Venture capital in india

Venture capital in india

• 1.
  VENTURE CAPITAL ININDIA Venture Capital Problem and Scenario !! PRESENTATION ON VENTURE CAPITAL IN INDIA BY – PAWNESHWAR DATT RAI
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  PRESENTATION OUTLINE  Needof Venture Capital  Potential of the Indian Venture Capital Industry.  Growth of Indian Venture Capital Industry.  Features of the SEBI (Venture Capital Fund) Regulations, Act 1996.  Problems faced by Indian Venture Capital Industry.  K. B. Chandrasekhar Committee.  Amendment to the SEBI on the basis of Chandrasekhar committee (Venture Capital Fund) Regulations, 1996.
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  WHY VENTURE CAPITALIN INDIA? Venture capital plays most important role in the emerging economies to:  Commercialize research and scientific knowledge in the fastest mode  Provide Risk Finance  Management Expertise to first generation entrepreneurs  Tap potential intellectual properties  Promotion of Innovation and Entrepreneurship  Quality IPOs
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  THE POTENTIAL OFINDIAN VENTURE CAPITAL INDUSTRY !!  Second Largest English speaking scientific and technical Manpower in the World  India graduates 200,000 engineers and over 40,000 managers every year as quality human capital
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  GROWTH OF VENTURECAPITAL FUNDS IN INDIA Inspite of large potential, size of VC Industry in India is still very small A growth of over 300% in number of the Venture Capital Fund registered with SEBI - from 8 in December 1998 to 26 in Sept. 2000. Lot of inquiries and interest. Total funds committed by SEBI registered Venture Capital Funds have grown from Rs. 207 crores (US $ 45 million approx.) in 1998 to Rs. 1,665 crores (US $ 362 million approx.), an increase of nearly 600%
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  SEBI (VENTURE CAPITALFUND) REGULATIONS, 1996  Investment Routes for Venture Capital: VCFs could invest in Indian companies Foreign and offshore investors could invest in domestic VCFs Foreign and offshore investors could also make direct investments into Indian companies through the FDI route. However, such investments would be subject to specific case by case approval of the Government of India.
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  SEBI (VENTURE CAPITALFUND) REGULATIONS, 1996 (CONT’D)  Form of Organization for VCFs Only Trusts and Companies could be registered as VCFs.  Minimum Contribution by each investor has to be Rs. 5 lacs. (US $ 10,500 approx..)  Filing of Placement Memorandum - Placement Memorandum to be filed with SEBI prior to funds raised by Venture Capital Fund.  Investment Criteria VCF had to invest at least 80% of corpus in the equity shares of unlisted companies or listed undertakings which were “financially sick”.
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  PROBLEMS FACED BYVENTURE CAPITAL FUNDS  Entry Barriers Restrictive Definitions of Venture Capital Fund, Venture Capital Undertakings resulting in limited scope of venture capital activity Multiplicity of regulations - Govt Guidelines, Income Tax Rules and SEBI Regulations. Offshore investors to seek Government approval for each investment No Registration provisions for Foreign Venture Capital Investors (FVCIs) Mutual Funds not allowed to participate in VCFs.
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  PROBLEMS FACED BYVENTURE CAPITAL FUNDS  Investment Barriers Investment in unlisted securities and securities of listed sick companies only - investment not permitted in structured instruments, debt instruments VCFs not allowed to participate in book- building for Initial Public Offerings  Taxation Issues Investors as well as the venture capital fund taxed for the income generated by the VCFs
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  PROBLEMS FACED BYVENTURE CAPITAL FUNDS Exit Barriers Limited exit options for investor as well as for VCF Lack of facilities for trading in unlisted securities Offshore investors to seek Government (FIPB/RBI) approvals for each disinvestment Approval for pricing required from RBI before disinvestment by Foreign investors maximum permissible investment limits to be enhanced Exit from Investments by VCF to promoter could attract Takeover Code
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  K. B CHANDRASEKHARCOMMITTEE  Major Recommendations Single window clearance and minimum regulation for domestic Venture Capital Fund and Foreign Venture Capital Investors - SEBI to be the nodal regulator Granting of QIB Status to VCFs and FVCIs Tax pass through status to SEBI registered Venture Capital Funds. Free entry and exit for overseas investment / disinvestment with minimum regulation Flexible Investment Criteria More disclosures to investors and no filing of Placement Memorandum with SEBI.
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  BENEFITS TO THEFVCIS Hassle Free Entry and Exit : SEBI registered FVCIs permitted to make investment on an automatic route within the overall sectoral ceiling of foreign investment as specified by the Government of India. SEBI registered FVCIs shall be granted a general permission from the exchange control angle for inflow and outflow of funds no prior approval of RBI would be required for pricing for investment / disinvestment. There would be only ex-post reporting requirement for the amount transacted.
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  TRADING IN UNLISTEDEQUITY  SEBI has approved the proposal to permit OTCEI to develop a trading window for unlisted securities where Qualified Institutional Buyers (QIB) would be permitted to participate.  Venture Capital Funds and Foreign Venture Capital Investors are amongst the QIBs.
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  A Happy andProsperous day to all friends. This PPT presented By – Pawneshwar Datt Rai