Indian Venture Firm Seeks $500M

ICICI Venture, an investment arm of No. 2 Indian lender ICICI Bank, is looking to raise between $150 million and $200 million from overseas investors for its India-focused fund, which has an overall target of $500 million, according to two sources with direct knowledge of the effort.

The Mumbai, India-based firm, which manages more than $2 billion in assets, is raising $500 million with an option to raise another $300 million for the fund. Vishakha Mulye, CEO of ICICI Venture, confirmed that the firm would begin road shows for international investors as early as last month, but declined to give details of the amount of funds it seeks to raise.

“We have already received commitments of $350 million from domestic investors, including institutions and wealthy investors,” she told Reuters. “Now, we are commencing the launch to international investors.”

ICICI Venture focuses on domestic investments in the health care, education and infrastructure sectors, says Mulye, who has been with ICICI for 17 years.

Total private equity investment in India fell more than 60% to $4.4 billion in 2009 from $11.9 billion in 2008, according to VCC Edge, which tracks M&A and private equity and venture capital deals.

The India story is looking better than ever before. Valuations now have become realistic and stable. We think it’s the best time to go for investments.

Vishakha Mulye

U.S.-based venture firms, in particular, have really pulled back from India. They invested $1.4 billion in 73 India-based companies last year, down from a five-year peak of $1.7 billion invested in 122 India-based companies in 2008, according to Thomson Reuters (publisher of VCJ). For example, Sequoia Capital and Warburg Pincus, the two most active U.S. investors in India in 2008, invested in four Indian companies and two Indian companies, respectively, last year, down from eight each the prior year, according to Thomson Reuters.

Mulye is optimistic about this year. “The India story is looking better than ever before,” she says. “Valuations now have become realistic and stable. We think it’s the best time to go for investments.”

ICICI Venture is also planning to exit some of its earlier investments as market conditions have become more stable. “We are definitely in the divestment mode from our earlier investments. A few could be through IPOs and others through private placements,” Mulye says.

ICICI Venture is not the only area investor looking at 2010 as a good time to exit. Kotak Mahindra Bank, IDFC and ILFS Investment Managers are also planning to exit some of their portfolio companies, encouraged by an 81% stock market rally in 2009 after the market slumped by more than half the year before. —Indulal P.M. and Pratish Narayanan of Reuters, with additional reporting by VCJ