The current level of IPO activity in India as well as the world is "low" to support the health of the venture capital industry, says a study.
The survey which was conducted by Deloitte in conjunction with the Venture Capital Associations of India, Brazil, Canada, China, France, Germany, Israel, US and the UK said that high returns generated by IPOs are critical for the sustainence of a healthy venture capital industry.
"Clearly the industry continues to feel the ripple effects of the global economic downturn -- most notably in the form of limited exit opportunities," said Mark Jensen, partner, Deloitte & Touche LLP and United States national managing partner for venture capital services.
As per the survey over 57% of Indian venture capitalists surveyed stated that current IPO activity levels in the country is low, while globally, more than 80% believe so.
"The need for a healthy IPO market is driven primarily by the aspiration to provide superior returns on investments. And there is heightened interest in innovative companies that cater to growing consumer demands," India Private Equity and Venture Capital Association president Mahendra Swarup, said.
Only 33% of India venture capitalists said that IPO markets in other geographies were essential to the success of the India venture capital industry, while globally the figure stands at 49%.
Among the world markets, 90% of Indian venture capitalists selected Nasdaq as one of the three most promising stock exchanges for venture-backed IPOs; followed by National Stock Exchange of India (57%) and the Bombay Stock Exchange (48%).
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Of the Indian venture capitalists who are investing outside their home countries, about 33% plan to increase this activity during the next five years and 24% plan to maintain their level of investment.
However, only 19% of the Indian respondents stated that they are investing currently outside of India with the majority investing only in the Indian markets.
"Some of the companies with the strongest potential to become profitable global leaders have a multinational focus from the beginning, leveraging R&D in Israel, manufacturing in China, services in India, and partnerships in the US and this is driving investors to increase their global coverage," Deepak Kamra, general partner of Canaan Partners said.
Though a large majority of venture capitalists around the world prefer the US exchanges for venture-backed IPOs, yet 87% of US venture capitalists believe that the current level of IPO activity is too low, the report said.
