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Summary:

Earlier this morning, Cisco Systems and 3i along with Oman Investment Fund announced a $125 million investment in Nimbus, a media company based in Bombay. And with this big investment, thus began another crazy year of private equity investments in India. The PE investments in India […]

Earlier this morning, Cisco Systems and 3i along with Oman Investment Fund announced a $125 million investment in Nimbus, a media company based in Bombay. And with this big investment, thus began another crazy year of private equity investments in India.

The PE investments in India topped out at $7.46 billion in 2006 and are estimated to touch $10 billion in 2007. If giants like 3i and Cisco keep walking around with open checkbooks like they currently are, then it won’t take long. Cisco, as you might remember had said that it would invest $1 billion in India, of which $100 million was slotted for start-up investments.

Hutch Essar, one of the larger India mobile operators, is in play, and if the winner is not Vodafone, then expect large PE giants like the Carlyle Group and Blackstone Group to play a significant role. Several others, like long-time telecom buyout investor Providence Equity Partners, have pitched a tent in New Delhi, after buying a 15 percent stake in local mobile operator, Idea Cellular.

These new comers will be competing with seasoned India investors. Only recently, one of our old buddies Ramanan Raghavendran, till recently with TH Lee Putnam, has set up Kubera Partners, which has raised $225 million for its private equity investments, with a focus on India and Asia. His partner in the fund is Kumar Mahadeva, who had previously started Cognizant Technology Solutions, an outsourcing company that now trades on NASDAQ. With so much private equity, India veterans like Raghavendran might have a better chance of finding bargains than some of the newer investors.

All this frenzy begs the question: is this boom legit or is it a bubble in the making? I wonder if this mad dash to India might soon turn into a stampede to leave the country. It would one of the things I would be looking to investigate when I visit my folks in New Delhi next month. Even though it is “my family time,” I will try and gather information and make sense of the ongoing private equity boom in India. Of course it is time to update the India Boom story I did for Business 2.0 back in 2004.

One of the big thrusts of that story was the emergence of a middle class, and their ability to spend would lead to opportunities in non-tech sectors – retail, hospitality, automobile, telecom, and even real estate. Past 30 months have followed that path, but there have been come cautionary flags waved by the local press and merit further investigation.

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By Om Malik

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  1. As more money is invested in India – most Indian managers will become mediocre.
    Most Indian enterprises excelled at a time when capital was constrained.
    Where have you gone, Mera India?

  2. it’s tough to say, but i wrote a quick writeup on the supposed bidding war for Hutch @

    http://celestri.org/2007/01/15/why-the-fight-for-hutch/

    Anyways, if you happen to be in Bombay, let me know.

  3. I think India will continue to grow above 8% in 2007. Manufacturing, infrastructure and agriculture are going to be the main growth engines along with IT. The only worry is going to be inflation (Wholesale Price Index) which catapulted from 5.58 percent to 6.12 percent, its highest level in two years.

    The link below shows what the Indian Finance Minister thinks about inflation.

    Chidambaram says inflation ‘spurt’ a concern

  4. virendra rode Monday, January 22, 2007

    I agree with petrabro’s comment. I guess Indian enterprenuers lack function of risk-taking.

    Currently India’s infrastructure SUCKS (poor BW performance) not to mention local provider’s control over subscriber’s connection (mac controlled). Not sure how the local infrastructure will support triple play (maybe 10 years). Then again, the the investors are looking at long term growth given India is a few years behind the West.

    Just thought I’d mention how this investement stacks up.

    3i gets 6.5% (in 2005 3i got 33%)
    cisco gets 4%
    oif gets 18%

    regards,
    /virendra

  5. Any chance you’ll be coming to Bangalore too?
    If you do, please do inform.

  6. Thought I’d add a note to the discussion as I am a “microfinance venture capitalist” currently living in Delhi and working to find microfinance firms to invest in, in India.

    While I agree with the comment above regarding the poor nature of India’s infrastructure, it only takes a 15 drive on the roads to see that there is certainly no lack of risk-taking in India.

    From the smaller world that I play in, there are plenty of entrepreneurs running small financial services firms who are 1) working on tight budgets to do big things, and 2) are constantly thinking about the future and how to achieve profitable growth.

    On the larger scale, I think we will continue to see big things on the Sensex this year to 18 months, whether they come in the form of earnings announcements or IPOs. The following sectors deserve a lot of attention from investors: Infrastructure, financial services, telecom, and consumer retail.

    You can keep up with my musings on India at http://www.bankerinindia.typepad.com

  7. sridhar balakrishnan Thursday, February 15, 2007

    we are growing and need equity/venture partners for upcoming projects. plz contact for details

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