Garnett & Helfrich Capital, a San Mateo, California-based private equity firm specializing in venture buyouts (VBOs), said Tuesday it will expand its operations to India.

Its first buyout is the Indian arm of Celunite, for $30 million.

Celunite is a Sunnyvale, California-based provider of Linux-based open-source technology for the mobile industry, but a big chunk of its R&D is done in two Indian cities: Pune and Hyderabad.

Some of Garnett & Helfrich’s portfolio companies such as Wyse Technologies and Ingres already have operations in India. The PE firm believes the time is right to set up an office to support these operations. Besides, having a team on the ground will help identify new acquisition targets for its venture buyout fund.

Garnett & Helfrich is in the process of raising an $850-million fund and hopes to close it by the end of the year.

“Indian entrepreneurs are following their own business models and not just replicating what’s been done elsewhere,” said Terry Garnett, managing director of Garnett & Helfrich Capital. “Google, Salesforce.com, and Red Hat are examples of companies that broke established business models.”

In line with its venture buyout model, Garnett & Helfrich will work closely with Celunite and its

CEO, Mahesh Veerina, to enhance the company’s management, product, and market strategies. The Celunite transaction is Garnett & Helfrich’s fourth and most recent venture buyout investment.

The PE firm’s other buyouts include Wyse Technologies, a thin client manufacturer that was spun out of KGI in 2004; Ingres, the database systems company extracted from Computer Associates; and Blade Networks from Nortel Networks.

Hidden Gems

Garnett & Helfrich’s model of slicing out divisions of large companies into separate product companies may find some hidden gems in India’s giant software service firms. Other possibilities for the firm are taking private some publicly listed companies that have hidden but unappreciated value.

Mr. Garnett has been visiting traditional family-owned conglomerates and finds that there could be some “real possibilities” tucked away.

Mainly, though, on his first ever visit to India, Mr. Garnett visited companies wearing his Ingres hat, where he took over as CEO last year when the buyout from CA was completed. He believes in listening to customers not only for what they need and want but also because they can point to some interesting companies for Mr. Garnett to buy out.

“Some of the most promising nuggets are not in Silicon Valley,” he said. Indeed, he has recently found one such nugget in Thinking Instruments, a 25-person company in Germany that has 200 customers.

But Mr. Garnett insists that the firm is not interested in early-stage investing. “It takes so much more time to get returns,” he said. “In our buyout model, we know that what we are buying has customers and is profitable.”

The only missing ingredient, he added, is management focus on the nugget. And that’s where PE firms like his come in: to turn nuggets into valuable assets.

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