Highlights:-
-- $70-75B estimated PE/VC Investment in India in 2010-2015
-- $22B for follow-up funding of current PE-funded companies (660 of the 1800 funded companies)
-- $30B in new investments in 2000 companies in top 4 sectors
-- $20B-25B in new investments in other sectors
-- $10B of the above investment likely to be Venture Capital, of which $7.5B expected to be in technology
The private equity and venture capital industry is likely to witness estimated investments worth $70-75 billion in 2010-2015 with existing growth rates. However, with proactive encouragement and incentives from the government, a $100-billion investment target is possible during this period, according to the data released by IDG Ventures India.
Releasing the data during the recent VCCircle India Invest 2010, Sudhir Sethi, founder, chairman & managing director, IDG Ventures India, mentioned that India will attract higher investments in PE/VC asset class than China as it has happened already in select quarters. A sum of $10 billion is likely to come by way of Venture Capital, of which $7.5-billion investment is expected to be in technology during 2010-2015, according to the study. A capital of $40 billion was invested by PE/VC funds in the 2004-2009 period in India.
As per the estimate, 660 companies are likely to attract $22 billion worth follow-on funding in 2010-2015. About $238 million worth follow-on funding will take place in growth stage, $1.2 billion in late stage and $1.38 billion in buyout/ PIPE in 2010.
In 2011, growth stage will get $295 million follow-on funding, late stage to get $986 million funding and buyout/ PIPE will get $1.39 billion funding. In 2015, the figures would be $478 million in late stage and $274 million in buyout/ PIPE.
As per the sector-wise forecast, IT & ITES, manufacturing, healthcare and engineering & construction will witness $30-billion plus investment in 2010-2015. Against an investment worth $6.6 billion in 2004-2009, IT& ITES will witness investment worth $12.8 billion during 2010-2015. For manufacturing, it would be $6.5 billion against $4.7 billion. Healthcare will be in the second slot with estimated $8.12 billion investment in 2010-2015 against $3 billion in 2004-2009. For engineering & construction, it would be $6.75 billion against $3 billion. In India, technology investments is now about software products, medical devices, energy and cleantech, says the study.
New technology deployment (3G/WiMax) will likely to drive next wave of PE funding in the telecom sector, which has a potential for PE investments worth over $8 billion for 2010-2015. There is an estimated $3 billion equity funding requirement for 3G license purchase alone, assuming 1:1 debt-equity ratio. The new banking licenses will spur equity investment of $200 million for each bank. The BFSI sector has $6 Billion worth potential for next 5 years.
Microfinance institutions are likely to continue to need strong equity support. Energy is the other major sector that will see $5 billion worth PE investments in 2010-2015 with addition in capacity by 150,000-MW by 2015 requiring an equity investment of $30 billion. Education has a $2 billion potential against $300 million invested so far. Retail sector, against $450 million investment so far, will see $2 billion worth investments in next 5 years.
The PE/VC investments in India for 2009 was just 0.3% of the total GDP growth, while, in the US, it was 0.7% of the total GDP growth. At its peak in 2007, PE/ VC penetration was 1.2% when GDP grew 8%. In the same year, it was 3.5% of the GDP growth in the US. Interestingly, Indian PE/ VC penetration as percentage of GDP in 2005 was 0.3%.
The VC investments in India as percentage of total PE investments is growing in a steady pace during last three years. The VC investments in India was 7% of the total PE investments which grew to 7.5% in 2008 and to 12.3% in 2009. In the US, it grew to 18.6% in 2009 from 9.3% in 2007.
According to Mr Sethi, at 10% share of VC, India has a capacity to absorb $10 billion VC investments in 2010-2015. As far as the PE investments during 2004-2009 are concerned, India witnessed 268 deals worth $4 billion in 2009 against $6 billion raised by India focused funds. In 2007, against $9.6 billion raised by India focused funds, 473 deals worth $13.57 took place in India. Overall, over $40 billion was invested in 1800 companies during 2004-2009. During the same period, $3.3 billion of venture capital invested in 625 deals, where 73% (by value) and 67% (by volume) made in technology companies.
By a stage-wise breakup, about $14.6 billion worth PE investments were witnessed in late stage, which is 33% of total investment during 2004-2009 while PIPE deals worth $12.32 billion (28%), growth stage deals worth $7.5 billion (17%), early stage deals worth $3.94 billion (9%) and buyout deals worth $4.11 (9%) took place during 2004-2009.
