One of the big challenges of tracking the private equity (PE) business in India is the absence of a single credible source of data on investment activity in the country. A couple of weeks ago, the capital markets regulator, the Securities and Exchange Board of India (Sebi), released numbers on investments by Sebi-registered domestic and foreign funds. The cumulative investments by such funds, as on 30 June, stood at Rs20,310 crore. But these numbers take into account investments only by 90 domestic funds and 80 foreign funds. By informal industry estimates, there are more than 300 PE and venture capital (VC) firms actively investing in the country today.
To credibly ascertain how much has been invested by the remaining funds, that are not registered with Sebi, is almost impossible. As far as data is concerned, one is actually spoilt for choice. Take, for instance, the investment numbers currently available from a variety of sources for the first six months of 2007. According to a recent report released by consulting firm PricewaterhouseCoopers, PE investments in the first half exceeded $6 billion (Rs24,420 crore) and are expected to scale $15 billion before the year is out. Another report by financial information services provider Thomson Financial, which also provides data to Mint for its weekly Deal Counter (below), investments in this period stood at $2.49 billion. There’s a third set of numbers. Accounting firm Grant Thornton says $5.7 billion worth of deals have been done in the January-June period. Take your pick.
In the US, annual and quarterly investment data is normally released by the National Venture Capital Association, in collaboration with Thomson Financial. So far, the data has been pretty much on the ball and is widely endorsed by PE investors there. In India, an organization called the Indian Venture Capital Association (IVCA) does exist, but it has remained largely non-functional. The usual sources for industry-wide data are private research groups such as Venture Intelligence (IVCA endorses their data from time to time), Grant Thornton and Thomson Financial. Nothing wrong with that, except none of these is actually officially endorsed by the PE community. Given the disparity in numbers, it is hardly surprising. So, Sebi emerges as the only alternative. At least, it is the most non-partisan of the lot.
Now, for Sebi to emerge as the final repository for PE investment data, it has to be able to bring more funds into its fold. The hitch is, Sebi’s regulatory framework for the industry still inhibits most funds from registering with it. Sure it has come a long way from the six foreign VC funds which were registered with it in 2003, but if it takes steps such as last week’s, wherein it capped overseas investments by registered funds at 10% of their corpuses, the 170-odd currently registered may also choose to sign out.
Snigdha Sengupta is Mint’s resident expert on private equity and venture capital. Comments and questions are welcome at firstname.lastname@example.org