PERFORMANCE OF INDIAN VENTURE CAPITAL

Transcription

1 CHAPTER-V PERFORMANCE OF INDIAN VENTURE CAPITAL PERFORMANCE OF INDIAN VENTURE CAPITAL INDUSTRIES PROFILE OF THE SAMPLE COMPANIES PERFORMANCE OF THE SAMPLE UNITS 155

2 Performance of Indian venture capital firms over the years is analysed usmg the economic indicators. Then the analysis is carried for the sample venture capital units. Venture capital development is a recent phenomenon in India. It is still in infant stage and requires promotional efforts and policy encouragement for its growth. It observed that venture capital in India is more significant in the context of small scale enterprise (SSMs) development. After it was introduced in union budgets, venture capital is catching up in India. At the end of 1993, 15 venture capital funds had rupees (h >' ^ ^' 'ivr r 4.6 billion worth of capital under management and during 2007 it has grown to 162 deals with an 5648 million US $. U *5 ( 1 * Number of Venture Capital Firms and Funds in India, in the recent years is presented in table-5.1. Table-5.1: Number of Venture Capital Firms and Funds Year No. of Firms No. of Funds Source Indian Venture Capita Association Reports various years. 156

3 Table-5.1(a), 5.1(b) and 5.1(c) give the Indian Venture Capital Commitments Year Table-5.1(a): Venture Capital Commitments Amount invested (Rs./millions) No of companies(no.) Amount committed (Rs.in millions) Source: Indian Venture Capita Association Reports various years. Table-5.1(b): Commitments by Fund Rising Year Fund Raising Year No. of Funds Amount Raised Average per Fund < Source: Indian venture Capital association Yearbook (2003) Table-5.1(c): Investment by Year Year Number of Number of Investment Average per Rounds Companies Amount ($MiII) Round Source: Indian venture Capital association Year book (2003) 157

4 Table-5.2 gives the amount invested by the Indian venture capital companies in different stages. Start up stage investment has been remarkably -grown over the years. Growth of later stage investment is significant. Table-5.2: Stage Wise Investment (Rs. Million) Year Seed Start-up Early Later Turnaround Source Indian Venture Capita Association Reports various years. Table-5.2(a): Commitments by Stage (2003) Stage No. of Funds Amount Raised Balanced Stage Seed Stage Expansion Early Stage Total Source: Indian venture Capital association Year book (2003, Average per Fund Table-5.2(b): Investment by Stage (2003) Stage No. of Rounds No. of Companies Investment Amount Average per Round Other Expansion 35 34' Early Stage Start-up/Seed Later Stage Total Source: Indian venture Capital association Year book (2003) 158

5 Table-5.3 gives Instrument Wise Investment made by the Indian venture capital companies. Equity and convertible investment have grown impressively over the years. Debt investment in fact has declined over the years. Table-5.3: Instrument Wise Investment (Rs. In millions) Years Equity Convertible Debt Preference Others Source Indian Venture Capita Association Reports various years. Indian venture capital Investment by Industry is given in table 5.4. Industrial products, Computer software, Consumer related, Medical, Computer hardware, Telecommunication Food processing, and Biotech are the important industries involved in venture capital investment. Table-5.4: Venture Capital Investment by Industry (Rs. In Millions) Industry Industrial products Computer software Consumer related Medical Computer hardware Food processing Telecommunication Biotech Electronics Energy related Others Total Source Indian Venture Capita Association Reports various years. 159

6 Venture capital investments in Industrial product, computer software and consumer related industries have remarkably increased in the recent years. Table-5.4(a): Investment by Industry (2003) Industry No. of Rounds No. of Companies Investment Amount (Rs. In Millions) Average per Round Financial Services Consumer Related Medical/Health Communications Computer Software Semiconductor/Electronics Biotechnology Internet Specific Business Services Computer Hardware Other Manufacturing Construction Transportation Industrial Energy Total Source: Indian venture Capital association Year book (2003) Percentage distribution of contributories to venture capital funds are presented in table

7 Table-5.5: Percentage Distribution of contributories to Venture Capital Funds. Main contributories to venture capital funds Contribution as % of total fund All India financial institutions Multilateral development agencies Non-resident Indians 3.89 State level financial institutions 2.28 Foreign institutional investors 1.84 Private sector/corporate bodies 7.25 Nationalized banks 4.95 Public(by way of public issue) 1.61 Insurance companies 0.97 Other banks 0.28 Public sector corporate bodies 1.02 Others 0.05 Source Indian Venture Capita Association Reports various years. Financial intuitions are the major contributors to the Indian venture capital (59.79 per cent) Indian venture capital industry is more significant in Asia; and it may be compared in table-5.6, and 5.6(a). 161

