'5 different sectors to attract over $8 bn investments'

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SME Times News Bureau | 03 Apr, 2010
A whopping investments of over USD 8.5 billion is expected in Indian Venture Capitalists (VCs) and Private Equities (PEs) by 2012 in five identified areas such as biotechnology and life sciences, logistics, clean technology, film production and education, says a study jointly brought out by Deloitte and ASSOCHAM.

The study titled "Indian Venture Capital – A Future Scenario", reveals that VCs and PEs which for long has been choosing IT for investment purposes, have found huge investment opportunities in above listed areas as regulatory regime in them is gradually disappearing.

Quoting findings of the ASSOCHAM & Deloitte paper, D S Rawat, Secretary General ASSOCHAM that India has large opportunities in Biotechnology and Life Sciences on lines of retail and Real Estate.

The Life Sciences sector in India has been attracting specialists Venture Capitalists from global and local funds. According to ASSOCHAM, US based Life Sciences Fund has recently invested approximately USD 40 million in a Hyderabad based pharmaceutical company.

Devices and diagnostics are other areas where investors are active. It is anticipated that the Biotechnology and Life Sciences will alone attract about USD 2 billion investments from VCs and PEs by 2012.

The Paper further states that logistics is another area in which VCs are expected to invest in excess of USD 2 billion in India’s maritime infrastructure and logistics as it strengthens cargo handling facilities to meet rising demand for exports and imports.

The paper mentions that National Maritime Development Programme envisages huge investment to upgrade India’s maritime sector of which 64% is expected to come from VCs and PEs firms. These funds are also looking at possibilities in ancillary business that support maritime trade such as warehousing and container freight stations.

Clean technology is still another area where VCs and PEs would grow more and more active. Investors until recently committed USD 300 million in number of cleantech investment deals. The momentum is expected to continue over the coming years given the government initiatives and policy focus on cleantech. It is expected that PEs and VCs would be able to jointly garner an investment of USD 4 billion in cleantech areas in next few years, pointed out Rawat.

The other prospective areas in which VCs and PEs would make huge investments include Indian film production and education. The Indian film industry currently is worth 2 billion and is expected to grow at double digit rate and reach a level of USD over 6 billion by 2012.

The paper further points out that venture capital investment is undergoing some interesting transitions. Developing economies like India and China continue to attract investments, early stage finance is becoming increasingly globalised. Investors are backing consumer and retail firms that benefit from the rise of the Indian middle class, as well as business services that cater to the nation’s growing economic sector.

The other transition is that the capital flowing to India is designed to expand existing companies. By contrast, venture capital in the United States, Europe and Israel is usually dedicated to backing new technologies or services.

In Asia, venture capitalists are still in the process of developing common evaluation criteria for investment, unlike in mature markets, where a common criterion is the level of attention paid to the entrepreneur’s personality and experience.

In Asia, different classes of stocks with different voting rights are relatively uncommon. Asian investors thus have to rely mostly on common stocks and other means to manage their portfolio risk. Traditional venture capitalists are expected to actively assist their portfolio companies in what are termed value-added activities. Most of the Asian venture capitalists’ assistance remains restricted to providing advice on financial matters.