions in the world.
This increased deal activity is having its effect. ``Another 40 firms are in the process of raising money for investing in Indian market,'' he adds. For the record, there are different estimates by different agencies on total investments into India for 2007 ranging from $9.9 billion to $14.2 billion. While India saw the arrival of billion dollar plus funds during the year 2007, analysts expect the country to see PE commitments of around $40 billion by 2010-11.
Alok Mittal of Canaan Partners argued that more funds could be operating in India because of the bigger investment opportunities available, compared to China or Russia, for instance. "Probably more sectors in India are open to private fund raising," he added, explaining that a sector-wise comparison between markets like China and India could throw up interesting data.
A longer history of private enterprise in India also contributes its bit to the traction in PE play, opined Arun Natarajan of Venture Intelligence. ``There are more mature companies in India which is attractive to PE players. China tends to be more of a VC market though the scene has changed in the last the few years ,'' he said.
Another factor working in favour of India, just like China, could be "knowledge transferability" with a large pool of Indians having already cut their teeth in the global financial institutions. But is there far too many funds chasing deals in the country? Mr Mittal said the activity levels varies with the sector. "Ten funds chasing retail sector may not be big, but the same number in sectors like late stage financial services may be a different story," he added.
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