IT sector bounces back on VC radar

Indian and Indian-founded IT and ITeS companies had taken a backseat in the first quarter (April - June 2005) this fiscal in terms of attracting venture capital and private equity investments. But, it has bounced back in second quarter (July - September 2005) in sheer number of deals. However, in terms of funding raised, first position was taken by the manufacturing sector.

The IT and ITeS sector witnessed seven deals worth $75 million during the latest quarter with companies such as Newgen Imaging Systems, Nevis Networks, VisualSoft Technologies, Four Soft and Northgate Technologies raising funds.

"While the sector is not a topper the amount of funding raised, the increased activity (number of deals) shows that IT & ITeS companies are back on the radar screens of private equity investors," said Arun Natarajan of Venture Intelligence India Service which tracks VC investments in India and Indian-founded companies worldwide.

The manufacturing sector was second with six deals but was right upfront in the amount raised with almost $100 million. The largest deal in the sector was the buyout of Associated Cement Companies' (ACC) refractory business by ICICI Ventures for about $59.8 million. Other manufacturing companies that raised funding during the quarter include Apar Industries, Hindustan Sanitaryware & Industries and International Auto.

The healthcare and textiles sectors, with four deals each, were tied in the third place. Healthcare firms, led by the $45 million investment by ICICI Ventures and CVC International in Perlecan Pharma, raised about $100 million.

Three Media & Entertainment companies attracted private equity investments worth $76 million.

The biggest deal in the sector was the $45 million invested by European private equity firm 3i in Nimbus Communications.