Venture Capital

Presented By: Anand Kumar (JU07019) SEC- C

CONCEPT Venture capital is a type of private equity capital

typically provided by professional, outside investors to new and growing businesses.

FEATURES Finance new and rapidly growing companies Assist in the development of new products or

services Add value to the company through active participation Take higher risks with the expectation of higher rewards Have a long-term orientation

ORIGIN OF VENTURE CAPITAL In the 1920's & 30's, the wealthy families of an individuals investors provided the start up money for companies that would later become famous." Eastern Airlines” and “Xerox” are the more famous ventures they financed.

TYPES OF VENTURE CAPITAL 1) VCFs promoted by the central govt. controlled development financial institutions:Industrial Finance Corporation of India(IFCI) 2) VCFs promoted by the state government controlled development finance institutions:Gujarat Industrial Investment Corporation(GIIC)

CNTD….. 3) VCFs promoted by Public Sector banks:SBI-Cap by State Bank of India 4) Promoted by the foreign banks or private sector companies and financial institutions:Indus Venture Fund

METHODS OF VENTURE FINANCE • EQUITY- All VCFs in India provide equity but

generally their contribution does not exceed 49% of the total equity capital. • CONDITIONAL LOAN - It is repayable in the

form of a royalty after the venture is able to generate sales. No interest is paid on such loans.

CNTD… • INCOME NOTE- It is a hybrid security which

combines the features of both conventional loan and conditional loan.

• OTHER FINANCING METHODS- A few venture

capitalists, particularly in the private sector, have started introducing innovative financial securities like Participating debentures.

RECOMMENDATIONS OF SEBI COMMITTEE, 2000 SEBI appointed the Chandrasekhar Committee to identify the impediments in the growth of venture capital industry in the country and suggest suitable measures for its rapid growth. Its report was submitted in January, 2000.

THE RECOMMENDATIONS PERTAIN TO VCF structures  Resource raising  Investments  Exit

VENTURE CAPITAL PROCESS Generating a deal flow Due diligence Investment valuation Pricing and structuring the deal Value Addition and monitoring Exit

PRESENT SCENARIO OF VENTURE CAPITAL IN INDIA

Some of the highlights of 2007 include 31% of all investments fell into the

US$10-25

million category Venture capital investments accounted for 25% of the private equity deals (in volume terms). Late stage deals accounted for 35% of all deals PE firms obtained exit routes in 65 companies, including 16 via initial public offering (IPO)

LOOKING AHEAD Some of the key sectors that private equity investors

will be looking at in 2008 onwards include: alternative energy, infrastructure services, banking and financial service and manufacturing.