FINANCIAL SERVICE

SECTORFueling India’s Development

Emphasizing on :

VENTURE CAPITAL:

“ Better Tomorrow”

0.6

0.9 1.8

0.8

0.9

1.5

1.6 1.8

2006 2007 2008 2009 2010 2011 2012 2013

INDIA

CHINA

CANADA

ISRAEL

EUROPE

8%

11%

2%1%

2%

5%

3%

17%

51%

Information technology

Telecommunications

Pharmaceuticals

Biotechnology

Media/entertainment

Services Sector

Industrial Products

Real estate

Others

S.NO PARAMETER VENTURE CAPITALIST

CONVENTIONAL FINANCIER

1. Form of Finance Equity/Quasi equity, bridge finance

Term loan (SECURITY BACKED)

2. Management Approach Active participation(Makeefforts in the direction of maximization of shareholder’s wealth

Passive participation(Makeefforts to keep its own money safe & secure)

3. Return Expectation Payments related to performance/Capital appreciation , royalty on sales

Fixed Obligation(Interest Rate)

4. Risk Taking Risk taker , willing to accept high risk only for potential high return

Risk averser

5. Projects Preference for smallstart-ups, innovative producers & markets, and non tangible asset base

Preference for successful business generally tangible asset based

Stages of

Financing

Seed

Money

To prove a

concept

(15-25L)

Extreme

risk

Start Up

Provided to

companies

(25-60L)

Very high

risk

First

Round

Manufacturing

funds

(1-3cr)

High risk

Second

Round

Working

capital &

expenses

(2-5cr)

Sufficiently

high

Third

Round

For newel

profitable

company

(2-10cr)

Medium

Fourth

Round

Bridge

Financing

for going

public

process

(100cr)

Low

NO.OF INVESTORS WHO HAVE actually made investment IN DIFFERENT STAGE

INVESTMENT STAGE

NO.OF INVESTORS

INVESTOR BY FUND ORIGIN TOTAL FUND FOCUSDOMESTIC FOREIGN

Early 71 30 41 36

Growth 57 20 36 34

Late 42 15 27 23

Other 9 5 4 2

Buy out 4 2 2 1

Pre-Ipo - - - -

PIPE - - - -

TOTAL 114 44 70 69

Active

scouting

Screening/P

rocessing

Business

Analysis &

Due

diligence

Deal

structuring

&

Negotiation

ClosingCompanies

follow upExit

Receipt of

Business

Plan/Present

ation

First

Meeting

with

Company/

Founders

Term

Sheet

Submis

sion

Signature

of Final

documents

Money

Transfer

Various

Exit

Plans

FORMS

OF VC

Equity

Conditional loan

Participating

debentures

Income note

Initial public

offer(IPOs)Trade sale

Promoter buy

back

Acquisition by

another

company

1.•Private Promoters

2.•Law Complications

3.•Lack of Entrepreneurial tradition

4.•Distant Access

5. •Research remains stagnant

6.•Crowd sourced process

Established on: 1991

Promoters: Promoted by Mr. Suresh Saraf, a

mechanical engineer and a first generation

entrepreneur.

Business: The company processes vacuum freeze-

dried fruits and vegetables, using indigenous

equipment.

Venture capitalist: GVFL-Gujarat Venture Finance

Ltd.

First company in India to process vacuum freeze dried fruits and vegetables using indigenous equipment.

An innovative idea that had potential as it involved a new technology, used indigenously sourced raw materials, and export oriented.

Involvement of professionals from the Bio-medical group of the BARC to help introduce this new technology in India.

Negotiated with suppliers of plant & machinery on behalf of the company

GVFL helped by networking with Central Food and Technological Research Institute (CFTRI) for preparing samples of the products

GVFL encouraged corporate governance practices and streamlining of systems and processes.

Revival after initial set backs

Tiding over severe onion crisis in1998 & the

subsequent ban on onion export.

Achieved full capacity utilization in 2001

in 2002 the company started using un

utilized capacity of another unit.

The company achieved a turn over of Rs 3.41

crores in 2002-2003, with a profit of Rs 33.19

lakhs.

The company turned around even after major

setbacks due to consistent support by GVFL.

A partial exit has been made from the

company by way of promoter buy back.

Its presence in both indian & global market.

Saraf spells its his success as combination of

'consistency, hard work and determination.

Venture Capital is the outright solution for any

country

and means of finance in turning the creative ideas

and abilities of the entrepreneurs into very fruitful

and viable commercials aspects.

It still is in the nascent stage in India because of

its risk perception.

Creating awareness on venture capital would

open the doors wide.

More young talents would make this possible.

Amrin Taj . K (B.Com –Honours)

Ramya . S (B.Com –Honours)

S.D.N.B.Vaishnav College For Women