Better Times Ahead ? |
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As pointed out in the reason for this survey, the Indian economic scenario does not inspire great confidence about growth prospects. Yet, this survey revealed that the VC industry,
at least, is quite upbeat about the future. |
Outlook for 2001 - 02 |
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In the near term, i.e. 2001-02, more than two thirds of the respondents expect at least some growth of the VC business in India. Only 13% expect
a decline. |
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Long term (5 years) outlook |
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As regards the long run (next five years), most respondents (78%) expect the investible funds to grow, many profitable exits (40%),
more venture funds (59%), increase in number of investments (56%) and increasing VC investments (56%). Hardly 12% responses were pessimistic. An
overwhelming percentage held favourable views, such as: |
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"VC environment is certainly related to the economic condition as well as the secondary markets. We see the current scenario as a
passing one. Over a period of five years we would once again see buoyancy in the economic condition as well as the secondary markets which would result in renewed interest in the VC activity. Importantly, India still offers much
more potential than developed markets showing consistent growth in GDP in excess of 6% p.a." |
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"There are many available investment opportunities available in India, at reasonable pricing. Furthermore, the prevailing sentiment
in public markets would generate additional opportunities for private equity." |
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"The Technology Sector is expected to grow and India is likely to witness increased trend in investments" |
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"India will continue to attract VC money as fundamentally competencies in Technology and skilled personnel as well as
entrepreneurship continues to exist." |
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"The global slowdown will affect the growth of business in India. But, the slowdown in growth will be offset by the number of good investments
opportunities available in India" |
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"Though the VC industry started in India in 1987, the actual growth and real venture investments took place in late 90s. Also the number of VCs
increased many fold starting from 1996, peaked in 2000 and the investments Made by all these VCs already starting maturing and would hit the capital markets once there are positive signs of recovery. Once these early VCs gets into
the exit mode and show the return potential of their investments, the foreign investors interest in the Indian VC industry and would have a positive impact on investible funds. |
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"VC industry in India is still at a nascent stage hence there is bound to be considerable growth in this industry over the next few years. Further
with the upturn of the economy and the capital markets, more opportunities for meaningful investments will emerge thus creating an increase in the number of deals. |
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The surprisingly optimistic view of the VCs could, among other things, be a reflection of the fact that some of the international investors view growth prospects
more positively in India in comparison to the recessionary conditions they are witnessing in the more developed economies. |
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A look at the capital markets shows that foreign institutional investors (FIIs) continue to remain bullish - during the first four
months of 2001 itself, their net investments in the capital markets have crossed the magic figure of Rs 10,000 crore. The entire calendar year 2000 had resulted in inflows of just Rs 6,543 crore. This is probably on account of the
relative attractiveness of the Indian stocks in the global perspective, following the bearish outlook in the US and other markets. The low valuations of Indian stocks have also attracted FII funds. |
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Lower current market valuations are prompting VCs to hold planned exits for later. Meanwhile, they plan to consolidate their existing investments for better
management of the total funds and move in for second round of funding in existing projects so that higher equity stakes can be obtained at relatively lower current valuations. Clearly, they expect to make a 'killing'
later when the markets are on the 'up' – having made an entry at the basement level, at bargain prices. |
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