PRINT THIS PAGE The US-India corridor19/07/2004. Source: Asia Private Equity Review.
Globalisation is challenging a core maxim of private equity investment. The conventional wisdom that a management firm has to be 'within a taxi ride' of its investee company is no longer valid. A recent trend in the Indian private equity industry suggests cross-border investment is the favoured approach, according to the Asia Private Equity Review. Nokia Venture Partners recently acquired a stake in the US-based Nevis Network
by committing $10m to the start-up company. This is the second round of financing
raised by Nevis Networks, which is developing a new class of solutions for enterprise
securities. In April, Nevis Network received $10m from New Path Ventures, a venture
capital fund management firm founded and managed by two chip industry pioneers.
Although Nevis Networks is headquartered in Santa Clara, California, its research
and development centre is in India. For its venture investors, having the research
and development base in India is a 'critical asset for building complex enterprise
security solutions', says one of the managers of New Path Ventures.
Westbridge Capital Partners is taking a similar route as Nokia Venture Partners
and New Path Ventures. In early June, it announced its second commitment to
Astra Business Services. Westbridge Capital Partners had earlier provided $1.75m
to Astra Business. In this most recent round, the private equity firm allocated
the same sum to the business process outsourcing (‘BPO’) company,
which received an additional $2.25m from its senior management as well as individual
investors.
Astra Business Services is a BPO company with expertise in the US collections
market. In addition to having an office in San Francisco, Astra Business also
has operations in Gurgaon, India.
For the past two years, a host of venture capital firms, including those based
in the Silicon Valley have been scouting US-based services companies, especially
those in the BPO sector with operations in India, as investment targets. In
the two and a quarter years ending March 2004, India attracted $1.1bn of private
equity capital in 54 deals. Of this amount, approximately $200m came from US-based
investors, testifying to growing overseas interest in India.
Indeed, strategic investors are already scouting opportunities in India in
order to broaden their business scope and access the burgeoning Indian economy.
Netkraft Private Ltd. (‘NetKraft’), a company that has long partnered
with venture capital investors, is a recent example. In early June, the global
business process and technology consulting services firm, Adea Solutions, Inc.
announced that it acquired NetKraft. Established in 1998, KetKraft is a software
company that builds and implements software solutions. It reached profitability
in the 2003/04 fiscal year when revenues hit $8.5m, a growth of 50% compared
with that of the preceding year. Adea Solutions’ acquisition came with
NetKraft confident of its ability to sustain its profitable momentum in the
coming years.
Actis (formerly known as CDC Capital Partners), one of the most established
foreign private equity firms in India, was one the earliest to park capital
in NetKraft. In December 1999, it allocated $4.7m in the company and assumed
a 45 per cent shareholding. Two years later, NetKraft received $2.5m from another
venture capital firm, JumpStartUp, which took up an approximate 25 per cent
position. However, the amount that Adea Solutions was to pay for taking over
NetKraft remains unknown. The deal is expected to close by the third quarter
of this year.
Another door along the USA-India corridor swung open in the heart of the New
York City, where Monster Worldwide Inc. is headquartered. The firm is in talks
to acquire one of India’s most-visited websites - JobsAhead.com. The four-year
old job-search site was funded by ChrysCapital and angel capital. Through two
rounds of financing that spanning the 12 months between May 2000 and February
2001, ChrysCapital committed close to $8.8m to JobsAhead.com. According to market
sources, Monster Worldwide Inc. is paying $9.6m to become a 100 per cent shareholder
of the company.
It was a decade ago that the incumbent prime minister of India, Mr Manmohan
Singh engineered the opening of the India’s cocoon economy and welcomed
foreign investors. The world’s second most populous nation has since become
a magnet for foreign investors with the flow of private equity capital along
the India-USA corridor become increasingly significant.
Asia Private Equity Review (APER) is the foremost voice
on matters related to private equity/venture capital in the region. Well-recognised
as being the singular source for accurate and timely news, in-depth analysis
and global perspectives, APER is published by the Hong Kong-based Centre for
Asia Private Equity Research. For further information please visit our website
at www.asiape.com or email us at info@asiape.com
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