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VENTURE CAPITAL PRESENTED BY: DEEPAK KUMAR CHANDAN KUMAR HARSH VARDHAN SHEKHAR MITTAL SHUBHADIP BISWAS SUPARAG MISHRA IILM GSM SECTION-A
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Page 1: Venture capital in india

VENTURE CAPITAL

PRESENTED BY:

DEEPAK KUMAR

CHANDAN KUMAR

HARSH VARDHAN

SHEKHAR MITTAL

SHUBHADIP BISWAS

SUPARAG MISHRA

IILM GSM

SECTION-A

Page 2: Venture capital in india

VENTURE CAPITAL:

Money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

investment made in a business or industrial enterprise that carries high elements of risk, insecurity and probability of business hazards.

Venture capitalists are full-time professional investors who invest for their partnership funds

Page 3: Venture capital in india

VENTURE CAPITAL…

Before making an investment, they carefully scrutinize the founders and their business concepts

After the initial investment, venture capitalists tend to be very active in the process of raising additional funds for their portfolio companies

They also continuously monitor their companies, both formally through participation at the board level and informally

Page 4: Venture capital in india

POTENTIALITY OF INDIA:

India, along with Israel, Taiwan and the United States, is recognized for its globally competitive high technology and human capital.

The success in software and information technology -- against several odds such as inadequate infrastructure, expensive hardware, restricted access to foreign resources and limited domestic demand, is a pointer to the hidden potential it has in the field of knowledge and technology based industry

Page 5: Venture capital in india

DEVELOPMENT

In 1972, a committee on Development of Small and Medium Enterprises highlighted the need to foster venture capital as a source of funding new entrepreneurs and technology. This resulted in a few incremental steps being taken over the next decade-and-a-half to facilitate venture capital funds into needy technology oriented small and medium Enterprises (SMEs), namely:

Risk Capital Foundation, sponsored by IFCI, was set-up in 1975 to promote and support new technologies and businesses.

Seed Capital Scheme and the National Equity Scheme was set up by IDBI in 1976

Programme for Advancement of Commercial Technology (PACT) Scheme was introduced by ICICI in 1985.

Setting up of TDICI AND REGIONAL FUNDS

Page 6: Venture capital in india

VENTURE CAPITAL FUNDS

1. Venture Capital Fund Scheme IDBI 1987 Rs. 543.6

2. India Investment Fund Grindlays 3i Invest.

Services Ltd. 1987 US$ 7.5

3. Venture Capital Unit Scheme I TDICI 1989 Rs. 300

4. Information Technology Fund Credit Capital Venture Fund (I) Ltd. 1993 Rs 100

Source: AVCJ, 1994-95

Page 7: Venture capital in india

TYPES OF VENTURE CAPITAL FUNDS

1 . VCFs promoted by the Central govt.

controlled development financial

institutions

2. VCFs promoted by the state government-

controlled development finance institutions

3. VCFs promoted by Public Sector banks

4. VCFs promoted by the foreign banks or

private sector companies and financial

institutions

Page 8: Venture capital in india

SOME OF THE PROJECTS FINANCED BY TDICI

MASTEK

TEMPTATION FOODS

RISHABH INSTRUMENTS

SYNERGY ART FOUNDATION

Page 9: Venture capital in india

FORMS OF ASSISTANCE OF VC’S

(1) Corporate & Independent VC’s help with

obtaining additional financing;

(2) strategic planning;

(3) management recruitment;

(4) operational planning;

(5) introductions to potential customers and

suppliers;

(6) resolving compensation issues.

