Chart of the week: Indian venture capital makes a comeback

A record year for Indian venture capital as closed-ended funds raise $3.55 billion of capital in 2015.

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This week, The Blackstone Group announced its plans to acquire a majority stake in Bangalore-based information technology services provider Mphasis Limited from Hewlett-Packard Enterprise for $825 million. This deal marks Blackstone’s largest investment in India, however questions about the stability of the Indian economy’s growth potential remain to be answered.

Despite fund managers’ increasing interest in India’s private equity space and India outstripping China as the fastest growing economy in the world, concerns have been raised about the viability of the growth statistics provided by Indian government agencies. There has been scepticism surrounding whether an economy largely reliant on exports and agriculture, which was subjected to serious negative pressures last year, can feasibly have grown at a rate of 7.5 percent in 2015.

PEI Research & Analytics has taken this opportunity to delve further into India’s economy, particularly the venture capital industry, which can be viewed as an indicator of India’s capacity for long-term growth and innovation.

Fund managers raised a record amount of capital for India-focused venture capital funds in 2015. With $3.55 billion amassed across 17 vehicles, the Indian venture capital sector surpassed every other strategy in the private equity industry. The largest of these funds was Sequoia Capital India IV which closed at $740 million, $140 million over its initial target.

The amount raised in 2015 is far greater than the $500 million raised in 2014, and is the largest amount since 2011. Fundraising for closed-ended venture capital vehicles fell 86 percent between 2011 and 2014.

However, the first quarter of 2016 indicates 2015’s appetite for closed-ended venture capital funds is not a blip, with $920 million being raised by the single fund closed so far, Sequoia Capital India V.