40 venture-funded projects may go public in 2-3 years

Around 40 venture capital-funded projects can be expected to go public over the next two to three years, according to the Economic Survey.

According to the figures put out by the government, as on March 31, 2004, there were 44 Sebi-registered venture capital (VC) funds which had raised Rs 1,750 crore of resources from domestic and foreign investors. Out of this, foreign investors put in Rs 230 crore.

The VC funds invested Rs 1,415 crore in 409 companies. The survey's calculation is based on one in ten of the above venture capital-funded projects coming out with an IPO.

"This is a significant number and highlights the economic significance of the VC industry as the breeding ground for important companies of the future," the survey said.

The largest five VC funds are ICICI Venture Funds with a corpus of Rs 486 crore, IL&FS Investment Managers with Rs 211 crore, GVFL Ltd with Rs 103 crore, IDFC Asset Management with Rs 100 crore and SIDBI Venture Capital with Rs 100 crore.

The survey said the Indian VC industry is done with the initial stages where investments were being made but exits were unproven.

There is an innate lag between investing in a start-up and obtaining an exit "" provided the project succeeds.

It is now important for this segment to move on to the next stage. "A steady stream of profitable exits where the VC fund sells out its holding in a start-up are required for the sustainable growth of the VC industry," the survey said.

In the last financial year, Sebi-registered VC funds obtained 56 exits amounting to Rs 116 crore. Out of this, four exits were through the IPO route raising Rs nine crore, while buyouts account for the other 16 exits raising Rs 42 crore. These exits reflect investments made some years ago, according to the survey.