Venture capital (VC) firms invested $475 million over 92 deals in India during the

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twelve months ending December 2009, according to a study by Venture Intelligence.

The study, conducted in partnership with the Global-India Venture Capital Association, also said that the amount invested during 2009 was lower as compared to 2008, which had witnessed $836 million being invested over 153 deals.

VC firms, however, began increasing pace of investments in Q4’09, making 42 investments worth $265 million – significantly higher than that made during the same period in 2008 (23 investments worth $102 million) as well as in Q3’09 (19 deals worth $74 million).

“The strong recovery in investment activity in the last quarter of 2009 as well the rising interest among global investors towards emerging markets like India is quite encouraging for the growth of the sector,” said Sudhir Sethi, director of GIVCA and founder, chairman & managing director of IDG Ventures India.

“During 2010, we expect significant follow-on investments as well as a rise in exit activity as the global economic recovery gathers pace,” he added.

While IT and ITeS industry retained its status as the favourite among VC investors during 2009, the industry’s share has declined to about 43 per cent (from about 55 per cent during 2008). Other industries that attracted significant investor attention during the period include financial services (led by microfinance deals), healthcare & life sciences, and alternative energy. Within IT & ITeS, online services companies retained their status as the favourite sector accounting for about 39 per cent of the investments during 2009, data shows.

Companies based in south India accounted for 50 per cent of all VC investments (47 per cent by value) during 2009. Their peers in western India accounted for 25 per cent of the pie (29 per cent by value) and those based in north India accounted for 15 per cent of the investments in 2009 (12 per cent by value).

Among cities, companies headquartered in Bangalore and Mumbai were the favourite among VC investors during 2009 with the former attracting 29 investments and the latter 15. New Delhi and the National Capital Region accounted for 11 investments followed by Hyderabad with 9.