Venture capital firms based in India appear to find real estate projects more lucrative. The bulk of these funds has been parked in real estate projects, according to the Securities and Exchange Board of India data.
Rs 10,000-cr investment
As of December 31, 2012, domestic venture capital funds (VCF) have pumped in Rs 10,159 crore into real estate projects, nearly 10 times the Rs 1,091 crore invested by foreign venture capital investors (FVCI). There are a total of 180 domestic VCFs registered with the market regulator, compared with 154 FVCIs.
Many of the home-grown firms are real estate investment focused, such as the Kotak Mahindra Realty Fund, JM Financial Property Fund, India Realty Venture Capital Fund, India Development and Construction Fund and HDFC Property Fund.
FVCIs appear to prefer the technology oriented sectors such as telecommunications, information technology and so on.
The foreign investors pumped in Rs 6,352 crore in the telecommunication sector that was five-times higher than domestic VCFs’ exposure.
Venture capitalists’ outstanding investments in India witnessed a decline in 2012 from the record levels charted in 2011. The quantum of seed capital provided by domestic and foreign venture capital investors to Indian companies dipped by 2.3 per cent over the course of the year to Rs 55,542 crore.
Cumulatively, VCF investments amounted to Rs 31,556 crore as of December 31, 2012, while FVCIs have invested Rs 33,773 crore. But the VCFs’ cumulative investment includes Rs 9,787 crore of FVCI investment that was routed through the home-grown funds.
Venture capital consists of equity, quasi equity or conditional loan in order to promote unlisted, high risk or high tech firms driven by technically or professionally qualified entrepreneurs. The typical venture capital investment occurs after the seed funding round with a view to generate return through an eventual realisation event, such as an IPO or trade sale of the company.
New classification
Following the notification of the (alternative investment funds) Regulations, 2012, in May last year, new venture capital funds launched in the country will be classified as alternative investment funds. But funds that were registered with SEBI prior to the new rules will continue to be governed by the old rules classifying them as “venture capital funds” till the time they are wound up.