1.BYAMARNATH POORNIMA

2. The venture capital investment helps for thegrowth of innovative entrepreneurships inIndia Venture capital means risk capital The risk envisaged may be very high may beso high as to result in total loss or very lessso as to result in high gains 3. In the 1920s and 30s, the wealthy familiesof and individual investors provided thestartup money for companies that would laterbecome famous Eastern Airlines and Xerox are the morefamous ventures they financed In its early years VC may have beenassociated with high technology, over theyears the concept has undergone a changeand as it stands today it implies pooledinvestment in unlisted companies 4. Venture capital means funds made availablefor startup firms and small businesses withexceptional growth potential. Venture capital is money provided byprofessionals who alongside managementinvest in young, rapidly growing companiesthat have the potential to develop intosignificant economic contributors. 5. Investment made in equity, investors wait for5-7 years to reap the benefits of capital gain Investments are made in innovative projects Investors does not interfere in day-to-daybusiness Capital need not be repaid in the course ofbusiness but realized through exist route(stock exchange) 6. It injects long term equity finance whichprovides a solid capital base for future growth. Theventure capitalist is abusinesspartner, sharing both the risks and rewards.Venture capitalists are rewarded by businesssuccess and the capital gain. The venture capitalist is able to providepractical advice and assistance to the companybased on past experience with other companieswhich were in similar situations. 7. The venture capitalist also has a network ofcontacts in many areas that can add value to thecompany. The venture capitalist may be capable of providingadditional rounds of funding should it be requiredto finance growth. Venture capitalists are experienced in the processof preparing a company for an initial publicoffering (IPO) of its shares onto the stockexchanges or overseas stock exchange such asNASDAQ.They can also facilitate a trade sale. 8. Deal origination ScreeningDue diligence (Evaluation)Deal structuringPost investment activity Exit plan 9. Venture capitalTraditional capital Less fluid More fluid Requires high return rate Bears lower return Invested based on long-run Invested based onfuture immediate future Concerned with product Concerned with pastand market potential performance Venture capitalist and Loaning bank is creditorpartner are co-workers Requires collateral 10. The concept of venture capital was formallyintroduced in India in 1987 by IDBI. The government levied a 5 per cent cess onall know-how import payments to createthe venture fund. ICICI started VC activity in the same year Later on ICICI floated a separate VCcompany - TDICI 11. VCFs in India can be categorized into following five groups: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) 12. 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 13. 4)Those promoted by private sectorcompanies.For example: - IL&FS Trust Company Ltd - Infinity Venture India Fund5)Those established as an overseas venture capitalfund.For example: - Walden International Investment Group - HSBC Private Equity management Mauritius Ltd 14. AS PER SEBI AS PER INCOME TAX ACT,1961 15. VCF are regulated by the SEBI (VentureCapital Fund) Regulations, 1996. The following are the various provisions:A venture capital fund may be set up by acompany or a trust, after a certificate ofregistration is granted by SEBI on anapplication made to it. On receipt of thecertificate of registration, it shall be bindingon the venture capital fund to abide by theprovisions of the SEBI Act, 1992. 16. A VCF may raise money from anyinvestor, Indian, Non-resident Indian orforeign, provided the money accepted fromany investor is not less than Rs 5 lakhs. TheVCF shall not issue any document oradvertisement inviting offers from the publicfor subscription of its security or units 17. SEBI regulations permit investment by venturecapital funds in equity or equity relatedinstruments of unlisted companies and alsoin financially weak and sick industries whoseshares are listed or unlisted 18. At least 80% of the funds should be investedin venture capital companies and no otherlimits are prescribed. SEBI Regulations do not provide for anysectoral restrictions for investment exceptinvestment in companies engaged in financialservices. 19. A VCF is not permitted to invest in the equityshares of any company or institutionsproviding financial services. The securities or units issued by a venturecapital fund shall not be listed on anyrecognized stock exchange till the expiry of 4years from the date of issuance . 20. A Scheme of VCF set up as a trust shall be wound up(a) when the period of the scheme if any, is over(b) If the trustee are of the opinion that thewinding up shall be in the interest of theinvestors(c) 75% of the investors in the scheme pass aresolution for winding up or,(d) If SEBI so directs in the interest of theinvestors. 21. The Income Tax Act provides taxexemptions to the VCFs under Section10(23FA) subject to compliance with IncomeTax Rules. Restrict the investment by VCFs only in theequity of unlisted companies. VCFs are required to hold investment for aminimum period of 3 years. 22. The Income Tax Rule until now providedthat VCF shall invest only upto 40% of thepaid-up capital of VCU and also notbeyond 20% of the corpus of the VCF. After amendment VCF shall invest onlyupto 25% of the corpus of the venturecapital fund in a single company.There are sectoral restrictions under theIncome Tax Guidelines which provide thata VCF can make investment only inspecified companies. 23. Percentage9.03 6.94IT & ITES 3.367.73EnergyManufacturing 12.9211.5Media & Ent.BFSIShipping & logistics4.32Eng. & Const. 11.43TelecomHealth care 4.82Others27.95Percentage calculated on the total VC investment- 14,234 USB (fig. of 2007) 24. CITIESSECTORSMUMBAISoftware services, BPO, Media,Computer graphics, Animations,Finance & BankingBANGALORE All IP led companies, IT & ITES, Bio-technologyDELHI Software services, ITES , TelecomCHENNAI IT , TelecomHYDERABAD IT & ITES, PharmaceuticalsPUNEBio-technology, IT , BPO