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PE funds eye small towns for crunch-proof prospects

Businesses dependent on smaller towns and cities, which are not so much affected by the current economic slowdown, and companies providing services to large infrastructure contractors are seen as hot investment prospects.

business Updated: Apr 17, 2009 21:11 IST
Radhika Pancholi

Private equity funds are eyeing slowdown-resistent ventures for opportunities. Businesses dependent on smaller towns and cities, which are not so much affected by the current economic slowdown, and companies providing services to large infrastructure contractors are seen as hot investment prospects.

“In general there are a lot of good investment opportunities even outside the four metros. Construction of roads and bridges are taking place across the country and is not limited to the big cities,” said Rahul Raisurana, Managing Director, Standard Chartered Private Equity, which recently made an investment in construction services company Man Infraconstruction, a Mumbai-based company with projects across Maharashtra.

“The opportunity has always been there beyond the big cities. In fact we feel that the real opportunity is here as rural India emerges as a big market for all sectors,” Bejul Somia, managing director, Lightspeed Advisory Services India Pvt Ltd told Hindustan Times.

“Projects such as modernisation of airports in many non-metro cities such as Jaisalmer and opportunities related to environmental services in Tier 2 towns also offer good potential for infrastructure related companies,” said Raisurana.

The numbers may be small yet, but funds are warming up to these cities that offer opportunities in the mid-market segment. Lightspeed, which is a subsidiary of US-based Lightspeed Venture Partners, manages over $2 billion of capital commitments worldwide.

The company, which has been investing in India since 2004, is now looking at investing approximately Rs 75 crore to Rs 100 crore this year.

“We have already made two investments in the last year, with a total investment of Rs 80 crore between a local information business and an education business,” said Somia adding that the company had the capacity to invest more for high quality opportunities at reasonable valuations.

“We have a $800 million fund from which we can invest,” said Somia referring to Lightspeed VIII, an $800 million fund that was closed by the parent company Lightspeed Ventures in early 2008 for investments in the international and Indian market.