venture capital by indian banks
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Venture Capital by Indian Banks
Bachelor of Commerce
Banking and Insurance
Semester V
Submitted
In Partial Fulfillment of the requirements
For the Award of Degree of Bachelor of
Commerce- Banking & Insurance
By
Ashmita Damji Patel
S.I.E.S (Nerul) College of Arts, Science & Commerce
Plot 1-C, Sector V, Nerul, Navi Mumbai-400 706
Certificate
This is to certify that Miss. Ashmita Damji Patel of B.Com Banking and Insurance, Semester V (2009-2010) has successfully completed the project on Venture Capital by Indian Banks under the guidance of Mr. Prakash.
Course co-ordinator Project Guide Principal
Internal Examiner External Examiner
Declaration
I Ashmita Damji Patel the student of B.Com. Banking & Insurance Semester V (2009– 2010) hereby declare that I
have completed the Project on Venture Capital by Indian Banks.
The information submitted is true and original to the best of my knowledge.
Signature
Ashmita Damji Patel
Acknowledgment
The project would not have been possible without the support of many people. I would like to thank Mr. Prakash for being my internal guide & for the support. I would also
like to thank our college librarian for providing books for reference. It is said that behind every successful deed there is a lot of effort put in and thus, this project is no exception to this saying.
Lastly special thanks to parents for their constant support and assistance, to make this project worth presenting before you.
Thanking You
Ashmita Damji Patel
SUMMARY
Technology and knowledge have been and continue to drive the global
economy. Given the inherent strength by way of its human capital, technical
skills, cost competitive work force, research and entrepreneurship, India is
positioned for rapid economic growth in a substainable manner. To realize
the potential, there is a need for risk finance and venture capital funding to
leverage innovation, promote technology and harness knowledge based
ideas.
Venture capital refers to money that is invested in companies during the
early stages of their development. Such funds may come from wealthy
individuals, government-backed small business Investment Companies
(SBICs), or professionally managed venture capital firms. venture capitalists
generally target companies that they believe offer significant potential for
growth, and therefore an opportunity to earn a high rate of return in a
relatively short period of time.
The present study on venture capital in the Indian context mainly focuses on
the venture capital process. Venture capital funding gives a hundred percent
funding to entrepreneurs. For a business owner, the process of obtaining
venture capital begins with a formal proposal. The most important element
of this proposal is a detailed business plan describing the company's goals
and strategies. The proposal should also include recent financial statements,
projections of future growth, a brief history of the company, biographies of
key managers, the amount of money requested, and a description of how the
funds will be used. Experts recommend that companies seeking equity
financing evaluate several venture capital firms before entering into a deal.
Managers should also hire professionals to help them understand the terms
of the agreement to avoid giving away too much control.
Overall, venture capital can provide a valuable source of financing for
growing businesses. Because of its associated risks, however, experts
generally suggest that it be viewed as one of a number of potential
sources of financing and be used in combination with debt financing
whenever possible.
INDEX
Ch.1
Ch.2
Ch.3
Ch.4
Ch.5
Ch.6
Ch.7
Ch.8
Ch.9
Ch.10
1.1Objective1.2Research methodology
Introduction
3.1 Concept of Venture Capital3.2 Meaning of Venture Capital3.3 Definition of Venture Capital3.4 History of Venture Capital3.5 Feature of Venture Capital
4.1 Scope of Venture Capital4.2 Disinvestment Mechanism 4.3 Importance of Venture Capital
5.1 Initiative in India5.2 Guidelines5.3 The Indian Scenario
Investment Process
Measures to be provided
Case Study
9.1 Recommendations9.2 Conclusion
Bibliography
CHAPTER 1
1.1 OBJECTIVE
The objective for the study on this topic of venture capital was to know how
the new ventures in India are financed. In India, venture capital has been
around for some time now. The performance has been mixed. So what are
these venture capital funds? How and to whom are they helpful? Do they
serve any useful purpose? What are the norms to be fulfilled before going
into financing of a project? As venture capital business is flourishing now in
India I choose this topic for a brief research which would help me in
knowing this subject better. The underlying goal was to know what venture
capital funding is all about and place them in all Indian contexts.
CHAPTER 2
INTRODUCTION TO VENTURE CAPITAL
Venture capital is money provided by professionals who invest alongside
management in young, rapidly growing companies that have the potential to
develop into significant economic contributors. Venture capital is an
important source of equity for start-up companies.
Professionally managed venture capital firms generally are private
partnerships or closely held corporations funded by private and public
pension funds, endowment funds, foundations, corporations, wealthy
individuals, foreign investors, and the venture capitalists themselves.
In India where the industry is still nascent, the Securities and exchange
board of India has laid down those activities that would constitute eligible
business activities qualifying for the concession available to a recognized
venture capital fund. Initially, SEBI defined venture capital as an equity
supported for the project launched by 1st generation entrepreneurs using
commercially untested but sophisticated technologies. However, this
definition has been subsequently relaxed and the restrictive feature
concerning “technology financing” was dispensed with. Venture capital is
now seen as encompassing all kinds of funding of a high technology
intensive undertaking at any stage of its life.
CHAPTER 3
3.1 CONCEPT OF VENTURE CAPITAL
The term ‘Venture Capital’ is understood in many ways. In a narrow sense,
it refers to, investment in new and tried enterprises that are lacking a stable
record of growth.
In a broader sense, venture capital refers to the commitment of capital as
shareholding, for the formulation and setting up of small firms specializing
in new ideas or new technologies. It is not merely an injection of funds into
a new firm, it is a simultaneous input of skill needed to set up the firm,
design its marketing strategy and organize and manage it. It is an association
with successive stages of firm’s development with distinctive types of
financing appropriate to each stage of development.
3.2 MEANING OF A VENTURE CAPITAL
Venture capital is long-term risk capital to finance high technology projects
which involve risk but at the same time has strong potential for growth.
Venture capitalist pools their resources including managerial abilities to
assist new entrepreneurs in the early years of the project. Once the project
reaches the stage of profitability, they sell their equity holdings at high
premium.
3.3 DEFINITION OF A VENTURE CAPITAL
A venture capital company is defined as “a financing institution which joins
an entrepreneur as a co-promoter in a project and shares the risks and
rewards of the enterprise”.
3.4 HISTORY OF VENTURE CAPITAL IN INDIA
Traditionally, the role of venture capital was an extension of the
developmental financial institutions like IDBI, ICICI, SIDBI and State
Finance Corporations (SFCs). The first origins of modern Venture Capital
in India can be traced to the setting up of a Technology Development Fund
(TDF) in the year 1987-88. TDF was meant to provide financial assistance–
to innovative and high-risk technological programs through the Industrial
Development Bank of India. This measure was followed up in November
1988, by the issue of guidelines by the (then) Controller of Capital Issues
(CCI). These stipulated the framework for the establishment and operation
of funds/companies that could avail of the fiscal benefits extended to them.
