private equity and venture capital in india

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  • Private Equity and Venture Capital in India- A PerspectiveTeam Members Roll no.Kedar Gharat20 Manoj Gupta21Pramod Jadhav24Arun Pacheco38Nilesh Raut49Anand Singh60

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  • Venture Capital Notes:Figures for 2007-08 and 2008-09 are provisionalVenture Capital is a form of "risk capital i.e. capital that is invested in a business where there is a substantial element of risk relating to the future creation of profits and cash flows. Risk capital is invested as shares (equity) rather than as a loan and the investor requires a higher "rate of return" to compensate him for his risk.

    Venture capital provides long-term, committed share capital, to help unquoted companies grow and succeed. If an entrepreneur is looking to start-up, expand, buy-into a business, buy-out a business in which he works, turnaround or revitalize a company, venture capital could help do this. Obtaining venture capital is substantially different from raising debt or a loan from a lender. Lenders have a legal right to interest on a loan and repayment of the capital, irrespective of the success or failure of a business. As a shareholder, the venture capitalist's return is dependent on the growth and profitability of the business. This return is generally earned when the venture capitalist "exits" by selling its shareholding in the business.

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  • Venture Capital Notes:Figures for 2007-08 and 2008-09 are provisionalHistory of Venture Capital in India dates back to early 70's.Govt of India appointed a committee laid by Late Shri R.S.Bhatt.to find out the ways to meet a void in conventional financing for funding start-up companies based on absolutely new innovative technologies. Such companies either did not get any financial support or the funding was inadequate which resulted into their early mortality. The committee recommended starting of Venture Capital industry in India. In mid 80's three all India financial institutions viz IDBI, ICICI, IFCI started investing into the equity of small technological companies.

    In Nov 1988, Govt of India decided to institutionalize Venture Capital Industry and announce guidelines in the parliament. Controller of Capital issues implemented these guidelines known as CCI for VC. These guidelines were very restrictive and following a very narrow definition of VC. They required Venture Capital to be invested in companies based on innovative technologies started by first generation entrepreneur. This made VC investment highly risky and unattractive. Nonetheless many private initiatives were taken. At the same time World Bank selected 6 institutions to start VC investment in India. This included TDICICI (ICICI), GVFL, Canbank Venture Capital Fund, APIDC, RCTC (now known as IFCI Venture Capital Funds Ltd.) and ILF (now known as Pathfinder).

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  • Venture Capital Notes:Figures for 2007-08 and 2008-09 are provisionalIn 1995, Govt of India permitted Foreign Finance companies to make investments in India and many foreign VC private equity firms entered India. In 1996, government announced guidelines to regulate the VC industry. Though there were many shortcomings these guidelines were the starting point.

    In 1997, IT boom in India made VC industry more significant. Due to symbiotic relationship between VC and IT industry, VC got more prominence as a major source of funding for the rapidly growing IT industry. Indian VC's which were so far investing in all the sectors changed their focus to IT and telecom industry.

    The recession during 1999 - 2001 took the wind out of VC industry. Most of the VC either closed down or wound-up their operations. Almost all of them changed their focus to existing successful firms for their growth and expansion. VC firms also got engaged into funding buyouts, privatisation and restructuring. Currently, just a few firms are taking the risk of investing into the start-up technology based companies.

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  • Capital Flows in India: 2006 to 2009 YTDNotes:Figures for 2007-08 and 2008-09 are provisionalFDI FlowsFII Flows

    Chart1

    8.96

    22.83

    34.36

    33.61

    Sheet1

    2005-062006-072007-08*2008-09*

    Amount invested (US$ Bn)8.9622.8334.3633.61

    Sheet1

    0

    Sheet2

    Sheet3

    Chart1

    8.11

    17.65

    -11.97

    4.99

    Sheet1

    2006200720082009*

    Amount invested (US$ Bn)8.1117.65-11.974.99

    Sheet1

    0

    Sheet2

    Sheet3

    *

  • Presentation Plan

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  • Presentation Plan

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  • Deal Distribution : Amount Invested by PE in CY08

    61.22%

    $640 MnLNM India Venture2.88%4.81%10.58%16.67%26.28%18.27%20.51%During 2008, about 61% of the deals happened in the range of US$ 5-50 Mn. About 9 transactions during the period are over and above US$ 200 Mn. Real Estate and IT & ITeS sectors have seen about 32% of the PE investments (on volume basis) during the period. Deal Size (US$ Mn.)

    Chart1

    64

    57

    82

    52

    33

    15

    9

    No of Deals

    36

    48

    20

    9

    1H 2008

    Sr. NoDateInvestorInvestee CompanyAmount (US $ Mn)% StakeIndustryRemarks

    36Indian Angel NetworkDruvaa Software Private Limited0.25IT and ITeSGTNews item to be found out for date

    18Feb-08Merrill Lynch Capital MarketsVakrangee Softwares Limited0.350.39IT and ITeSGT/BShttp://www.business-standard.com/common/news_article.php?leftnm=10&bKeyFlag=BO&autono=314248

    165May-08High Networth IndividualsZeus Numerix0.5OthersGT/VChttp://www.vccircle.com/2008/05/19/zeus-numerix-iit-bombay-incubated-firm-gets-500k-seed-funding/Investment made by HNIs

    75GVFLCentury Pharmaceuticals Limited0.63Healthcare & LifesciencesGTNews item to be found out for date

