Private Equity (PE) and venture capital (VC) investment rose by 29 per cent to $648 million (around Rs 2,916 crore) in the period January-September 2011, compared to $500 million (around Rs 2,250 crore) in the corresponding period of 2010. The number of deals rose by 21 per cent during this period. Industry experts said investors are bullish about this segment and the growth potential remains strong in the SME sector. According to industry estimates PE players have lined up almost $1 billion to be deployed in India.
With a fast-growing market, increased consumer presence and a growing middle class, India is fast becoming a ground for new business start-ups. Previously a heavily regulated economy, India has started to allow more foreign investment, and has become one of the fastest-growing economies — as well as being one of the four BRIC nations. As a result, investments in Indian start-up companies have started increasing steadily and are growing faster.
While SMEs are considered key players in the growth of the Indian economy, access to finance for funding growth has been a constant and major challenge for them. Their fund requirements are too large for microfinance institutions, but commercial banks consider them a risk. It is this funding gap that PE and VC funds address.