However, it was realized that the concept of venture capital funding needed
to be institutionalized and regulated. This funding requires different skills
in assessing the proposal and monitoring the progress of the fledging
enterprise. In 1996, the Securities and Exchange Board of India (SEBI)
came out with guidelines for venture capital funds has to adhere to, in
order to carry out activities in India. There are a number of funds,
which are currently operational in India and involved in funding start-up
ventures.
The Indian Venture Capital Association (IVCA), is the nodal center
for all venture activity in the country. The association was set up in
1992 and over the last few years, has built up an impressive database.
According to the IVCA, the pool of funds available for investment to its 20
members in 1997 was Rs25.6bn. Out of this; Rs10bn had been invested in
691 projects.
3.5 FEATURES OF VENTURE CAPITAL
1. Nature: Venture Capital is a long term investment. Since the project is
risky, it may take time to earn profits. Therefore, it takes time to get the
refund of capital as well as return on it. The investors can exist on success of
the project by off-loading their investment. But it takes long time to get the
success.
2. Form: Venture Capital is mainly in the form of equity capital. Investors
can subscribe the equity capital and provide the necessary funds to complete
the project. The amount of equity invested by the venture capitalist is
normally up to 49%of the total equity capital required for the project.
3. Borrowers: The borrowers are the new entrepreneurs who raise venture
capital because they cannot get such an amount from the general investors.
4. Type of project: Venture Capital projects are high risk, high technology
and long term projects.
5. Managenment: Venture Capital projects are managed jointly by the
entrepreneurs and venture capitalists. However, venture capitalist should not
interfere in day to day activities of the management. The venture capitalist
can take active part in the management and decision-making.
6. New venture: Venture capital investment is generally made in new
enterprises that use new technology to produce new products, in
expectations of high gains or sometimes, spectacular returns.
7. Continuous involvement: Venture capitalists continuously involve
themselves with the client’s investments, either by providing loans or
managerial skills or any other support.
8. Mode of investment: Venture capital is basically an equity financing
method, the investment being in relatively new companies when it is too
early to go to the capital market to raise funds. In addition, financing also
takes the form of loan finance/convertible debt to ensure a running yield on
the portfolio of the venture capitalists.
9. Objective: The basic objective of a venture capitalist is to make a capital
gain in equity investment at the time of exit, and regular on debt financing. It
is a long-term investment in growth-oriented small/medium firms. It is a
long-term capital that is injected to enable the business to grow at a rapid
pace, mostly from the start-up stage.
10. Hands-on approach: Venture capital institutions take active part in
providing value-added services such as providing business skills, etc to
investee firms. They do not interfere in management of the firms nor do they
acquire a majority/controlling interest in the investee firms. The rationale for
the extension of hands-on management is that venture capital investments
tend to be highly non-liquid.
11. High risk-return ventures: Venture capitalists finance high risk-return
ventures. Some of the ventures yield very hi8gh return in order to
compensate for the heavy risks related to the ventures. Venture capitalists
usually make huge capital gains at the time of exit.
12. Nature of firms: Venture capitalists usually finance small and medium-
sized firms during the early stages of their development, until they are
established and are able to raise finance from the conventional industrial
finance market. Many of these firms are new, high technology-oriented
companies.
13. Liquidity: Liquidity of venture capital investment depends on the
success or otherwise of the new venture or product. Accordingly, there will
be higher liquidity where the new ventures are highly successful.
CHAPTER 4
4.1 SCOPE OF VENTURE CAPITAL
Venture capital may take various forms at different stages of the project.
There are four successive stages of development of a project viz.
development of a project idea, implementation of the idea, commercial
production and marketing and finally large scale investment to exploit the
economics of scale and achieve stability. Financial institutions and banks
usually start financing the project only at the second or third stage but rarely
from the first stage. But venture capitalists provide finance even from the
first stage of idea formulation. The various stages in the financing of venture
capital are described below:
1. Development of an Idea- Seed Finance: In the initial stage venture
capitalists provide seed capital for translating an idea into business
proposition. At this stage investigation is made in depth which
normally takes a year or more.
2. Implementation Stage- Start up Finance: When the firm is set up to
manufacture a product or provide a service, start up finance is
provided by the venture capitalists. The first and second stage capital
is used for full scale manufacturing and further business growth.
3. Fledging Stage- Additional Finance: In the third stage, the firm has
made some headway and entered the stage of manufacturing a product
but faces teething problems. It may not be able to generate adequate
funds and so additional round of financing is provided to develop the
marketing infrastructure.
4. Establishment Stage- Establishment Finance: At this stage the firm
is established in the market and expected to expand at a rapid pace. It
needs further financing for expansion and diversification so that it can
reap economies of scale and attain stability. At the end of
establishment stage, the firm is listed on the stock exchange and at
this point the venture capitalist disinvests their shareholdings through
available exit routes.
Before investing in small, new or young hi-tech enterprises, the venture
capitalist look for percentage of key success factors of a venture capital
project. They prefer projects that address these problems. After assessing the
viability of projects, the investors decide for what stage they should provide
venture capital so that it leads to greater capital appreciation. All the above
stages of finance involve varying degrees of risks and venture capital
industry, only after analyzing such risks, invest in one or more. Hence they
specialize in one or more but rarely all.
4.2 DISINVESTMENT MECHANISM
The objective of venture capitalist is to sell of the investment made by him
at substantial capital gains. The disinvestment options available in developed
countries are:
1. Promoter’s buy back
2. Public issue
3. Sale to other venture capital funds
4. Sale in OTC market and
5. Management buy outs.
In India, the most popular investment route is promoter’s buy back. This
permits the ownership and control of the promoter in tact.
The Risk capital and Technology Finance Corporation, CAN-VCF etc., in
India allow promoters to buy back equity of their enterprise.
The public issue would be difficult and expensive since first generation
entrepreneurs are not known in the capital market. The option involves high
transaction cost and also less feasible for small ventures on account of high
listing requirements of the stock exchange.
The OTC exchange in India has been set up in 1992. It is hoped that OTCEI
would provide disinvestment opportunities to venture capital firms.
The other investment options such as management buy out or sale to other
venture capital fund are not considered appropriate in India.
4.3 IMPORTANCE OF VENTURE CAPITAL
Venture capital is of great practical value to every corporate enterprise in
modern times.
1) Advantages to investing public
The investing public will be able to reduce risk significantly
against unscrupulous management, if the public invest in
venture fund who in turn will invest in equity of new business.
With their expertise in the field and continuous involvement in
the business they would be able to stop malpractices by
management.
Investors have no means to vouch for the reasonableness of the
claims made by the promoters about profitability of the
business. The venture funds equipped with necessary skills will
be able to analyze the prospect of the business.
The investors do not have any means to ensure that the affairs
of the business are conducted prudently. The venture funds
having representatives on the board of directors of the company
would overcome it.
2) Advantages to promoters
The entrepreneur for the success of public issue is required to
convince tens of underwriters, brokers and thousand of investor
but to obtain venture capital assistance, he will be required to
sell his idea to justify the officials of the venture fund.