    34Jan-08GVFLVmukti Solutions Private Limited1IT and ITeSGT

    103Mar-08HSBCYes bank1BFSIVC

    71Jun-08AcumenKerala First Health Services Private Limited AyurVAID1.1Healthcare & LifesciencesVC

    95Mar-08Lok Capital LLCSatin Creditcare Network Limited1.25BFSIGT/VC

    68Mar-08Seedfund / Aavishkar IndiaVaatsalya Healthcare Sol1.5Healthcare & Lifesciences4 S/VC

    51May-08Sandalwood PartnersUnnamed Company2Manufacturing4 Shttp://www.indiape.com/blog/_archives/2008/5/1/3669047.html

    156Mar-08Unitus, OthersMokshaYug Access2OthersVI/think change indiahttp://thinkchangeindia.wordpress.com/2008/05/05/unitus-to-recieve-9-million-support-from-omidyar-network/amount is not mentioned on company's wesite but investor has invested

    84Apr-08Aavishkaar GoodwellGrameen Koota2.3BFSIVI/Microfinancehttp://www.microfinancegateway.org/content/article/detail/48309

    112NEA - Indo US VenturesBay Talkitec2.5TelecomGTNews item to be found out for date

    192BCCLSKC Retail Limited2.53.3RetailsGTNews item to be found out for date and amount

    16Feb-08IDG Ventures IndiaAujas Networks Private Limted3IT and ITeSGT/VChttp://www.vccircle.com/2008/02/14/idg-ventures-india-invests-3-million-in-eir-spin-off-aujus-networks/

    20May-08Venrock AssociatesSlideshare3IT and ITeS4 S/VC

    32Apr-08KPCB, Sherpalo Ventures, Info EdgeStudyPlaces Inc3IT and ITeSGT

    76RFCL (ICICI Venture Company)Medical diagnostic business of Godrej Industries Limited3100Healthcare & LifesciencesGThttp://www.indiaprwire.com/pressrelease/medical/200801046502.htm

    119Jun-08IDFC PESeaways Shipping Limited322Shipping & LogisticsVC

    170Mar-08Shyam EquitiesSambhaav Media39.09Media & EntertainmentVI/VC

    204Mar-08Origo Sino-IndiaFomento International30.9Mining & MineralsVI/h-l.co.ukhttp://www.h-l.co.uk/shares_and_stock_markets/security_news/articles/1978577.hl?rq=rns_article&sedol=B1G3MS1&type=reg

    33Jan-08Aditya Birla groupCore Projects and Technologies3.45IT and ITeSGThttp://www.indiape.com/blog/_archives/2008/1/28/3490534.html

    59Mar-08New VernonShriram EPC3.5ManufacturingVC

    143Mar-08MayfieldServomax India3.75EnergyVI/GT/VC

    58Mar-08BlackstoneTitagarh Wagons4ManufacturingVChttp://www.indiape.com/blog/_archives/2008/3/13/3577755.htmlPre - IPO Placement

    118Jan-08Galleon PartnersPipavav Shipyard and Engineering40.35Shipping & LogisticsVI/Live Minthttp://www.livemint.com/2008/02/19011933/Pipavav-Shipyard-in-talks-to-s.html?d=1

    121Jun-08Clearstone Venture PartnersElbee Express435Shipping & LogisticsGThttp://www.indiape.com/blog/_archives/2008/6/7/3732482.html.Amount invested 6.25 Mn together with Rakesh Jhunjhunwala

    27Apr-08John Keells HoldingsQuatrro Finance & Accounting Solutions5.7544IT and ITeSGThttp://www.indiape.com/blog/_archives/2008/4/11/3632524.html

    31Jan-08Motilal OswalEffort BPO6.25IT and ITeSGT/VC

    94Mar-08Future capital HoldingsCentrum Wealth Managers6.2550.1BFSIGT/VC

    55Apr-08AIG Global InvestmentsKinetic Engineering6.414.5ManufacturingGT/VC

    14Feb-08Nexus India Ventures, JAFCO AsiaMistral Solutions Private Limited6.5IT and ITeSVI/VChttp://www.vccircle.com/2008/02/06/design-services-firm-mistral-gets-65-million-from-nexus-india-jafco-asia/

    54Jun-08Frontline Strategy LimitedShriram SEPL Composites Private Limited6.526ManufacturingVC/ET/Blogspothttp://economictimes.indiatimes.com/News/News_By_Industry/Indl_Goods__Svs/Engineering/Frontline_Strategy_picks_up_26_pc_stake_in_Shriram_SEPL/rssarticleshow/3164933.cmshttp://rajeevdesai.blogspot.com/2008/07/shriram-epca-good-buy-cmprs12845.html

    24Jun-08Sequoia Capital IndiaSatNav Technologies7IT and ITeSVC

    30Jan-08DFJ, Helion, Nexus CapitalKomli (Pubmatic)7IT and ITeSGT

    67May-08BTS India Private EquityParabolic Drugs7Healthcare & Lifesciences4 S/VC

    29Apr-08KPCB, Sherpalo VenturesmKhoj Solutions Private Limited7.1IT and ITeSGT

    53Mar-08Tano IndiaAnil Printers7.4Manufacturing4 S/VC

    25Jun-08HSBC PENewgen Software7.5IT and ITeSGT/VC

    46May-08SIDBI VCAnabond7.5Manufacturin

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