ICT investment in India gathers steam

India’s VC market has become increasingly crowded, with Intel being the most recent investor to announce plans for further investment in the country’s information and communications technology (ICT) industry. By Judy Kuan.

India’s new technologies market has generated strong investor interest for several years now, and the flow of capital to the country’s information and communications technology sector shows few, if any, signs of abating anytime soon.

Barrett: Intel in India for the long run

The latest evidence of Indian ICT’s pull for investors came in the form of global chipmaker Intel Corporation’s announcement earlier this week that it would direct over $1 billion (€850 million) for expanding its operations in India over the next five years and for establishing a $250 million India-specific, technology-focused venture capital fund to be managed by Intel Capital.

According to Intel chairman Craig Barrett, the $1 billion allocated to India evinces Intel’s intentions to remain active in India in the long run. “We will grow our local operations, boost venture capital investments and work closely with the government, industry and educators to increase the impact of the country’s information and communications technology industry,” commented Barrett in a recent company statement.

Intel’s newly-announced India investment plan builds upon the $700 million that its equity investment arm, Intel Capital, has already funnelled into the country in the past ten years. Through this sum, Intel Capital has backed over 40 companies since 1998, and much of the capital was invested in India’s communications, software, and business process outsourcing sectors.

Intel’s plans for India in the upcoming years include the expansion of its Intel India Development Center in Bangalore, which employs a staff of 2,800 and serves as the company’s India hub for hardware and software engineering R&D for globally marketed products.

Other venture investors, such as Ramanan Raghavendran, a senior partner with New York-headquartered TH Lee Putnam Ventures, have recently expressed positive outlooks for Indian VC investing, pointing to the entrepreneurial nature of India’s population, the increasing liquidity of the local capital market, and the already realised returns on Indian investments.

Under these conditions, notable venture capital firms have continued to flock to India this year. Draper Fisher Jurvetson, the Menlo Park, California-based early stage and seed VC investor, brought its business-plan competition – Venture Challenge – to India, where the firm expects to establish an office and launch a fund to target the region. UK-based venture capital firm MTI Partners is also considering an expansion to India in the next two to three years. Meanwhile, WestBridge Capital Partners, headquartered in Mauritius, has closed on $200 million for its WestBridge Ventures II fund, which will invest in high growth Indian companies targeting the domestic and export markets in a number of sectors, including outsourced services, IT, healthcare and the Internet.

Considering the growing emphasis placed on India by major buyout firms – with 3i, Carlyle and The Blackstone Group all opening offices in Mumbai this year – which could have the clout to ensure regulatory consistency toward investors, accompanied by continued improvements in India’s economic standing and infrastructure, it would seem that the time is ripe for venture firms to gain a stronger foothold in India’s new technologies market.