Public issue of equity shares has to be preceeded by lot of
efforts viz. necessary statutory sanctions, underwriting and
brokers arrangement, publicity of issue etc. The new
entrepreneur find it very difficult to make underwriting
arrangement and require a great deal of effort. Venture fund
assistance would eliminate those efforts by leaving entrepreneur
to concentrate upon bread and butter activities of business.
Cost of public issues of equity share often range between 10%
to 15% of nominal value of issue of moderate size, which are
often even high for small issues. The company is required, in
addition to above, to incur recurring cost for maintenance of
share registry cell, stock exchange listing fee, expenditure on
printing and posting of annual reports etc. These items of
expenditure can be ill afforded by the business when it is new.
Assistance from venture funds does not require such
expenditure.
3) General
A developed venture capital institutional set up reduces the time
lag between a technological innovation and its commercial
exploitation.
It helps in developing new processes/products in conducive
atmosphere, free from the dead weight of corporate
bureaucracy, which helps in exploiting full potential.
Venture capital act as cushion to support business borrowings, a
bankers and investors will not lend money with in adequate
margin of equity capital.
Once venture capital funds start earning profits, it will be very
easy for them to raise resources from primary capital market in
the form of equity and debts. Therefore, the investors would be
able to invest in new business through venture funds and, at the
same time, they can directly invest in existing business when
venture fund disposes its own holding. This mechanism will
help to channelise investment in new high tech business or the
existing sick business. These business will take off with the help
of finance from venture funds and this would help in increasing
productivity, better capacity utilization etc.
The economy with well developed venture capital network
induces the entry of large number of technocrats in industry,
help in stabilizing industries and in creating a new set of trained
technocrats to build and manage medium and large industries,
resulting in faster industrial development.
A venture capital firm serves as an intermediary between
investors looking for high returns for their money and
entrepreneurs in search of needed capital for their start ups.
It also paves the way for private sector to share the
responsibility with public sector.
CHAPTER 5
5.1 INITIATIVE IN INDIA
India tradition of venture capital for industry goes back more than 150 years
when many of the managing agency houses acted as venture capitalists
providing both finance and management skill to risky to risky projects. It
was the managing agency system through which Tata Iron and Steels and
empress Mils were able to raise equity capital from the investing public. The
Tatas also initiated a managing agency system, named Investment
corporation of India in 1937 which by acting as venture capitalist,
successfully promoted hi-tech enterprises such as CEAT tyres. Associated
Bearings, National Rayon etc. The early form of venture capital enabled the
entrepreneurs to raise large amount of funds and yet retain management
control. After the abolition of managing agency system, the public sector
term lending institutions met a part of venture capital requirements through
seed capital and risk capital for hi-tech industries which were not able to
meet promoters contribution. However, all these institutions supported only
proven and sound technology while technology development remained
largely confined to government labs and academic institutions. Many hi-tech
industries, thus, found it impossible to obtain financial assistance from banks
and other financial institutions due to unproven technology, conservative
attitude, risk awareness and rigid security parameters.
Venture capital’s growth in India passed through various stages. In 1973,
R.S. Bhatt Committee recommended formation of Rs. 100 crore venture
capital fund. The Seventh Five Year Plan emphasized the need for
developing a system of funding venture capital. The Research and
Development Cess Act was enacted in May 1986 which introduced a cess of
5 % on all payments made for purchase of technology from abroad. The levy
provides the source for the venture capital fund.
United Nations Development Programme in 1987 on behalf of government
examined the possibility of developing venture capital in private sector.
Technology Policy Implementation Committee in the same year also
recommended the same provision. Formalised venture capital took roots
when venture capital guidelines were issued by Comptroller of Capital
Issues in November 1988.
5.2 GUIDELINES
The venture capital operations in India are regulated by The Securities
Exchange Regulation Board of India (SEBI). The following legal
instruments are in operation:
SEBI Act 1992.
SEBI (venture capital funds)‘Regulations’ 1996
New sector regulations issued in September 2000
Highlight of Policy and Legal Framework
VCFs can be constituted as trust fund or Company. Separate vehicle
for constitution and operation of venture funds such as limited liability
partnership is yet to be introduced in the country
Any company or trust proposing to undertake venture capital
investments is required to obtain certificate of registration from SEBI.
VCFs before raising any funds for investment are required to file
placement memorandum with SEBI. Private placement memorandum
can be issued only after expiry of 21 days from submission to SEBI.
VCFs can raise funds for investment through private placement route.
Individual investor is required to invest minimum of Rs. 5 lakhs in
venture capital fund. Raising of funds from public is restricted.
VCFs are required to invest 80 percent of funds raised in equity or
equity related securities issued by companies whose securities are not
listed or which are financially weak.
VCFs are barred from investing in company or institutions providing
financial services venture capital funds which desire to claim exemption
from income tax are required to follow rules given hereunder:
Registration with SEBI.
Claiming Income tax exemption in respect of dividend and capital gains
income.
Not more than 40 percent of equity in a venture
80 percent of monies raised for investment are required to be invested
in equity shares of domestic companies whose shares are not listed on
recognised stock exchange
Shares of investee companies are required to be held for a period of at
least 3 years. However, these shares can be sold either if they are listed
on recognised stock exchange in India.
Under the SEBI's venture capital rules:
VCFs can be either company or trust.
There is no minimum capital adequacy requirement for venture capital
funds.
Are allowed to take loans, donations or issue securities.
VCFs cannot be public companies - they need to contain a restriction
on inviting the public to subscribe to securities.
VCFs are only allowed to carry the business of venture capital fund -
cannot engaged in any other business.
Every VCF investor has to contribute at least Rs. 5 lacs.
VCFs shall not invest in the equity capital of a financial services
company. This still allows investment in financial services companies,
other than by way of equity capital.
5.3 THE INDIAN SCENARIO
Method of venture financing
Venture capital is available in four forms in India.
1. Equity participation
2. Conventional loan
3. Conditional loan
4. Income notes.
1. Equity Participation: Venture Capital Firms participate in
equity through direct purchase of shares but their stake does not
exceed 49%. These shares are retained by them till the assisted
projects making profit. These shares are sold either to the
promoter at negotiated price under buy back agreement or to
the public in secondary market at a profit.
2. Conventional Loan: Under this form of assistance, a lower
fixed rate of interest is charged till the assisted units become
commercially operational, after which the loan carries normal
or higher rate of interest. The loan has to be repaid according to
the predetermined schedule of repayment as per terms of loan
agreement.
3. Conditional Loans: Under this form of finance, an interest free
loan is provided during the implementation period but it has to
pay royalty on sales. The loan has to be repay according to the
predetermined schedule as soon as the company is able to
generate sales and income.
4. Income Notes: it is a combination of conventional and
conditional loans. Both interest and royalty are payable at much
lower rates than in case of conditional loans.
