Private Equity firms flock to IT sector

Priya Padmanabhan

BANGALORE: Investor interest in Indian IT and the ITES companies is on the increase this year with PE firms investing in 32 deals worth about $317 million.

According to a survey by Chennai-based research agency, Venture Intelligence, IT and ITES re-emerged as the favorite industry among PE investors during the latest quarter. The manufacturing industry followed with 14 deals worth $289 million.

According to Arun Natarajan, CEO, Venture Intelligence, PE firms are investing in various stages of a company’s growth. “They have invested across all stages in this industry during the recent

quarter - from early-stage (companies like Paymate and Travelguru) to growth stage (Insilica and IMImobile) to late-stage (Microland) to already listed companies (Allsec, Rich Crest and Subex). Most PE investors preferred late-stage and growth-stage investments.

Some of the top investments in the IT sector in the July-September period include $100 million investment into Quatrro BPO by Olympus Capital; $18 million into inSilica by a group including Intel Capital, Flextronics, Crossbow Ventures, Dow Ventures and NewPath Ventures, Allsec Technologies that received $17 million from Carlyle.

In terms of exits, PE and VC firms obtained exit routes in three IT and ITES companies during July-September 2006. The $224 million NYSE IPO of WNS Global Services, India’s second largest BPO firm, was the largest PE-backed IPO during the period. WP, which held a $64.7 per cent stake prior to the IPO, is estimated to have realized about $29.8 million as part of the issue.

Other exits include GVFL exiting out of Parsec Technologies by selling its stake to the company’s promoters and M2W - the Chinese subsidiary of Mumbai-based Mobile2win (which had Softbank China and Siemens Ventures as investors) that was acquired by Walt Disney in September.

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