"It's not difficult to find investors when you have a beautiful business," says Dharmendra Kumar, the managing director of Rucha Engineers, an Indian auto parts manufacturer that is about to start producing components for the Tata Nano, the world's cheapest – and most talked about – car.

The boast is far from idle. In the past couple of hours, Rucha, which is based in Aurangabad, an economic backwater in west India, has been courted by seven major private equity houses, including the US giant Carlyle. Mr Kumar could have seen 20 hopeful investors – but did not have time.

His beaming, moustached visage represents the newest face of corporate India – those businesses that have turned profits for years in the subcontinent's smaller cities but are only now popping up on investors' radars.

"You want to know today's big story?" a Bombay-based banker for one of Wall Street's largest firms says when asked about Rucha's prospects. "It's: 'private equity meets India's midcap companies'. It's going to be an epic."

Such comments were common amid the buzz of India's Private Equity Fair, a kind of Dragon's Den on steroids that took place in Bombay yesterday. The event, the first of its kind, drew 150 private equity and venture capital investors, who came to run their slide rules over 25 Indian businesses looking for cash to expand.

Those hoping to raise money made for an eclectic crew, ranging from the de rigueur dot-com start-up – an internet portal, huntindia.com, asking for £2.5 million – to a group hoping to raise nearly £150 million to put towards a new coal-powered fire station.

Somewhere in between stood the immaculately suited Anil Agarwal, the director of Karan Woo-Sin Limited. Based in Secunderabad, south India, a city off limits to even the most adventurous investor roadtrip, the company claims to make "the finest hand-finished, double cylinder cotton socks in the entire world" using an array of machines imported from Italy.

Its main problem: most Indians do not wear socks.

Boasting a market capitalisation of "less than $1 million – probably the lowest on the entire Bombay Stock Exchange" Mr Agarwal is aiming to raise about £7 million to build a distribution network to take 200,000 dozen pairs of socks to the west. "I need to raise money for an intangible untouchable asset, which makes me an untouchable in the eyes of Indian bankers," he said.

"And my size has meant I have so far been invisible to venture capitalists. But I have a track record of profits. If my plan works an investor could make a good exit in three years – exactly what they are looking for."

The chatter from investors suggested that if Mr Agarwal's sums stack his socks may well adorn western toes soon. While in Munich this week there were jokes that the industry's flagship event SuperReturn 2008 should be rechristened "Mediocre Returns" because of the effects of the present global economic malaise on private equity, in India sentiment is cautiously resilient.

India attracted about $12 billion (£6.1 billion) in private equity funds last year – about a third more than China. That figure is expected to increase by between 20 and 30 per cent this year. A 20 per cent fall in the value of the Bombay bourse last month rattled nerves, but eased valuations of target companies to more reasonable levels, according to Carlton Pereira, the managing director of Tano Capital. "An American slowdown may take 1 per cent off Indian growth. That may not be a bad thing," he said.

The optimists also cite the broad base of India's economic growth. "Businesses are making money at grass roots. There's money sitting out there and what the stock market does tells you very little. There's enough liquidity and more in India," Kabir Kewwalrami, of Berggruen India, a subsidiary of New York-based investment company Berggruen Holdings, said. The net effects of the crash in the value of Indian equities will be beneficial he suggested: "People will be more careful, hopefully".

It is not all good news: Michael Newbill, chief of economic and political affairs at the US consulate, gave warning that buyout firms often encounter difficulties in making valuations in India because of factors such as "off-balance book activity", while the subcontinent's creaking infrastructure also presents a major callenge.

For businessmen like Mr Kumar, however, the sun is shining. Rucha Engineers has a net worth of about $25 million and, he says, no debt. Turnover was $45 million last year and he is gunning for a valuation of between $250 and $300 million. Clients include Bajar, the biggest motorcycle maker in India, and Mahindra & Mahindra, another auto giant. The company also has a contract to supply no less than 60 components for Tata's new Nano.

With all this in his favour and investors now beating a track to his door, he believes he can afford to be picky. Indeed, he appears to relish the prospect of setting rival investors against each other.

"We know that the private equity industry has a bad reputation in some regards," he says. "We don't want a fly-by-night operator. We're looking for money with quality and commitment."

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