CHAPTER 6
VENTURE CAPITAL INVESTMENT PROCESS
In generating a deal flow, the venture capital investor creates a pipeline of
‘deals’ or investment opportunities that he would consider investing in. This
is achieved primarily through plugging into an appropriate network. The
most popular network obviously is the network of venture capital
funds/investors. It is also common for venture capitals to develop working
relationships with R&D institutions, academia, etc, which could potentially
lead to business opportunities.
Understandably the composition of the network would depend on the
investment focus of the venture capital funds/company. Thus venture capital
funds focusing on early stage technology based deals would develop a
network of R&D centers working in those areas. The network is crucial to
the success of the venture capital investor. It is almost imperative for the
venture capital investor to receive a large number of investment proposals
from which he can select a few good investment candidates finally.
First, you need to work out a business plan. The business plan is a document
that outlines the management team, product, marketing plan, capital costs
and means of financing and profitability statements.
1. Initial Evaluation:
Before any in depth analysis is done on a project, an initial screening is
carried out to satisfy the venture capitalist of certain aspects of the project.
These include
Competitive aspects of the product or service
Outlook of the target market and their perception of the new product
Abilities of the management team
Availability of other sources of funding
Expected returns
Time and resources required from the venture capital firm
Through this screening the venture firm builds an initial overview about
the
Technical skills, experience, business sense, temperament and ethics
of the promoters
The stage of the technology being used, the drivers of the technology
and the direction in which it is moving.
Location and size of market and market development costs, driving
forces of the market, competitors and share, distribution channels and
other market related issues
Financial facts of the deal
Competitive edge available to the company and factors affecting it
significantly
Advantages from the deal for the venture capitalist
Exit options available
2. Due diligence
Due diligence is term used that includes all the activities that are associated
with investigating an investment proposal to assess feasibility. It includes
carrying out in-depth reference checks on the proposal related aspects such
as management team, products, technology and market. Additional studies
and collection of project-based data are done during this stage. The
important feature to note is that venture capital due diligence focuses on
the qualitative aspects of an investment opportunity.
Areas of due diligence would include
General assessment
Business plan analysis
Contract details
Collaborators
Corporate objectives
SWOT analysis
Time scale of implementation
People
Managerial abilities, past performance and credibility of promoters
Financial background and feedback about promoters from bankers and
previous lenders
Details of Board of Directors and their role in the activities
Availability of skilled labour
Recruitment process
Products/services, technology and process
In this category the type of questions asked will depend on the nature of
the industry into which the company is planning to enter. Some of the
areas generally considered are
Technical details, manufacturing process and patent rights
Competing technologies and comparisons
Raw materials to be used, their availability and major suppliers,
reliability of these suppliers
Machinery to be used and its availability
Details of various tests conducted regarding the new product
Product life-cycle
Environment and pollution related issues
Secondary data collection on the product and technology, if so
available
Market
The questions asked under this head also vary depending on the type of
product. Some of the main questions asked are
Main customers
Future demand for the product
Competitors in the market for the same product category and their
strategy
Pricing strategy
Potential entrants and barriers to entry
Supplier and buyer bargaining power
Channels of distribution
Marketing plan to be followed
Future sales forecasts
Finance
Financial forecasts for the next 3-5 years
Analysis of financial reports and balance sheets of firms already
promoted or run by the promoters of the new venture
Cost of production
Wage structure details
Accounting process to be used
Financial report of critical suppliers
Returns for the next 3-5 years and thereby the returns to the venture
fund
Budgeting methods to be adopted and budgetary control systems
External financial audit if required
Sometimes, companies may have experienced operational problems during
their early stages of growth or due to bad management. These could result in
losses or cash flow drains on the company. Sometimes financing from
venture capital may end up being used to finance these losses. They avoid
this through due diligence and scrutiny of the business plan.
3. Structuring a deal:
Structuring refers to putting together the financial aspects of the deal and
negotiating with the entrepreneurs to accept a venture capital’s proposal and
finally closing the deal. Also the structure should take into consideration the
various commercial issues (i.e. what the entrepreneur wants and what the
venture capital would require to protect the investment). The instruments to
be used in structuring deals are many and varied. The objective in selecting
the instrument would be to maximize (or optimize) venture capital’s
returns/protection and yet satisfies the entrepreneur’s requirements.
The instruments could be as follows:
Instrument Issues
Equity sharesNew or vendor shares
Par value
Partially-paid shares
Preference
shares
Redeemable (conditions under Company
Act)
Participating
Par value
Nominal shares
Loan Clean v/s Secured
Interest bearing v/s Non interest bearing
convertible v/s one with features
(warrants)
1st Charge, 2nd Charge,
Warrants Exercise price, Exercise period
Options Exercise price, Exercise period, call, put
In India, straight equity and convertibles are popular and commonly used.
Nowadays, warrants are issued as a tool to bring down pricing. A variation
that was first used by PACT and TDICI was "royalty on sales". Under this,
the company was given a conditional loan. If the project was successful, the
company had to pay a percentage of sales as royalty and if it failed then the
amount was written off.
In structuring a deal, it is important to listen to what the entrepreneur wants,
but the venture capital comes up with his own solution. Even for the
proposed investment amount, the venture capital decides whether or not the
amount requested, is appropriate and consistent with the risk level of the
investment. The risks should be analyzed, taking into consideration the stage
at which the company is in and other factors relating to the project. (E.g. exit
problems, etc).
A typical proposal may include a combination of several different
instruments listed above. Under normal circumstances, entrepreneurs would
prefer venture capitals to invest in equity, as this would be the lowest risk
option for the company. However from the venture capitals point of view,
the safest instrument, but with the least return, would be a secured loan.
Hence, ultimately, what you end up with would be some instruments in
between which are sold to the entrepreneur. A number of factors affect the
choice of instruments, such as –
Categories Factors influencing the choice of InstrumentCompany specific Risk, current stage of operation, expected profitability,
future cash flows, and investment liquidity options.Promoter specific Current financial position of promoters, performance
track record, willingness of promoters to dilute stake.Product/Project
specific
Future market potential, product life cycle, gestation
period.Macro environment Tax options on different instruments, legal framework,
policies adopted by competition.
3. Investment valuation:
The investment valuation process is an exercise aimed at arriving at ‘an
acceptable price’ for the deal. Typically in countries where free pricing
regimes exist, the valuation process goes through the following steps:
1) Evaluate future revenue and profitability
2) Forecast likely future value of the firm based on experienced market
capitalization or expected acquisition proceeds depending upon the
anticipated exit from the investment.
3) Target ownership positions in the investee firm so as to achieve
desired appreciation on the proposed investment. The appreciation
desired should yield a hurdle rate of return on a Discounted Cash Flow
basis.
4) Symbolically the valuation exercise may be represented as follows:
NPV = [(Cash)/(Post)] x [(PAT x PER)] x k,
Where
a) NPV = Net Present Value of the cash flows relating to the investment
comprising outflow by way of investment and inflows by way of
interest/dividends (if any) and realization on exit. The rate of return used
for discounting is the hurdle rate of return set by the venture capital
investor.
b) Post = Pre + Cash
c) Cash represents the amount of cash being brought into the particular
round of financing by the venture capital investor.
d) ‘Pre’ is the pre-money valuation of the firm estimated by the investor.
