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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

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 Guide Principal Internal Examiner External Examiner Project


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


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

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.

Ch.1 Ch.2 Ch.3 1.1Objective 1.2Research methodology Introduction 3.1 Concept of Venture Capital 3.2 Meaning of Venture Capital 3.3 Definition of Venture Capital 3.4 History of Venture Capital 3.5 Feature of Venture Capital 4.1 Scope of Venture Capital 4.2 Disinvestment Mechanism 4.3 Importance of Venture Capital 5.1 Initiative in India 5.2 Guidelines 5.3 The Indian Scenario Investment Process Measures to be provided Case Study 9.1 Recommendations 9.2 Conclusion Bibliography



Ch.6 Ch.7 Ch.8 Ch.9 Ch.10


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.



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.


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 firms development with distinctive types of financing appropriate to each stage of development.


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.


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.


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.


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 clients 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 mediumsized 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.


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.


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. Promoters 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 promoters 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.


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.


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 capitals 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.

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.


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.


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 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

of the promoters

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 Details of Board of Directors and their role in the activities Availability of skilled labour Recruitment process

previous lenders

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 capitals 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 capitals returns/protection and yet satisfies the entrepreneurs requirements. The instruments could be as follows: Instrument Equity shares Issues New or vendor shares Par value Partially-paid shares Redeemable (conditions under Company Act) Participating Par value Loan Nominal shares Clean v/s Secured Interest bearing v/s Non interest bearing convertible v/s one with features (warrants) 1st Charge, 2nd Charge, Warrants Options Exercise price, Exercise period Exercise price, Exercise period, call, put

Preference shares

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 Company specific Promoter specific Factors influencing the choice of Instrument Risk, current stage of operation, expected profitability, future cash flows, and investment liquidity options. Current financial position of promoters, performance track record, willingness of promoters to dilute stake.

Product/Project Macro environment specific

Future market potential, product life cycle, gestation Tax options on different instruments, legal framework, period. 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 investors 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 founders/management teams 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.

Investors 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 firms 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 firms 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.

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 firms 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 Indias 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 is a leading supplier of standardized power distribution and protection solutions for range of low voltage and high voltage distribution products including Silicone Rubber Range of HT Products.

SWITCHGEAR PVT uninterrupted power supply. It manufactures a


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 (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., 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 is a Diversified, leading Engineering Group in the business of manufacturing Industrial Furnaces and Heat Treatment Services.


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 An IT / ITES integrated business and technology LTD solutions and consulting services provider, offering domain knowledge in the financial services and education sectors. The Fund has exited from this company.


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.


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 An ITES Company providing web enabled SERVICES LIMITED customer relationship management solutions and services. The Fund has exited from this company.


Manufacturer of Bio-Fertilizers, Bio-Pesticides & Gluconate salts.


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.


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 estaterelated 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) 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.