Intel Capital, the investment arm of Intel Corp <INTC.O>, the world's biggest chipmaker, believes valuations of early-stage technology companies in India have reached a "near-bubble" stage, as too much capital chases too few quality opportunities.
"It's crazy. I am not drawing parallels, but it feels like '99 in the U.S.," said Suresh Kumar Kuppam, managing director for Asia Pacific at Intel Capital.
"This is not a good sign. Most of the time, we evaluate companies and we have to leave it at that stage as we feel valuations were too high," Kuppam told Reuters during a visit to India's financial capital.
Big valuation expectations in the global tech sector are being driven in part by much-anticipated initial public offerings planned by U.S. firms such as Groupon and Zynga, although market weakness in recent months has cooled that excitement.
U.S.-based Intel Capital normally picks up stakes of less than 20 percent in early stage companies, with an average deal size of $5 million. Its $250 million India fund has made about $40 million in investments so far this year, including $20 million for stakes in six small firms announced on Friday.
While corporate culture in India is historically family driven, with company owners reluctant to bring in private equity investors, the software and technology start-ups that are mushrooming in the country tend to be more willing to sell stakes to outsiders.
"We are seeing plenty of entrepreneurs taking the step, seeing the opportunity and past successes," Kuppam said, referring to companies bringing in venture capital.
"You can see every Silicon Valley v.c. (venture capital) fund has an office in India," he said.
Private equity investments in India rose 21.6 percent percent in the first half of this year to $3.3 billion, according to Thomson Reuters data.
Intel's investments announced on Friday include stakes in Saankhya Labs, a fabless semiconductor company; Testing Czars, which makes mobile applications; FINO, a business and banking technology platform provider; solar power products maker Duron Energy; enStage, which is in electronic payments; and What's on India, an electronic TV program guide.
(Editing by Tony Munroe)