While technically it is measured by the intrinsic value of the firm at the
time of raising capital. It is more often a matter of negotiation driven by
the ownership of the company that the venture capital investor desires
and the ownership that founders/management team is prepared to give
away for the required amount of capital
e) PAT is the forecast Profit after tax in a year and often agreed upon by
the founders and the investors (as opposed to being ‘arrived at’
unilaterally). It would also be the net of preferred dividends, if any.
f) PER is the Price-Earning multiple that could be expected of a
comparable firm in the industry. It is not always possible to find such a
‘comparable fit’ in venture capital situations. That necessitates, therefore,
a significant degree of judgment on the part of the venture capital to
arrive at alternate PER scenarios.
g) ‘k’ is the present value interest factor (corresponding to a discount
rate ‘r’) for the investment horizon.
It is quite apparent that PER time PAT represents the value of the firm at
that time and the complete expression really represents the investor’s share
of the value of the investee firm. In reality the valuation of the firm is driven
by a number of factors. The more significant among these are:
Overall economic conditions: A buoyant economy produces an
optimistic long- term outlook for new products/services and therefore
results in more liberal pre-money valuations.
Demand and supply of capital: when there is a surplus of venture
capital of venture capital chasing a relatively limited number of venture
capital deals, valuations go up. This can result in unhealthy levels of low
returns for venture capital investors.
Specific rates of deals: such as the founder’s/management team’s track
record, innovation/ unique selling propositions (USPs), the
product/service size of the potential market, etc affects valuations in an
obvious manner.
The degree of popularity of the industry/technology in question also
influences the pre-money. Computer Aided Skills Software Engineering
(CASE) tools and Artificial Intelligence were one time darlings of the
venture capital community that have now given place to biotech and
retailing.
The standing of the individual venture capital: Well established
venture capitals who are sought after by entrepreneurs for a number of
reasons could get away with tighter valuations than their less known
counterparts.
Investor’s considerations could vary significantly: A study by an
American venture capital, Venture One, revealed the following trend.
Large corporations who invest for strategic advantages such as access to
technologies, products or markets pay twice as much as a professional
venture capital investor, for a given ownership position in a company but
only half as much as investors in a public offering.
Valuation offered on comparable deals around the time of investing in
the deal.
Quite obviously, valuation is one of the most critical activities in the
investment process. It would not be improper to say that the success for a
fund will be determined by its ability to value/price the investments
correctly. Sometimes the valuation process is broadly based on thumb rule
metrics such as multiple of revenue. Though such methods would appear
rough and ready, they are often based on fairly well established industry
averages of operating profitability and assets/capital turnover ratios.
Such valuation as outlined above is possible only where complete freedom
of pricing is available. In the Indian context, where until recently, the pricing
of equity issues was heavily regulated, unfortunately valuation was heavily
constrained.
5. Documentation
It is the process of creating and executing legal agreements that are needed
by the venture fund for guarding of investment.
Based on the type of instrument used the different types of agreements are
Equity Agreement
Income Note Agreement
Conditional Loan Agreement
Optionally Convertible Debenture Agreement etc.
There are also different agreements based on whether the agreement is with
the promoters or the company. The different legal documents that are to be
created and executed by the venture firm are
Shareholders agreement: This agreement is made between the venture
capitalist, the company and the promoters. The agreement takes into
account
Capital structure
Transfer of shares: This lays the condition for transfer of equity
between the equity holders. The promoters cannot sell their shares
without the prior permission of the venture capitalist.
Appointment of Board of Directors
Provisions regarding suspension/cancellation of the investment. The
issues under which such cancellation or suspension takes place are
default of covenants and conditions, supply of misleading
information, inability to pay debts, disposal and removal of assets,
refusal of disbursal by other financial institutions, proceedings against
the company, and liquidation or dissolution of the company.
Equity subscription agreement: This is the agreement between the
venture capitalist and the company on
Number of shares to be subscribed by the venture capitalist
Purpose of the subscription
Pre-disbursement conditions that need to be met
Submission of reports to the venture capitalist
Currency of the agreement
Deed of Undertaking: The agreement is signed between the promoters
and the venture capitalist wherein the promoter agrees not to withdraw,
transfer, assign, pledge, and hypothecate etc their investment without
prior permission of the venture capitalist. The promoters shall not
diversify, expand or change product mix without permission.
Income Note Agreement: It contains details of repayment, interest,
royalty, conversion, dividend etc.
Conditional Loan Agreement: It contains details on the terms and
conditions of the loan, security of loan, appointment of nominee directors
etc.
Deed of Hypothecation, Shortfall Undertaking, Joint and Several
Personal Guarantee Power of Attorney etc.
Whenever there is a modification in any of the agreements, then a
Supplementary Agreement is created for the same.
6. Monitoring and follow up:
The role of the venture capitalist does not stop after the investment is made
in the project. The skills of the venture capitalist are most required once the
investment is made. The venture capitalist gives ongoing advice to the
promoters and monitors the project continuously.
It is to be understood that the providers of venture capital are not just
financiers or subscribers to the equity of the project they fund. They function
as a dual capacity, as a financial partner and strategic advisor.
Venture capitalists monitor and evaluate projects regularly. They are
actively involved in the management of the of the investor unit and provide
expert business counsel, to ensure its survival and growth. Deviations or
causes of worry may alert them to potential problems and they can suggest
remedial actions or measures to avoid these problems. As professional in
this unique method of financing, they may have innovative solutions to
maximize the chances of success of the project. After all, the ultimate aim of
the venture capitalist is the same as that of the promoters – the long term
profitability and viability of the investor company.
The various styles are:
Hands-on Style suggests supportive and direct involvement of the venture
capitalist in the assisted firm through Board representation and regularly
advising the entrepreneur on matters of technology, marketing and general
management. Indian venture capitalists do not generally involve themselves
on a hands-on basis bit they do have board representations.
Hands-off Style involves occasional assessment of the assisted firm’s
management and its performance with no direct management assistance
being provided. Indian venture funds generally follow this approach.
Intermediate Style venture capital funds awe entitled to obtain on regular
basis information about the assisted projects.
7. Exit:
One of the most crucial issues is the exit from the investment. After all, the
return to the venture capitalist can be realized only at the time of exit. Exit
from the investment varies from the investment to investment and from
venture capital to venture capital. There are several exit routes, buy-buck by
the promoters, sale to another venture capitalist or sale at the time of Initial
Public Offering, to name a few. In all cases specialists will work out the
method of exit and decide on what is most profitable and suitable to both the
venture capitalist and the investor unit and the promoters of the project.
At present many investments of venture capitalists in India remain on paper,
as they do not have any means of exit. Appropriate changes have to be made
to the existing systems in order that venture capitalists find it easier to
realize their investments after holding on to them for a certain period of
time. This factor is even more critical to smaller and mid sized companies,
which are unable to get listed on any stock exchange, as they do not meet the
minimum requirements for such listings. Stock exchanges could consider
how they could assist in this matter for listing of companies keeping in mind
the requirement of the venture capital industry.
