CALL IT serendipity. This year has been a sort of annus mirabilis for India, particularly after Taj Mahal was unanimously nominated among the seven wonders of modern world and the government announced the National Design Policy that aims to make India a major hub for design services.

Deals Galore
The last eight months has seen many private equity investments in the design services space. Investment firm General Atlantic bought a 13 % stake in Hyderabad-based Infotech Enterprises, a geospatial, design engineering and software services and solutions company, for Rs 300 crore in June. Buyout firm India Value Fund invested an additional Rs 50 crore in SFO Technologies, an electronics design and manufacturing company in May. BTS India Private Equity Fund, a fund focused on SMEs, picked up under 20 % stake in a Nashik-based auto component manufacturer, Reliable Autotech, for Rs 20 crore, in April.
Part of these funds will go into subsidiary Realtime Technologies which designs tool, dies, jigs and fixtures.

More such deals are in the pipeline. "We see great value in the engineering design entrepreneurs here; they have moved up from being just tierone suppliers to OEMs to being value engineering enablers," says K Srinivas, Vice Chairman and Managing Director of BTS Advisors.

A report by Nasscom and Booz Allen Hamilton last year projected that India will have a potential market of $14-18 billion in telecom engineering services by 2020; $7-9 billion in automotive engineering; $2-4 billion in aerospace and less than $.15 billion in construction and industrial machinery engineering services. "The last decade belonged to IT. This decade belongs to engineering design ser. vices," says Ketan Bakshi, Chairman and Managing Director of Neilsoft, a Pune-based engineering and technology solutions company. The company has grown from Rs 13 crore in 2003 to Rs 65 crore in FY07. About 90 % of its revenues come from design services. The venture arm of Sicom invested Rs 5.5 crore in the company in 2000. The company is planning to raise another $7 million within two months. The design services space has seen many more such entrepreneurial success stories like QuEST, a firm that has scaled $40 million in revenues and Plexion Technologies (recently acquired by Mahindra & Mahindra.) Realtime Technologies, part of the Reliable group, was created for captive consumption. But now the firm offers design solutions for tool, dies, jigs and fixtures to Tata Motors, M&M and Bajaj Auto.
One thing that goes in favour of these companies is India's low-cost advantage. According to a Nasscom and Booz Allen Hamilton report, the average labour cost per hour for detailed design in the US comes to $85, while in India it is $20. Likewise, concept development costs $90 per hour in the US and $23 in India. Hence global companies in the automotive, aerospace, telecom and engineering segments are keen to offshore design work to countries like India. These advantages have helped this industry race past the $1 billion mark in consolidated revenues.