Page 10: Venture capital in india

RETURN ON INVESTMENT TYPICALLY SOUGHT BY

VENTURE CAPITALISTS:

Stage of Business Expected Annual Return on

Investment

Expected Increase on Initial

Investment

Start-up business

(Idea stage)

60% + 10-15 *investment

First-Stage financing

(New business)

40%-60% 6-12*investment

Second-Stage financing

(Development stage)

30%-50% 4-8*investment

Third–Stage financing

(Expansion stage)

25%-40% 3-6*investment

Turnaround situation 50% + 8-15*investment

Page 11: Venture capital in india

INVESTMENT DETERMINANTS OF THE VENTURE

CAPITAL FIRM

Page 12: Venture capital in india

SECTOR WISE INVESTMENT IN 2010

IT & ITES

18%

HEALTH CARE

11%

REAL ESTATE

10%

MEDIA & ENTERTAINMENT

9%MANUFACTURING

8%

CONSUMER PRODUCTS

7%

BANKING AND FINANCIAL

SERVICES

6%

TELECOM

6%

ENGINEERING

CONSTRUCTION AND

INFRASTRUCTURE

5%

GREEN AND CLEAN TECH

4%

FOOD AND AGRICULTURE

2%

ENERGY

RELATED

3%

SHIPPING AND

LOGISTICS

2% EDUCATION

1%

NOT AVAILABLE

3%

NOT DISCLOSED

1%

OTHERS

4%

PERCENTAGE

Page 13: Venture capital in india

GROWTH IN REGISTERED VENTURE CAPITAL

FIRMS IN INDIA

2000 2002 2004 2006 2008 2010

81 7886

105

160

180

1 2 3 4 5 6

Chart Title

year number of vc firms

Page 14: Venture capital in india

CLASSIFICATION OF INVESTORS

Corporate Venture (CORPVEN)

Financial Corporations (FINCORP)

Investment Banks (IBANK)

Government Institutions (GOVT)

Private Equity/ Venture Capital Firm (PRIV)

Page 15: Venture capital in india

ROUTES OF VCPE INVESTMENTS IN INDIA

There are 4 major routes through which VCPE investments happen in India:

1. The investor can register with SEBI (Securities Exchange Board of India) as a Domestic or Foreign Venture Capital Fund.

2. Direct Investment in an Indian company from outside India

3. Investment in an Indian subsidiary of a US company

4. a US company invests in a subsidiary in India by routing the investment through a Mauritius subsidiary of the US company

Page 16: Venture capital in india

VENTURE CAPITAL IS TYPICALLY AVAILABLE IN

THREE FORMS IN INDIA

Equity : All VCFs in India provide equity but generally their contribution does not exceed 49 percent 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. In India, VCFs charge royalty ranging between 2 to 15 percent;

Income Note : It is a hybrid security which combines the features of both conventional loan and conditional loan

Page 17: Venture capital in india

SOME IMPORTANT VENTURE CAPITAL FUNDS IN

INDIA

1. APIDC Venture Capital Limited, Hyderabad

2. Canbank Venture Capital Fund Limited,Bangalore

3. Gujarat Venture Capital Fund 1997, Ahmedabad

4. Industrial Venture Capital Limited, Chennai

5. Auto Ancillary Fund Opp. New Delhi

6. Gujarat Venture Capital Fund , Ahmedabad

7. Karnataka Information Technology Venture Capital Fund .Bangalore

8. India Auto Ancillary Fund, Mumbai

9. Information Technology Fund, Mumbai

10. Tamilnadu Infotech Fund , Mumbai

11. Orissa Venture Capital Fund, Mumbai

12. Uttar Pradesh Venture Capital Fund, Mumbai

Page 18: Venture capital in india

TOP FIVE CAPITAL VENTURE FIRMS IN 2010

iYogi

Aryaka Networks

Agni Property

Webaroo Technology India

NetAmbit InfoSource & e-Services

Page 19: Venture capital in india

CURRENT SCENARIO

- Private equity and mutual venture investment in India in February 2011 dropped by 30.85% to $334 million as compared to the same period last year.

- The median deal amount and the average value of deals was $13 million and $24 million, respectively.

- Financials, consisting of BFSI and Real Estate, was the most targeted sector with a cumulative investment of $221.47 million across 5 deals.

- Exits took a backseat with investors realizing only $53 million of capital across 8 deals as compared to $485 million realized from 11 deals during the same period last year.

- Fund raising activity gained momentum with three funds raising $347 million and another three funds gearing up to raise money from limited partners.

Page 20: Venture capital in india

THANK

YOU