Venture capital investment in India rose more than 30 percent in the second quarter, with a boost coming from United States VC firms that see substantial promise in Indian companies.

Thirty-six Indian companies raised $395 million in the three-month period, according to data from analyst firm TSJ Media. In the same period last year, 12 companies raised $300 million.

The second quarter investment numbers also represent an improvement on first quarter spending. From January to the end of March, VCs invested $355 million in 29 companies.

“A special highlight of the latest quarter was the flurry of actual investments by U.S.-based VCs who had made exploratory visits to India in 2004,” said Arun Natarajan, an analyst with TSJ Media.

The report says U.S. venture firms such as New Enterprise Associates, Morgan Stanley, and Bessemer Venture Partners made investments in India during the second quarter.

International firms such as Nokia’s two venture arms, BlueRun Ventures and Nokia Growth Partners, have also increased their investment activity in the subcontinent and recently assigned new partners to India.

For example, Nokia Growth Partners put $3 million into telco software outfit Sasken Communication Technologies, based in Bangalore. The company has filed for an IPO.

Manufacturing Focus

Venture investment in India continued to flow toward manufacturing outfits, despite increasing interest from U.S. venture firms, which often have a tech focus. Investors were particularly attracted to manufacturing and heavy industry companies. Mumbai-based ABG Shipyard raised $32.6 million, and Rico Auto Industries, based in Gurgaon, raised $24 million.

But venture capital was not as helpful of a source of funding for public companies in the second quarter as it was in the first. The number of public companies that attracted financing dropped to 10 during the second quarter from 19 in the first. In the first quarter, public companies accounted for two-thirds of private investment.

The VC market in India is still tiny compared to the U.S. market. In the U.S., startups announced funding of about $4.6 billion in funding during the second quarter of 2005. Many more may have received stealth funding, and the total amount of funding won’t be certain for another few weeks.