He was one of the 30-member team - all heads of Indian companies and banks - that winged to New York mid-November to meet the heads of 100 top United States-based venture funds and private equity investors, to hard sell the India story. And ever since, he has been busy keeping the "170 requests for one-on-one meetings that have already come in."

"This indicates the strong appetite that foreign investors have for quality investment opportunities," says Kumar, adding, "there is a buzz once again in the venture capital industry over opportunities in India."

Indeed, going by the investments of VC funds private equity investors over the last 12 months, it appears that the India story is slowly becoming an integral strategy for a large number of foreign venture capitalists from all over the globe. And many of them are taking a fresh look at the country.

"There is fresh demand arising in the market. U.S. companies looking at fresh investment are looking at Indian companies," says Norwest Venture Partners' Managing Partner, Pramod Haque who was Forbes' number one venture capitalist in 2004.

According to a report from TSJ Media, that tracks VC flows in the country, venture capital and private equity firms invested over $1.1 billion in 66 Indian companies during 2004. The amount pumped in was significantly higher than the $774 million invested during 2003. The single-largest investment during 2004 was the $149 million put in by Warburg Pincus in the New Delhi-based Moser Baer, the publicly-listed maker of optical storage media.

And interestingly, the business process outsourcing sector was the favorite of the investors, attracting the maximum number of investments with nine Indian companies in this sector raising about $148 million.

While the entire Asia Pacific region attracted around $17.5 billion of private equity and venture capital in 2003 there is a clear trend towards emergence of successful India-centric venture capital and U.S.-based VCs' increased appetite to invest in India. For instance, in the last year, more than 40 U.S.-based venture capitalists visited India, which is the highest ever.

However, unlike the trend seen in the period 2000 to 2003, there seems to be a shift in the focus and direction of VCs investing in the Indian market. For instance there has been a move from early stage opportunities. A lot of recent vintage funds particularly private equity funds seem to be looking at growth and expansion stage opportunities.

"Investments in BPOs declined both in terms of the number of deals as well as the total amount invested compared to 2003," said the TSJ report.

"A major portion of the VC and PE fund investments in 2004 went to late-stage and publicly-listed companies. The year witnessed as many as 20 PIPE (private investment in public enterprises) deals," said Arun Natarajan, TSJ Media.

Gaurav Dalmia, director, First Capital, noted, "It is true that investments at the seed stage have declined with most venture capitalists looking at growth capacity rather than early stage risk financing."

According to Dalmia although "sectors like IT and BPO continue to attract the usual attention, sectors such as real estate are beginning to find favor with some specific funds like real estate funds. Entertainment again is becoming accepted as a high growth sector and venture capital investments are beginning to be made in the entire media arena. There is also a lot of interest in life sciences arena."

So what changed in 2004 started that is making VCs renew their interests in India?

One of the big reasons is that the country's 15-year old reforms process has finally stated taking effects. At a projected 6-plus percent GDP growth rates India has not only emerged as one of the fastest growing economies in the country, but thanks to a booming domestic market, its stock markets are also booming like never before, which also offers the best promises of return the VC community ever got from the country.

According to the Securities Exchange Board of India (equivalent to the SEC in the U.S.), 2005 is expected to be a record year for primary markets with $15 billion of IPOs in the pipeline, and that according to the Prime Database, an IPO tracking agency, could enable at least 40 venture capital-funded projects to go public.

Moreover, SEBI has made significant changes in the regu latory framework pertaining to the venture capital industry. "The thrust of these changes was to enable a smoother flow of venture capital through relaxation or removal of restrictive clauses like lock-in-period and investment limits," says SEBI chairman GN Bajpai. "Consequently, what we see (increased VC inflows)is a result of those efforts."

The general consensus is that 2005 could be an even better year for India in terms of VC inflows. Although few are willing to hazard a guess just yet as to how much could flow in this year, the industry is poised to move further ahead, say industry sources.

"Overall the Indian VC scenario is maturing and with large U.S. pension funds also entering, the industry is poised to grow," said Saurabh Srivastava Chairman, Infinity Technology.

"India is already amongst the top five destinations for venture capital in Asia and that this position will improve," he added.

All rights reserved. � 2004 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International.

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