To provide the lenders with additional security, a Special Purpose Vehicle
(SPV) can be created, which would hold the shares bought back from the
venture capitalist firm in a trust until the firm achieves a certain targeted rate
of return. Meanwhile a certain proportion of the firm’s sale proceeds can be
funneled directly to the SPV amortize the debt.
An exit via the capital market is certainly less expensive but this option is
open only to the more established firms. A listing on a stock exchange,
which would enable the venture capitalist to easily off-load his stake, is
obviously a far more feasible proposition for a firm already in existence for a
few years than for a new venture. There are stiff capital requirements for
listing on either the BSE or the NSE, the minimum capital requirement is
RS. 10 Crore. While the OTCEI would have been an ideal solution for a
young company contemplating listing, since its inception in 1992, the
Exchange has been plagued by poor liquidity, negative returns and a general
lack of investor interest.
Even if the OTCEI does manage to perk up, it cannot be expected that small
startups will enlist. Global experience indicates that, despite liberal
admission requirements, OTCEs for unlisted securities tend to be dominated
by fast growing or medium size companies.
CHAPTER 7
MEASURES TO BE PROVIDED
From the experience of Venture Capital activities in the developed countries
and detailed case study of venture capital in India we can derive that the
following measures needs to be provided to boost Venture Capital industry
in India.
Social Awareness:
Lack of social awareness of the existence of venture capital industry has
been observed. Hardly few know about the principal objectives and
functions of the existing venture capital funds in the country and thus
banking of the media is required to bridge the gulf between the society
and the existing venture capital funds.
Deregulated Economic Environment:
A less regulated and controlled business and economic environment
where an attractive customer opportunity exists or could be created for
high-tech and quality products.
Fiscal Incentives:
Though Venture Capital funds like Mutual funds are exempted from
paying tax on dividend income and long-term capital gains, from equity
investment, unlike Mutual funds there are pre-conditions attached to the
tax shelter. So it is imperative that the Government streamlines its
guidelines on tax exemption for Venture Capital Funds.
Entrepreneurship And Innovation:
A broad-based (and less family based) entrepreneurial traditions and
societal and governmental encouragement for innovation creativity and
enterprise.
Marketing Thrust:
A vigorous marketing thrust, promotional efforts and development
strategy employing new concepts such as venture fairs, venture clubs
venture networks, business incubators etc., for the growth of venture
capital.
A Statutory Co-ordination Body:
A harmonious co-ordination needs to be maintained among the
technology institutes, professional institutes and universities who are the
producers of future venture capital managers. The coordinating organ so
formed is expected to ventilate an outline of the latest requirements of the
venture capital funds management. Central Government should come
forward to promote the referred coordination organ in the form of a
statutory body. The coordination organ would not only maintain link with
the domestic professional institutions, technology institutes and
universities but also with the global venture capital funds in order to
exchange the novel ideas that can help in standardizing Indian practice on
venture capital funds.
Technological Competitiveness:
Encouragement and funding of R&D by private and public sector
companies and the government for ensuring technological
competitiveness.
Training and Development of Venture Capital Managers:
For the success of venture capital fund, be it privately owned or public
sector financial institutions, strategies need to be found to promote
entrepreneurship. For this, venture capital funds need professionals with
initiative, drive and vision to identify such entrepreneurs who have sound
& ideas and innovative vision. Unfortunately, such professionals are not
easily available particularly in developing countries like India. Therefore
management schools need to develop social training programs to train
venture capital mangers in which risk taking and entrepreneurial attitude
needs to be incubated.
Broad Knowledge Base:
A more general, business and entrepreneurship oriented education system
where scientist and engineers have knowledge of accounting, finance and
economics and accountants understand engineering or the physical
sciences.
Exit Routes:
For venture capital funds, exits are crucial; going public is one way for
the investors to be paid back. Current rules of companies going public in
India insist on sustained track record of profits. For entrepreneur driven
companies where value creation is through intellectual property patents,
methodologies and processes, such norms are archaic. Venture capitalists
earn through value creation leading to exits and not through dividends.
Venture funds would prefer the company to invest back dividends into
the business. As such the question of stream of dividends pay outs prior
to IPO over three years as is required in India is a hindrance.
Another exit route can be repurchases of shares by promoters but it is an
expensive way of assuring investors an exit bank roll. Inter accruals alone
may not be adequate to back roll the repurchases and institutional
funding for such buyouts is rarely forthcoming. Though there is no legal
bar on such funding, but the risk of extending against the shares of newly
established company have kept away most of the bank and financial
institutions. Creative financial engineering can find a way around this
problem. To provide the lenders with an additional degree of security, a
special purpose vehicle (SPV) can be created which would hold the
shares bought back from the venture capital firms in trust until the firm
achieves a certain rate of return. Meanwhile, a certain proportion of the
firm’s sales proceeds can be funneled directly to the SPV to amortize
debt.
CHAPTER 8
Case study
Canbank Venture Capital
Canbank Venture Capital Fund Ltd (CVCFL) is a wholly owned Subsidiary
of Canara Bank. Canbank Venture Capital Fund is India’s First and Only
Public Sector Bank sponsored Venture Capital Fund, set up in 1989. The
Fund is registered with SEBI.
Four Venture Capital Funds with an aggregate corpus of around INR 1200
Million launched till date. The portfolio investments are spread across
diverse industrial segments.
Canbank Venture Capital Fund Ltd (CVCFL) intends to set up a new,
general, close-ended Venture Capital/Private Equity Fund with a corpus of
INR 5000 Million shortly. In this regard, proposals have been invited from
consultancy firms of repute for appointment as Advisors for setting up the
new Fund.
Overview
Canbank Venture is a premier domestic Venture Capital Fund. An
experienced fund management company, Canbank Venture believes in
adopting a General Fund philosophy and has a good portfolio of investments
in several promising sectors. The fund's corpus is contributed by Public
Sector Banks and Financial Institutions.
Over the last 19years Canbank Venture has invested in several promising
companies, partnered progress and posted successful exits. We invest in
businesses with an established technological or market positioning edge and
good growth potential.
The company has a well qualified team to invest, manage and create value in
its investee companies.
Canbank Venture is currently investing from BHARATH NIRMAN FUND,
which is a broad based fund. The Fund focuses on Growth Capital. The
investment philosophy is to pursue transactions with established companies
managed by professional teams.
Directors
The Board of Directors of Canbank Venture comprises the senior
management of Canara Bank and banking doyens. The members of the
board are:
- Mr. A.C. Mahajan – Chairman, Canara Bank
- Mr. H.S. Upendra Kamath – Executive Director, Canara Bank
- Mr. D.S. Anandamurthy – General Manager, Canara Bank Director
-Mr. Suresh Gadwal B.V – Managing Director, Canara Bank
Team
Canbank Venture has an experienced team to invest and manage the funds
efficiently. The team members are experienced venture capitalists and have
good knowledge of various sectors.
