Pvt Equity Funds Bullish On India

Foreign private equity funds are still bullish on India in terms of venture capital funding, but the focus is on infotech and related services as also back-office solutions.

At a seminar "Indian Private Equity - Investing in the New Environment" held in the city today, speakers were of the opinion that India stood a good chance of attracting private equity funding vis-a-vis its competitors China and Japan.

According to W Bowman Cutter, managing director, Warburg Pincus, US China had the advantage of having vast amount of foreign direct investment inflows, most of which were in strategic sectors, but it had very small private equity inflows.

"One reason for this is China's markets are nowhere as developed as in India. The stranglehold which the state had over the banks and the financial sector in general had led to the capital markets in China developing in a peculiar way," Cutter said.

Japan, he said, would take some time to get itself on the track and would probably miss a number of investment cycles in Asia. "It has yet to begin its focus on its true competencies," Cutter said adding that he did not see Japan as much of a competition in terms of attracting private equity.

According to the Asian Venture Capital Journal figures, India received the second-largest investment in terms of private equity at $1,104.90 million during January-November 2001, covering a total of 91 deals. Japan got the highest funding of $1858.38 million covering 39 deals, while the third in the list is South Korea with $1054.18 million, spanning 19 deals.

Daniel M Schwartz, chairman of the journal, said that most of the deals happening in India were small in nature but spread over a larger spectrum, while in the other countries the deals are larger in size.

However India has a long way to go - the large fiscal deficit, poor investment in infrastructure and the general financial weakness of the banking system are issues of concern to India, Cutter said.

Infotech-enabled services were trashed by the gathering as a low-end business activity with low returns.

The new areas, according to Rajiv Lall MD of Warburg Pincus, Singapore, is wireless devices for venture capitalists, while India is expected to become a services and IP powerhouse. He stressed on the need for India to team up with Singapore in this respect, which would result in a win-win situation for both.

On the impact of Enron debacle in India, Cutter said that it would have a large and negative impact but its filing for bankruptcy, the ensuing fight and the fact that it was facing problems on a global scale "has overshadowed the impact," to some extent.