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Presented By:Anand Kumar (JU07019)
SEC- C
CONCEPT
Venture capital is a type of private equity capital typically provided by professional, outside investors to
new and growing businesses.
FEATURESFinance new and rapidly growing companies Assist in the development of new products or
services Add value to the company through active
participation Take higher risks with the expectation of
higher rewards Have a long-term orientation
ORIGIN OF VENTURE CAPITAL
In the 1920's & 30's, the wealthy families of an individuals investors provided the start up money for companies that would later become famous." Eastern Airlines” and “Xerox” are the more famous ventures they financed.
TYPES OF VENTURE CAPITAL
1) VCFs promoted by the central govt. controlled development financial institutions:-
Industrial Finance Corporation of India(IFCI)
2) VCFs promoted by the state government controlled development finance institutions:-
Gujarat Industrial Investment Corporation(GIIC)
CNTD…..3) VCFs promoted by Public Sector banks:-
SBI-Cap by State Bank of India
4) Promoted by the foreign banks or private sector companies and financial institutions:-
Indus Venture Fund
METHODS OF VENTURE FINANCE
• EQUITY- All VCFs in India provide equity but generally their contribution does not exceed 49% of the total equity capital.
• CONDITIONAL LOAN - It is repayable in the form of a royalty after the venture is able to generate sales. No interest is paid on such loans.
CNTD…
• INCOME NOTE- It is a hybrid security which combines the features of both conventional loan and conditional loan.
• OTHER FINANCING METHODS- A few venture capitalists, particularly in the private sector, have started introducing innovative financial securities like Participating debentures.
RECOMMENDATIONS OF SEBI COMMITTEE, 2000
SEBI appointed the Chandrasekhar Committee to identify the impediments in the growth of venture
capital industry in the country and suggest suitable measures for its rapid growth. Its report was
submitted in January, 2000.
THE RECOMMENDATIONS PERTAIN TO
VCF structures
Resource raising
Investments
Exit
VENTURE CAPITAL PROCESS
Generating a deal flow
Due diligence
Investment valuation
Pricing and structuring the deal
Value Addition and monitoring
Exit
PRESENT SCENARIO OF VENTURE CAPITAL IN INDIA
Some of the highlights of 2007 include
31% of all investments fell into the US$10-25 million category
Venture capital investments accounted for 25% of the private equity deals (in volume terms). Late stage deals accounted for 35% of all deals
PE firms obtained exit routes in 65 companies, including 16 via initial public offering (IPO)
LOOKING AHEAD
Some of the key sectors that private equity investors will be looking at in 2008 onwards include:
alternative energy, infrastructure services, banking and financial service and manufacturing.