PROSPECTS OF VENTURECAPITAL IN INDIA

Presented by: SHWETA GUPTA 10MBA 32

1.To find out the venture capital investment volume in India. 2.To study the problem faced by venture capitalist in India. 3.To study the future prospects of venture capital financing

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.

According to venture economics, providing seed, start-up and first stage financing' and also 'funding the expansion of companies that have already demonstrated their business potential but do not yet have access to the public securities market or to credit oriented institutional funding sources.

Methods of Venture Financing

EQUITY

CONDITIONAL LOANS

INCOME NOTE

Stages of Financing
Seed Money Start Up First Round Second Round Third Round Forth Round

To prove a concept (15-25L)

Provided to companies (25-60L)

Manufacturing funds (1-3cr)

Working capital & expenses (2-5cr)

For newel profitable company (2-10cr)

Bridge Financing for going public process (100cr)

Extreme risk

Very high risk

High risk

Sufficiently high

Medium

Low

Instruments

Rs million

Per cent

Equity Shares Redeemable Preference Shares Non Convertible Debt Convertible Instruments Other Instruments Total

6,318.12 2,154.46 873.01 580.02 75.85 10,000.46

63.18 21.54 8.73 5.8 0.75 100

Rs million 7,000.00 6,000.00 5,000.00 4,000.00 3,000.00 2,000.00 1,000.00 0.00 6,318.12

2,154.46 873.01 580.02 75.85

Redeemable Preference Shares

Non Convertible Debt

Equity Shares

Convertible Instruments

Other Instruments

Financing By Investment Stage

Investment Stages Rs million Number

Start-up Later stage Other early stage Seed stage Turnaround financing Total

3,813.00 3,338.99 1,825.77 963.2 59.5 10,000.46

297 154 124 107 9 691

Rs million 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 3,813.00 3,338.99 1,825.77 963.2 59.5
Start-up Later stage Other early stage Seed stage Turnaround financing

This diagram shows the highest finance is received by the venture in startup stage of any venture.

Financing By Industry
Industry Rs million

Industrial products, machinery Computer Software Consumer Related

2,599.32 1,832 1,412.74

Medical
Food, food processing Other electronics Tel & Data Communications Biotechnology Energy related Computer Hardware Miscellaneous Total

623.8
500.06 436.54 385.09 376.46 249.56 203.36 1,380.85 10,000.46

Rs million 3,000.00 2,599.32 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 1,832 1,412.74 623.8 500.06 436.54 385.09 376.46 1,380.85

249.56 203.36

Medical

Food, food processing

Tel & Data Communications

Energy related

Computer Hardw are

Computer Softw are

Industrial products,

Consumer Related

In this diagram highest finance received by industrial products and machinery and secondly finance received by computer software.

Miscellaneous

Other electronics

Biotechnology

Financing By States
Investment Rs million

Maharashtra Tamil Nadu Andhra Pradesh Gujarat Karnataka West Bengal Haryana

2,566 1531 1372 1102 1046 312 300

Delhi
Uttar Pradesh Madhya Pradesh Kerala Goa Rajasthan Punjab

294
283 231 135 105 87 84

Orissa
Dadra & Nagar Haveli Himachal Pradesh Pondicherry Bihar Overseas Total

35
32 28 22 16 413 9994

Rs million
3,000 2,500 2,000 1,500 1,000 500 0
Ta m il N ad u Pr ad es h G uj ar at Ka rn at ak a Be ng al as ht ra Ha ry De lh i an a

2,566

1531

1372 1102 1046 312 300 294

M ah ar

In this diagram highest finance given by the Maharashtra to the ventures to promote the state economy growth.

nd hr a

W es t

1.Requirement of an experienced management team. 2.Requirement of an above average rate of return on investment. Longer payback period. 3.Uncertainty regarding the success of the product in the market. 4.Questions regarding the infrastructure details of production like plant location, accessibility, relationship with the suppliers and creditors, transportation facilities, labor availability etc.

5.The category of potential customers and hence the packaging and pricing details of the product. 6.The size of the market. 7.Major competitors and their market share. 8.Skills and Training required and the cost of training. 9.Financial considerations like return on capital employed (ROCE), cost of the project, the Internal Rate of Return (IRR) of the project, total amount of funds required, ratio of owners investment (personnel funds of the entrepreneur), borrowed capital, mortgage loans etc. in the capital employed

1.VC can help in rehabilitation of sick industry. 2.VC funds can play a significant role in developing countries. 3.VC can assist small ancillary unit to upgrade their technologies. 4. Provides financial assistance to people coming out of universities, technical institutes etc.

1)

Those promoted by the Central Government controlled development finance institutions. For example: - ICICI Venture Funds Ltd. - IFCI Venture Capital Funds Ltd (IVCF) - SIDBI Venture Capital Ltd (SVCL)

2) Those promoted by State Government controlled development finance institutions. For example: - Punjab Infotech Venture Fund - Gujarat Venture Finance Ltd (GVFL) - Kerala Venture Capital Fund Pvt Ltd. 3) Those promoted by public banks. For example: - Canbank Venture Capital Fund - SBI Capital Market Ltd

4)Those promoted by private sector companies. For example: - IL&FS Trust Company Ltd - Infinity Venture India Fund 5)Those established as an overseas venture capital fund. For example: - Walden International Investment Group - HSBC Private Equity management Mauritius Ltd

1.A number of people in India feel that financial institution are not only conservatives but they also have a bias for foreign technology & they do not trust on the abilities of entrepreneurs. 2.Some venture fails due to few exit options. Teams ignorant of international standards. The team is often found to have technical skills but does not possess the overall organization building skills team is often short sited. 3.Venture capitalists in India consider the entrepreneurs integrity &urge to grow as the most critical aspect or venture evaluation.

1.Since there are many sick industries in India and the number is growing each year, the venture capitalists that have specialized knowledge in management can help sick industries. It would also be highly profitable if the venture capitalist replace management either good ones in the sick industries. 2.The present situation may compel venture capitalists to opt for less risky opportunities but is against the spirit of venture capitalism. 3.There should be a greater role for the venture capitalists in the promotion of entrepreneurship..