8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 2/23
Meaning Venture capital means funds made available
for startup firms and small businesses withexceptional growth potential.
Venture capital is money provided byprofessionals who alongside management investin young, rapidly growing companies that havethe potential to develop into significant economic
contributors.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 3/23
Venture Capitalists generally:
y Finance new and rapidly growing companies
y Purchase equity securities
y Assist in the development of new products orservices
y Add value to the company through active
participation.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 4/23
Characteristics
y Long time horizon
y Lack of liquidity
y High risk
y Equity participation
y Participation in management
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 5/23
Advantagesy It injects long term equity finance which provides
a solid capital base for future growth.
y The venture capitalist is a business partner,sharing both the risks and rewards. Venturecapitalists are rewarded by business success andthe capital gain.
y
The venture capitalist is able to provide practicaladvice and assistance to the company based onpast experience with other companies which werein similar situations.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 6/23
Advantages (Cont.) The venture capitalist also has a network of
contacts in many areas that can add value to thecompany.
The venture capitalist may be capable of providing additional rounds of funding should itbe required to finance growth.
Helps small and medium first generationentrepreneurs to translate their ideas into areality.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 7/23
DEVELOPMENT OFDEVELOPMENT OF
VENTURE CAPITALVENTURE CAPITALIN INDIAIN INDIA
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 8/23
y
The concept of venture capital was formallyintroduced in India in 1987 by IDBI.
y The government levied a 5 per cent cess on allknow-how import payments to create the venture
fund.
y ICICI started VC activity in the same year
y Later on ICICI floated a separate VCcompany - TDICI
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 9/23
Venture Capital Funds in India
VCFs in India can be categorized intofollowing five groups:
1) Those promoted by the Central Governmentcontrolled development finance institutions.
For example:- ICICI Venture Funds Ltd.- IFCI Venture Capital Funds Ltd (IVCF)- SIDBI Venture Capital Ltd (SVCL)
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 10/23
2) Those promoted by State Government
controlled development financeinstitutions.For example:
- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)- Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks.
For example:- Canbank Venture Capital Fund- SBI Capital Market Ltd
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 11/23
4) Those promoted by private sectorcompanies.For example:
- IL& FS Trust Company Ltd- Infinity Venture India Fund
5) Those established as an overseas venturecapital fund.For example:
- Walden International Investment Group
- HSBC Private Equity managementMauritius Ltd
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 13/23
Risk Capital & Technology Finance Corporation Ltd. (RCTFC)
y Set up in Jan 1988.
y Promoted by IFCI.
y To cater the risk capital needs of firstgeneration entrepreneurs
y Provides both risk capital and venturecapital assistance.
y In the form of conventional loans andinterest free conditional loans.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 14/23
IDBI Venture Capital Fund
y Came into effect from later half of 1987.
y Provides financial assistance to thoseindustrial concerns who adopt importedtechnology to widen domesticapplications.
y In the field of chemicals, computersoftware, electronics, food products and
medical equipments.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 15/23
Technology Development & Inf ormation
Company Of India Ltd.(TDICI)
y Established in July 1988 by ICICI and UTI under Companies Act 1986.
y Focus is on small and medium sizedunlisted companies with exceptionalgrowth.
y
In the field of IT, pharmaceutical,engineering etc.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 16/23
Indus Venture Capital Fundy Private venture capital fund.
y Provide both equity capital and
management support to entrepreneurs.y In the area of health care products,
electronics and computer technology.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 17/23
Others
y Small Industrial Development Bank Of India (SIDBI)- July 1993.
y Gujarat Venture Finance Ltd.- July1990.
y Credit Capital Venture Fund- April 1989.
y Andhra Pradesh Industrial DevelopmentCorporation.
y 20th century Venture Capital Fund.y SBI Venture Capital Fund.
y Canara Bank Venture Capital Fund
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 18/23
Guidelines For VC Companies
The Govt. of India has issued the followingguidelines for various venture capital funds operating
in the country.
The financial institutions, SBI, Scheduled banks andForeign banks are eligible to establish venture capitalcompanies or funds subject to the approval from RBI.
The venture capital funds have a minimum size of Rs10 crores and a debt equity ratio of 1:1.5. If theydesire to raise funds from public, promoters willrequire to contribute minimum of 40% of the capital
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 19/23
Contd« The guidelines also provide for NRI investment
up to 74% on a non-repatriable basis.
The VC funds should be independent of theparent organizations.
The VC funds will be managed by professionalsand can be set up as joint ventures with non-institutional promoters.
The VC assistance should be extended to thepromoters who are new and are professionally ortechnically qualified with inadequate resources.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 20/23
Contd« The VC funds will not be allowed to undertake
activities such as trading, broking, and moneymarket operations but they will be allowed toinvest in leasing to the extend of 15% of thetotal funds deployed.
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 21/23
Venture capital industry wise
segmentation
6.94
7.73
11.5
4.32
27.95
4.82
11.43
12.92
3.36
9.03
Percentage
IT & ITES
Energy
Manufacturing
Media & Ent.
BFSI
Shipping & logistics
Eng.& Const.
Telecom
Health care
Others
Percentage calculated on the total VC investment- 14,234 USB (fig. of 2007)
8/8/2019 meenu -MFS
http://slidepdf.com/reader/full/meenu-mfs 22/23
Future prospects of VC in India
y VC can help in the rehabilitation of sick units.
y VC can assist small ancillary units to upgradetheir technologies.
y VCFs can play a significant role in developingcountries in the service sector including
tourism, publishing, health care etc.
y They can provide financial assistance topeople coming out of universities, technicalinstitutes, etc thus promoting entrepreneurial
spirits.