Mr. Suresh Gadwal B.V, Managing Director
Mr. Suresh Gadwal brings with him an experience of over 37 years in
banking, with varied exposure into Corporate Credit, Export Finance,
Syndication, Investment Banking and Relationship Banking. He has a niche
for structuring customized products to Corporates/PSUs based on their
requirements and has a network of contacts with HNIs/VIPs/ Corporates/
PSUs/ SEBI/ BSE/ NSE/ and other Intermediaries in the Capital Market
Ms. Rajee R, Vice President
Ms. Rajee, brings with her over 19 years of venture capital experience. She
has a degree in Electronics Engineering and a Masters in Business
Administration
Mr.Anil Kumar Shetty B.V, Asst. Vice President
Mr. Anil Kumar Shetty B.V, Asst. Vice President brings with him over 12
years of banking experience. He is a Post Graduate with CAIIB.
Funds
Canbank Venture Capital Fund has through its funds, invested in companies
covering a broad spectrum of industries.
Bharath Nirman Fund- Fund IV
The Core Contributors of the Fund are leading nationalized banks viz.,
Canara Bank, Allahabad Bank, Andhra Bank, Corporation Bank, Indian
Overseas Bank, Oriental Bank of Commerce, Vijaya Bank, and Small
Industries Development Bank of India (SIDBI)
The Investment Focus is on Emerging Indian SME Businesses in IT/ ITES/
BPO, Telecom, Biotechnology, Healthcare, Pharmaceuticals, Engineering,
Auto & Auto Components, Infrastructure led Sectors and Domestic Demand
Driven Segments.
Portfolio
Canbank Venture has a diverse portfolio of investments in different sectors. Some of our
investments are.
ASIATIC
ELECTRICAL &
SWITCHGEAR PVT
LTD
Asiatic is a leading supplier of standardized power
distribution and protection solutions for
uninterrupted power supply. It manufactures a
range of low voltage and high voltage distribution
products including Silicone Rubber Range of HT
Products.
MERCHEM LTD. Merchem Limited is one of India's leading
manufacturers of rubber & specialty chemicals,
serving rubber-processing and allied industries.
With state-of-the-art technology and world-class
manufacturing facilities, Merchem consistently
delivers superior quality products that are on par
with international standards.
COLOUR ROOF
(INDIA) LTD.
COLOUR ROOF (INDIA) LTD (CRIL) is
dedicated exclusively to manufacture of roof and
wall cladding profiled sheets, and is a highly
customer focused organization in cladding profiles
M-TECH
INNOVATIONS
LTD
M-Tech Innovations Ltd., is one of the leading
manufacturers of high-tech Security Cards, Bank
Cards, Smart Cards, Pre paid Cards, etc for
Banking/ Telecom / Automobile & Electronic
Sectors. M-Tech is an ISO 9001:2000 / TS
16949:2002 certified company.
UNITHERM
ENGINEERS LTD
Unitherm is a Diversified, leading Engineering
Group in the business of manufacturing Industrial
Furnaces and Heat Treatment Services.
POLYGEL
TECHNOLOGIES
(I) PVT. LTD.
Polygel is a Specialty Chemicals company,
engaged in manu-facture of Adhesives and
Sealants, Cable Gels, Organic Titanates, etc. The
Fund has exited from this company.
ITEAMIC PRIVATE
LTD
An IT / ITES integrated business and technology
solutions and consulting services provider, offering
domain knowledge in the financial services and
education sectors. The Fund has exited from this
company.
KLT
AUTOMOTIVE &
TUBULAR
PRODUCTS LTD.
A major manufacturer for automotive products,
precision tubes, chassis frames, chassis components
and body components / assemblies. The company is
a leading supplier of Automotive chassis frame
assemblies for MUV's , Pick-ups, and other light
commercial vehicles. The Fund has exited from this
company.
AVASARALA
TECHNOLOGIES
LTD
The Avasarala Group of companies is a Bangalore
based; well diversified group with interests in
Engineering Design, Process Machinery,
Conveyors & Automation Systems, Electron Guns
for picture tubes and CDT Tungsten Rod, Wire and
Powder products and Health Care. The Group is a
leader in manufacture of capital machinery for
engineering and electronic industries. The Fund has
exited from this company.
RT OUTSOURCING
SERVICES
LIMITED
An ITES Company providing web enabled
customer relationship management solutions and
services. The Fund has exited from this company.
PRATHISTA
INDUSTRIES
LIMITED
Manufacturer of Bio-Fertilizers, Bio-Pesticides &
Gluconate salts.
OMNITECH
INFOSOLUTIONS
LIMITED
The company offers customized end to end
solutions in the areas of e-commerce, web
technology, database management etc. The Fund
has exited from this company.
INVESTMENT CRITERIA
ACTIVITY:
Growth and Expansion financing.
TECHNOLOGY AND BUSINESS:
Businesses with established technological or market positioning edge
with sustainable competitive advantage, operating efficiencies and
attractive profit margins.
MANAGEMENT TEAM:
Strong Management Team with a demonstrated track record of
performance, integrity, commitment and enterprise.
SECTOR:
Investment will be in sectors with sustainable high growth potential.
NATURE AND SIZE OF ASSISTANCES:
Participation will be in the form of investment in equity/ equity
related instruments,/ debt instruments in unlisted companies in the
range of Rs.45 to 90 million
OUR ROLE IN THE VENTURE:
Board Representation.
RIGHT TO INFORMATION ACT, 2005.
The Government of India has enacted "Right to Information Act 2005” to
provide for setting out the practical regime of right to information for
citizens to secure access to information under the control of Public
Authorities in order to promote transparency and accountability in the
working of any public authority.
RIGHT TO INFORMATION
The right to information includes an access to the information which
is held by or under the control of any public authority and includes the right
to inspect the work, document, records, taking notes, extracts or certified
copies of documents / records and certified samples of the materials and
obtaining information which is also stored in electronic form.
THE INFORMATION WHICH IS EXEMPT FROM DISCLOSURE
The Act provides under Sections 8 and 9, certain categories of information
that are exempt from disclosure to the citizens. The public may also refer to
the relative sections of the Act before submitting a request for information.
FEE / COST TO GET THE INFORMATION
A request for obtaining information under Section 6(1) of the Act needs to
be accompanied by an application fee of Rs.10 by way of cash against
proper receipt or by DD or bankers’ cheque.
WHO CAN ASK FOR INFORMATION?
Any citizen can request for information by making an application in writing
or through electronic means in English / Hindi / official language of the
areas, in which the application is being made together with the prescribed
fees.
WHO WILL GIVE INFORMATION?
Any public authority would designate Public Information Officer (PIO) who
will receive the requests for information from the public and arrange for
providing necessary information to the public as permitted under the law.
The public authorities are also required to designate authority (ies) senior in
rank to PIO, as Appellate Authorities, who will entertain and dispose off
appeals against the decision of the PIO as required under the Act. Any
person who does not receive the decision from PIO either by way of
information or rejection within the time frame, may within 30 days from the
expiry of period prescribed for furnishing the information or 30 days from
the date of receipt of the decisions, prefer an appeal to the Appellate
Authority.
