Venture capital investments halve in 2003

Venture capital and private equity investments in India declined to $530 million in 2003 from $1.1 billion in 2002.

According to a report by the National Association of Software and Service Companies, venture capital funds made 45 investments in 2003. Over 80 per cent of these investments went to profitable companies.

Funding of start-ups declined from 36 per cent of total venture capital investment in the country in 2001 to less than 10 per cent in 2003.

"Venture capital funds that focus on later-stage deals are finding fewer traditional opportunities because the exit time has lengthened. As a result, venture capital funds are finding that the only new area that fits them is expansion stage deals that require even more time to mature before exit becomes a possibility," the Nasscom report says.

The booming business process outsourcing sector received $70 million in venture capital investment in 2003, with one of the key deals being the $20-million investment by Olympus Capital and Intel Capital in Nipuna, the BPO subsidiary of Satyam Computer Systems.

According to Nasscom, despite the significant hype surrounding the biotechnology sector, investments in the sector were negligible, less than $60 million till now, spread over seven firms.

The largest among the venture capital and private equity investments in 2003 was ICICI Bank receiving $150 million funding from the government of Singapore, followed by Aurobindo Pharma receiving $71 million from Chrys Capital, CVC International and Merlion.