After having a record year for Intel Capital in India with $56 million invested in 17 companies, Asia Pacific MD Sudheer Kuppam affirms that 2012 too shall see investments in similar vain. In 2011, Intel invested in Happiest Minds Technologies, TELiBrahma Convergent Communications and Fashionandyou.com among others. India was the second largest investment destination for Intel in 2011, after the US. With Intel entering the smartphone market in India by tying up with homegrown Lava Mobiles to launch the smartphone XOLO, Kuppam tells FE’s Sarika Malhotra that more such tie-ups, especially in the smartphone and tablet space are in line. Excerpts:

One of your portfolio companies, MCX, recently had a stellar IPO. Do you plan stay invested in MCX?

Intel has a strong engagement with the company. Given how MCX went into the rural segment to set up mandis and derivativised the produce, it has been a very good channel and partner to take technology into rural markets. MCX public issue will give it a strong financial foothold. The key brand awareness will be beneficial to take technology to the base of the pyramid. We are not going to exit MCX anytime soon. We believe that the entire derivative industry in India, especially in the commodities and the agri space, has tremendous growth potential and MCX will be one of the anchor portfolios for Intel Capital in India.

How do you rate the exit scenario in India? Do you see it impacting future investments?

India is one of the leading public market indices in the world. 2011 was not a great run, though. So after doubling in 2010, a good market would cool down automatically. That’s exactly what happened last year. Starting this year again, the market has picked up. All estimates are ranging between 6.5 to 8% GDP growth. We believe that India can have sustainable 7-8% growth for the next decade. Technology markets are always a nominal percentage of the overall GDP, we believe that as India grows, it will also elevate the potential for technology markets. Given the lower PC and broadband penetration in India, it bodes very well for future growth. India will add 100-200 million new broadband subscribers in the next five years, and that creates a huge critical mass for driving growth.

What will be the thrust areas for Intel Capital?

Since we are the strategic investment arm for Intel, every single investment has to be in the technology sector. In emerging markets such as India, the major strategic initiative that we tend to execute is to evangelise technology. We will invest in companies in the services and product innovation side.

PE funds operating in India have not delivered great return. What’s your take on the IRR scenario?

The main reason why India is unable to generate good returns is because it has become too expensive for investors. Returns are always good when you get into an asset at an attractive valuation and exit at a more attractive valuation.

The problem with India is that most of the assets are priced way too high than their true worth. Because of that the return potential is much lesser for the investor. This has been the historical problem for the VC and PE funds in India.