VC investments in India slumped to $1.4 bn, says E&Y

Venture capital investments into India slumped nearly 18% to $1.4 billion last year, even though the number of such deals saw a spurt during the same period, according to global consultancy Ernst & Young.

Venture capital investments into India slumped nearly 18% to $1.4 billion last year, even though the number of such deals saw a spurt during the same period, according to global consultancy Ernst & Young.

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In 2011, such investments into the country had touched $1.7 billion.

Amid uncertain economic conditions, global venture capital investments plunged 20% to $41.5 billion in 2012. In the previous year, the same stood at $51.7 billion.

"The figures for 2011 (in India), however, contained a few large investments with a combined value of between $400 million to $500 million, and if these are excluded, the year-on-year comparison looks far healthier," E&Y said in a report released today.

However, the number of VC investment rounds witnessed in India last year jumped to 205 as against 175 in 2011. "Wealth creation in India over the past decade has meant an active domestic investor community especially for angel/early stage investing which has in turn provided India's VC industry with a degree of insulation from global shocks, and the outlook for the coming year is positive," E&Y Partner (Private Equity) Mayank Rastogi said.

As per the report, the Indian VC industry is heavily weighted towards later-stage investment. The proportion of deals in the revenue generating stage was 87% in 2012, up from 83% in the previous year.

"The reason for the predominance of late-stage investment is that, compared with Silicon Valley, Indian companies are focused less on innovation and more on application development and efficient delivery models, which take less time to develop into the revenue generating phase," it added. E&Y noted that outlook for this year is "relatively positive" for the Indian VC investment, especially on account of increase in amount of capital being invested in purely domestic opportunities. Globally, widespread economic uncertainty and a tough exit environment saw decline in VC investments to $41.5 billion, while the number of rounds fell to 4,970 during the same period.