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ICICI Venture Fund to raise $125-140 million

India's largest venture capital firm, ICICI Venture, is raising $125 million to $140 million for a new fund called the ICICI India Advantage Fund, which will invest in four areas.

Renuka Ramnath, managing director and chief executive officer, said in an interview on Tuesday that the fund will invest in companies creating intellectual property, in service sector companies, in companies building big retail brands in entertainment and media, and in private equity.

The service sector investments will be targeted at information technology, telecom, Internet and business process outsourcing companies, Ramnath said.

The private equity investments could involve capital restructuring, funding management buyouts or buying stakes in privately-held companies which have been in existence for some time and may be moving toward selling shares to the public, she indicated.

ICICI Venture is a subsidiary of ICICI Ltd, a leading Indian financial service firm. The 13-year-old venture capital arm manages nearly $300 million invested through 12 funds.

LINK TO COMPAQ COMPUTER

ICICI Venture has sold an eight per cent stake in one of its funds to Compaq Computer Corp for about $4 million, Ramnath also said.

She said Compaq had bought the stake in ICICI Venture's self-financed E-fund, which is currently valued at $50 million.

The sale is part of ICICI Venture's new strategy to move beyond being a mere financier and passive investor, to playing a more active role in companies in which it invests, said Ramnath, who took charge of the venture capital company three months ago.

The Compaq tie-up is an example of the sort of alliances ICICI Venture looks to forge to add value to its investments.

"They (Compaq) have products and services in the technology space and if I am investing in a chip company, I have Compaq as a testing ground immediately," Ramnath said. "I will check with them how useful the product is, the difficulties in scaling up."

"The focus going forward is that ICICI Venture is not going to be a deal-driven organisation. It is going to be focused on building expertise and bringing that expertise to our investee company," she said.

RAISING NEW FUNDS

Ramnath said ICICI Venture may participate in second-round funding of companies it helped start up.

But in the future, ICICI Venture would prefer to be a second-round investor in service sector companies, "rather than create more new ventures in the current market scenario and walk them through the struggle of being an infant company," Ramnath said.

She also said ICICI Venture will soon start cashing out of investments made more than 18 months ago.

"We had committed four billion rupees in the last one to one and a half years, but capital that was committed before that is in harvesting stage," she said.

She said several exit options were being considered including preparing some of the companies for IPOs and looking for strategic sale of its stake for some others.

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