VCs are wary of more funding

With fears of an economic downturn and weak markets gripping foreign institutional investors FIIs and other stakeholders in the markets, venture capital VC investors too seem to be getting wary of participating in the India growth story. According to Venture Intelligence, a VC investment tracking firm, fund houses invested 158 million over 26 deals in India during April-June 2008, a dip of 24 million that flowed in the preceding quarter. VC firms had invested 182 million over 25 deals in the January-March quarter this year. The total venture investments during the first six months of 2008 has been 340 million across 51 investments.

Venture Intelligence CEO Arun Natarajan says that the impact has not been acute and good ventures have managed to get funding. 8220;VC investments during the first half of the year has not been much affected by the turmoil in the global financial markets,8221; Natarajan said. In the January-June 2007, VC investments to the tune of 363 million had taken place over 55 deals which grew to 384 million over 62 deals in the second half of the year. But VC investors have turned more cautious now. 8220;Though there has been a marginal dip in the total amount of funds that have been invested, around 20-25 deals have happened in every quarter,8221; said an analyst. While IT companies continue to account for a majority of investments, non-IT investments 8212; both by activity and value 8212; have now climbed up to 40 per cent. VC investments are increasingly focusing on alternative energy, media, retail and other consumer demand-led sectors.

On the other hand, volatility in the secondary markets seems to have shaken the faith of private equity PE players. PE firms invested about 2.8 billion in 77 companies during the April-June quarter. The amount was significantly lower than the January-March quarter which saw 115 deals totalling 3.6 billion. Total PE investments in the first six months of 2008 has been around 6.3 billion. The largest investment reported during the April-June quarter was 640 million raised by Aditya Birla Telecom ABTL, a subsidiary of listed mobile telephone services provider Idea Cellular, from Providence Equity Partners. The steep fall in the secondary markets resulted in a decline in the number of PE placement, pre-IPO and late stage investments during the latest quarter. There has been a significant drying up of investments in the banking and financial services industry and engineering and construction sectors.

Heavy Drop

158 million The amount fund houses invested over 26 deals in India during April-June 2008

182 million The amount that VC firms had invested over 25 deals in India during January-March 2008