31 May 2010 | By: Mohamed Hairul Borhan

Private equity (PE) firms have snapped up deals worth over US$225 million in the IT and BPO space between January and April, more than double the levels seen the same time last year, according to data by Grant Thornton.

“This confirms to a broader trend across industries, where PE transactions have exceeded the last year's levels. Overall, the liquidity has eased considerably and PEs are looking to deploy capital in high growth businesses in India,” said Subbu Subramaniam, chairman of the Venture Capital Association of India (VCAI) and a partner with Barings Private Equity India.

The deal volumes too have surged - 19 deals were reported this year compared to 14 deals in the corresponding period during the previous year. “This is similar to the global trends…The capital deployment has improved. Last year, the market sentiments were negative and there were issues such as alignment of valuations,” said Sanjiv Kaul, Managing Director at private equity firm ChrysCapital.

Earlier this year, three private equity investors, including Goldman Sachs Investment Partners, Indivision India Partners and Oak India Investments picked up a 70 per cent stake in wireless Internet broadband service provider Tikona Digital Networks, for US$107 million.

Other notable PE transactions included a US$15 million investment in iYogi (an on-demand consumer tech services company) from Draper Fisher Jurvetson and old investors Canaan Partners, SAP Ventures, and SVB India Capital Partners.

In addition, SMS GupShup received funding worth US$12 million from Globespan Capital Partners and existing investors Charles River Ventures and Helion Venture Partners.

The tech sector has pulled out of the 2009 slump, benefitting from revival in budgets and an uptick in demand for IT services from sectors like banking and financial services and healthcare among others.

“Given the uncertainties last year, PE and VC firms had focused largely on fixing their portfolios. We are now starting to see a renewed interest in the Indian market as well as the tech sector. The tech space, particularly mobile Internet, is appealing as it offers scalability without significant incremental costs,” said Sandeep Murthy, a partner at Sherpalo Ventures.

Courtesy of IBEF