Persistent Systems on course for IPO

Persistent Systems, the Pune-based outsourced product development outfit recently funded by US-based venture funds Norwest Venture Capital and Gabriel Venture Capital...

Persistent Systems, the Pune-based outsourced product development outfit recently funded by US-based venture funds Norwest Venture Capital and Gabriel Venture Capital, is coursing towards an IPO by April next year to raise some 30-50 million Rs 200-250 crore.

The two funds invested 18.8 million Rs 86 crore in Persistent in December 2005, and Norwest8217;s Promod Haque and Gabriel8217;s Navin Chaddha got management positions with Persistent.

During the current quarter, Persistent signed up 25 new customers and is now shoring up for an IPO to raise roughly Rs 200 crore as the VCs seek to 8216;8216;create a bigger company8217;8217; out of it.

8216;8216;There is an understanding today that you can create bigger companies in India than in the US. The US8217; product development market is worth 20 billion, of which we believe Persistent can get a big share. The IPO will also help it meet industry8217;s growing expectations on corporate governance,8217;8217; said Navin Chaddha.

Persistent is profitable and has shipped 700 products before last year8217;s VC funding came through. Apart from the relative ease of going public in India and the lower compliance costs involved in staying listed, an IPO my prove the best way to raise funds in relatively cash-strapped India.

8216;8216;In India we can go public with 15 million. Because not a lot of capital is otherwise available, the IPO route is favoured and that is why you see 4-5 IPOs every month. There are also lower compliance costs and fewer liabilities with CEOs and CFOs in India compared with the US,8217;8217; says Chaddha.

Gabriel itself is very bullish on India, he promises. The 260 fund has total assets worth roughly 0.5 billion, and though no specific allocation is for India, a lookout is on for 2-3 new early or mid-stage tech companies to invest in.

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These are likely to be announced in April, and will be on the consumer end of the telecom, auto component, financial services, travel or retail sector. 8216;8216;Gabriel typically places 1-5 million in a single investment,8217;8217; Chaddha said. 8216;8216;We are keen on mobile applications such as ring tones and wallpapers, internet sites like job and matrimonial web sites,8217;8217; he said.