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VENTURE CAPITAL & PRIVATE EQUITY INDIAN EXPERIENCE

VENTURE CAPITAL & PRIVATE EQUITY INDIAN EXPERIENCE. BY G. N. BAJPAI. IMPERATIVES OF VENTURE CAPITAL (VC). Technological progress is the key driver of economic growth Technological progress involves: Improvement in skills Better capital equipment

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VENTURE CAPITAL & PRIVATE EQUITY INDIAN EXPERIENCE

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  1. VENTURE CAPITAL & PRIVATE EQUITY INDIAN EXPERIENCE BY G. N. BAJPAI

  2. IMPERATIVES OF VENTURE CAPITAL (VC) • Technological progress is the key driver of economic growth • Technological progress involves: • Improvement in skills • Better capital equipment • New products, processes & business methods • Technological progress in emerging economies will emerge from enterprises catch-up • Technology capacity is necessary to adopt technologies to local conditions • VC encourages technological progress via research & development • VC converts research & development into new ventures

  3. FINANCING STAGES DURING LIFE- CYCLE OF INITIATIVE • VC funding is special which enterprises tap at different stages of life cycle of initiative • Seed - to prove concept • Start-up - product development & market testing • First stage - commercial production • Second stage - expansion to scale • Later stage - expansion of profitable enterprise • Bridge/ Mezzanine - preparation for going public

  4. SNAPSHOT OF INDIAN VENTURE CAPITAL SCENARIO SOURCE: www.nishithdesai.com/Research-Papers/VCF-Xroads.pdf

  5. EVOLUTION OF PRIVATE EQUITY FINANCE Sources: TSJ Media, ICVA publications (various Years)

  6. Phase I Pre- 1995 Phase II 1995-97 Phase III 1998-2001 Phase IV 2002-05 EVOLUTION OF PRIVATE EQUITY FINANCE (cont.) Primary Sources of Funds Data Sources: TSJ Media, ICVA publications (various Years)

  7. Phase I Pre- 1995 Phase II 1995-97 Phase III 1998-2001 Phase IV 2002-05 EVOLUTION OF PRIVATE EQUITY FINANCE (cont.) Primary Sources of Funds Data Sources: TSJ Media, ICVA publications (various Years)

  8. EVOLUTION OF PRIVATE EQUITY FINANCE (cont.)

  9. INDIA RISK CAPITAL INVESTMENTS BY STAGE 2003-05

  10. VC IN INDIA • Securities & Exchange Board of India (SEBI) regulates both Domestic Venture Capital Funds & Foreign Venture Capital Investors & Registration benefits • Income passes through to investors without tax when Trusts are registered under the Indian Trust Act & Venture Capital Companies • FVCIs freely remit funds to India for investments in Indian venture capital undertakings (VCUs) & SEBI registered DVCFs • FVCIs are exempt from both the entry & exit pricing regulations that otherwise apply to foreign investors, such as market-related pricing on disinvestment • Sale of shares by VCFs to company insiders post- listing is exempt from SEBI takeover code • VCFs automatically obtain (“QIB”) Qualified Institutional Buyer status, which is useful in participating in new security placements • Exemption from one year lock-in for disinvestment post-IPO for shares purchased prior to the IPO • VCFs do not get treated as promoters for purposes of IPO

  11. WHAT IS INDIA WORKING ON? • Securities & Exchange Board of India (SEBI) to: • Obviate restriction on preferential offering • Permit investment in projects/SPVs& surplus funds in bank deposits etc. • Mitigate restrictions of Substantial Acquisition & Takeover Regulations • Reserve Bank of India (RBI) to: • Grant general permission under FEMA and clear inconsistencies • Allow banks to value VCF investments on cost basis • Allow investment in real estate • Government of India: • Revisit tax issues for greater participation • Allow investments in VCF by pension funds • Streamline regulations under companies act including winding up & valuation guidelines

  12. Mr. G. N. Bajpai Chairman Mob : 98335 64458 Email : gnbajpai@intuit-consulting.com CONTACT DETAILS Add : Intuit Consulting Pvt. Ltd. Trade World, ‘B’ Wing, 7th Floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013. India. Tel : +91-22-40043041-44 Fax : +91-22-40043045

  13. THANK YOU

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