I attended a recent Investment in China and India Summit hosted by Financial Research Associates  I will use this forum to share some of the slide/insights that were given at this summit for the benefit of those hoping/thinking/planning on investing in an Asian country – China, India or Japan.

I received a brief history of India’s Investment revival. I will share it here in three parts.

With the public stock markets soaring during the year (the “Sensex”, the Bombay Stock Exchange’s broad market index, surged by almost 40%), Private Equity firms witnessed late-stage and PIPE deals become more and more expensive. From FIIs (Foreign Institutional Investors) to FCCBs (Foreign Currency Convertible Bonds), late-stage PE firms faced competition from multiple sources. As if these weren’t enough, two cash rich Indian business groups – Bennett, Coleman & Co. Limited (BCCL) and Reliance – picked 2005 to become hyperactive in the private equity space.

More than half-a-dozen private and public companies opted to strike “barter” deals with BCCL, India’s largest media group, during 2005. As part of these innovative deals, BCCL invested cash to pick up between 5-15% stakes in fast growing, consumer focused companies which agreed to plough the money back as advertising in BCCL’s publications and electronic media channels. In total, BCCL is estimated to have notched up over 40 such barter investments. Reliance Group firms, despite an ongoing wrangle in the promoter family, made a series of financial and strategic investments during 2005 in sectors ranging from energy to entertainment. Such intense competition for deals from a range of new domestic and overseas sources has already prompted some PE firms to look towards real estate and even earlier-stage investments for succor.

While late-stage and publicly-listed companies cornered over 60% of PE investments in 2005, early-stage companies re-emerged on investors’ radar screens during the year. In the last couple of years, whatever little early-stage funding that happened tended to be dominated by Indo-US cross border technology companies – companies which, while headquartered in the US, carry out a bulk of their R&D in India. 2005 marked a break from this trend, with purely India-based early-stage companies attracting more investor interest. While the going was not easy for “seed stage” or pre-revenue companies as well as those seeking less than $2 million in capital, PE and VC firms provided $79 million in the first or second of institutional funding to 22 revenue generating (if not profitable) companies in 2005.

For more information, email arun@ventureintelligence.in

And then, India was ready to take its place on the global economic theatre.

For more information, email arun@ventureintelligence.in

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