THE ROLE OF PUBLIC INFORMATION OFFICERS (PIO)
The PIO will receive the application / request for information under the Act
and process the request for providing the information and dispose of the
same; either by providing the information or rejecting the request, within a
period of 30 days from the date of receipt of request.
Kotak Realty Funds
Introduction
Kotak Realty Funds Group (KRFG) is a division of Kotak Investment
Advisors Ltd (KIAL) that focuses on Real Estate Investment opportunities.
Established in May 2005, it is one of India's first private equity funds, with a
focus on real estate and real estate intensive businesses. Our realty
investment funds actively consider investment opportunities with the local
developers and projects in the residential, commercial and other real estate
sectors.
Real estate investment funds have a lot of potential, considering the boom in
the property sector, which is expected to continue because of a shortfall in
demand and growing incomes. The demand for funds is expected to increase
exponentially, and real estate private equity firms will benefit. Kotak realty
funds investment aim is to capitalize on this growing opportunity.
Kotak Investment Advisors Ltd (“KIAL”), a subsidiary of Kotak Mahindra
Bank was set up to focus on managing the Alternate Assets business of the
Kotak Group. As part of KIAL, KRFG currently manages 2 funds that are
domicile in India and advises one Offshore Fund.
Team
Indian Real Estate Fund Management Team
The real estate fund management team has a unique blend of real estate
industry and capital and financial markets experience. Core members of the
team, S. Sriniwasan, V. Hari Krishna, Vikas Chimakurthy, Amit Mathur and
Sandeep Agarwal have 71 years of cumulative experience in the real estate
industry and capital markets. The team has strong relationships and contacts
for deal creation and execution.
The team provides complementary skills in the real estate and financial
markets that will enable the Fund to benefit from the budding environment.
The real estate fund management team has sound knowledge of regional
laws and business practices.
Team members
S. Sriniwasan, 43, Chief Executive Officer
V. Hari Krishna, 32, Director – Investments
Vikas Chimakurthy, 34, Director – Investments
Naozad Sirwalla, 35, Chief Operating Officer
Amit Mathur, 35, Vice President, Acquisitions
Sandeep Agarwal, 29, Vice President, Acquisitions
Prakash Dalal, 45, Head Investor Relations
Shagoofa R. Khan, 32, Head, Legal & Compliance
Sakar Mawandia, 29, Associate Vice President
Deepshikha Dhamija, 30, Vice President
Vikhyat Srivastava, 25, Associate Vice President
Raj Shah, 23, Associate Vice President
NG Srinivasan, 51, Vice President, Investment Risk Management
Funds
Kotak Investment Advisors Ltd ("KIAL"), a subsidiary of Kotak Mahindra
Bank, focuses on managing the Alternate Assets business of the Kotak
Group
Kotak India Real Estate Fund: This is the first fund introduced by
Kotak Realty Fund and is close-ended with an AUM of Rs.4,580
million. It focuses on investing in the Indian real estate and allied
sectors.
Raised from domestic HNI clients, the India Real Estate Fund has
now been fully invested.
Kotak Alternate Opportunities India Fund: Kotak Alternate
Opportunities (India) Fund ("KAOIF" or "Fund") is the second
domestic fund from Kotak Realty Fund. It is a close-ended fund of Rs.
15,780 million with a focus on investing in the Indian real estate and
allied sectors. This also has been raised from domestic HNI's.
Kotak India Realty Fund Limited: Kotak India Realty Fund Limited
(Fund) is an offshore Fund of $ 281 million set up to invest in equity,
equity-related and/or debt securities in real estate and real estate-
related projects and companies across India. The Fund will be
managed by Kotak Mahindra (International) Ltd and is currently
investing in projects and companies across all asset classes in Real
Estate within FDI norms.
Portfolio
Current Investments
Project level investment in Mumbai IT Park ,
Project-Level Investment in Distressed Asset Property (Land) in Chennai,
Enterprise level investment in Lemon Tree Hotels,
Enterprise level investment in Pride Hotels Limited,
Enterprise level investment in Sobha Developers,
Project level investment in an IT Park, NOIDA – Delhi NCR. ,
Project level investment in Golf Community, Bangalore,
Enterprise level investment in NDR Warehousing Private Limited,
Enterprise level investment in Sunteck Realty Limited,
Project level investment in a residential township, Chennai,
Enterprise level investment in Lalith Gangadhar Constructions Pvt. Ltd.,
Project level investment in a residential township, Chennai,
Project level investment in Mid Income Housing in Hyderabad.
ICICI Venture Funds Management Company Limited
ICICI Venture (formerly TDICI Limited) was founded in 1988 as a joint
venture with the Unit Trust of India. Subsequently, ICICI bought out UTI's
stake in 1998 and ICICI Venture became a fully owned subsidiary of ICICI.
ICICI Venture also has an affiliation with the Trust Company of the West
(TCW), which provides it a platform for networking Indian companies with
global markets and technology. Strong parentage and affiliates for ICICI
Venture also translates into access to a broad spectrum of financial and
analytical resources thus enabling a keen understanding of the Indian
financial markets and entrepreneurial ethos.
IFCI VENTURE CAPITAL FUNDS LTD. (IVCF)
IFCI Venture Capital Funds Ltd. (IVCF) was originally set up by IFCI as a
Society by the name of Risk Capital Foundation (RCF) in 1975 to provide
institutional support to first generation professionals and technocrats setting
up their own ventures in the medium scale sector, under the Risk Capital
Scheme. In 1988, RCF was converted into a company, Risk Capital and
Technology Finance Corporation Ltd. (RCTC), when it also introduced the
Technology Finance and Development Scheme for financing development
and commercialization of indigenous technology. To reflect the shift in the
company's activities, the name of RCTC was changed to IFCI Venture
Capital Funds Ltd (IVCF) in February 2000.
SIDBI Venture Capital Limited (SVCL)
SIDBI Venture Capital Limited (SVCL) is a wholly owned subsidiary of
SIDBI, incorporated in July 1999 to act as an umbrella organization to
oversee the Venture Capital operation of SIDBI. SVCL mission is to
catalyze entrepreneurship by providing capital and other strategic inputs for
building businesses around growth opportunities and maximize returns on
investment. SVCL will manage the various Venture Capital Funds launched/
being launched by SIDBI.
Gujarat Venture Finance Limited (GVFL)
Started in July 1990, at the initiative of the World Bank, GVFL Ltd. is
regarded as a pioneer of Venture Capital in India. Over the past ten years,
GVFL Ltd. has provided financial and managerial support to over 57
companies with a high growth potential.
GVFL Ltd invests all over India and across industries. It has created a niche
for itself in small and medium scale companies. Investment and monitoring
such companies require considerable effort and involvement as compared to
large projects. Over the last ten years GVFL Ltd. has been developing an
edge, dealing in such investments.
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