8 Table-5.6: Indian Venture Capital Activity Compared to Asian Regions (2003) Company Nation No. of No. of Cos Amount Invested Rounds ($MiII) Australia China South Korea Singapore India Hong Kong Taiwan Malaysia Thailand New Zealand Source: Indian venture Capital association Year book (2003) Table-5.6(a): India in Asia Venture Capital Industry Capital under management (US $ million) Country No. of firms/funds 17, Japan 120 3, Hong Kong/china 58 1, Singapore Taiwan India Malaysia 14 Source Indian Venture Capita Association Reports various years. Percentage distribution of source of VCFs in Asian countries is given in table 5.7; also, Table-5.8 gives the percentage distribution of source of VCFs in India. 162

9 Table-5.7: Percentage Distribution of source of VCFs in Asian Countries Source of Funds Percentage of total Funds Government Banks 19.8 Pension funds 12.2 Insurance companies 19.3 Corporate sector 29.9 Individuals 3.1 Others 12.3 Source Indian Venture Capita Association Reports various years. Table-5.8: Percentage Distribution of Source of VCFs in India Source of Funds Percentage of total Funds Banks: Nationalized banks 4.05 Other banks 0.28 Insurance companies 0.97 Corporate sector: Private 7.25 Public 1.02 Public 1.61 Financial institutions State 2.28 All India Foreign institutions NRIs 3.89 Fils 1.84 Multilateral Dev. Agencies Source Indian Venture Capita Association Reports various years. 163

10 Distribution of total investment made by Indian venture capital companies/funds in enterprises in the form of instruments of finance may be seen in table Table-5.9: Distribution of total investment made by Indian venture capital companies/funds in enterprises in the form of instruments of finance Venture capital Equity Redeemable Convertible Debentures Total companies/funds shares pref. shares instruments RCTC TDCI IDBI ANZ 3i Canbank VCF CVF < oo APIDC GVCF m century INDUS IL&FS IFB Source Indian Venture Capita Association Reports various years. It is clear from the table-5.9 that equity shares and debentures are the major instruments of the finance of venture capital investments. Table-5.10 and the table-5.11 give the industry wise Cumulative Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Venture Capital Investors (FVCI) 164

11 Table-5.10: Industry wise Cumulative Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Venture Capital Investors (FVCI) Sept 30,2006 (Rs. in Cr) Dec 31,2006 (Rs. in Cr) Sectors of Economy VCF FVCI Total VCF FVCI Total Information technology Telecommunications Pharmaceuticals Biotechnology Media/ Entertainment Services Sector Industrial Products Real Estate Others Total 8093* ** *Includes Rs 1352 Crore of FVCI investments in VCF **Indudes Rs 1703 Crore of FVCI investments in VCF 165

12 Table-5.11: Industry wise Cumulative Investment Details of SEBI Registered Venture Capital Funds (VCF) and Foreign Venture Capital Investors (FVCI). March 31,2007 (Rs. in Cr) June 30,2007 (Rs. in Cr) Sectors of Economy VCF FVCI Total VCF FVCI Total Information technology Telecommunications Pharmaceuticals Biotechnology Media/ Entertainment Services Sector Industrial Products Real Estate Others Total 11270* ** * Includes Rs 1505 Crore of FVCI investments in VCF ** Includes Rs 3264 Crore of FVCI investments in VCF Note: The above report is compiled on the basis of quarterly information submitted to SEBI by registered Venture Capital Funds and Foreign Venture Capital Investors. Table-5.12: Types of Exits Year IPO After Trade Liquidation/ M&A Buy others EPO Sale Bankruptcy back Source: Indian venture Capital association Year book (2003) 166

13 PROFILE OF THE SAMPLE VENTURE CAPITAL FIRMS For analysing the performance and managerial practices of venture capital firms, 15 sample units have been selected at random and the profile of these VCFs are discussed here. Most of the information about the venture capital companies and venture capital-backed ventures are borrowed from their respective websites. The address of theses sample units are given in table Table-5.13: Address and websites of the research sample units SI. No Name of the Venture Capital Fund 1 Baring Private Equity Partners India Limited 2 CanBank Venture Capital Funds Limited 3 Gujarat Venture Capital Limited Address Baring Private Equity Partners India Private Limited 9th Floor, Infinity Tower A, DLF Phase II, Gurgaon CANBANK VENTURE CAPITAL FUND LTD. 6TH FLOOR, NAVEEN COMPLEX NO. 14, M.G. ROAD BANGALORE GVFL Ltd. 1 st Floor, Premchand House Annexe, B/h Popular House, Ashram Road, Ahmedabad ILabs ILabs Capital Pvt Ltd Unit No. 18, ILabs Centre Madhapur, Software Units Layout Hyderabad Infinity Infinity Technology Investments Pvt. Ltd., 001, Turf Estate Shakti Mills Lane, Off Dr. E Moses Road, Mahalakshmi, Mumbai - 4t) IFCI Venture Capital Funds Ltd. (IVCF) IFCI Venture Capital Funds Ltd.(IVCF) 16th Floor, IFCI Tower, 61, Nehru Place, New Delhi KIT VEN Fund The Managing Director KITVENFund 403,4th Floor, HVS Court 21, Cunningham Road, Bangalore , INDIA. Websites http ://www,canbankventure,com

14 SL No Name of the Venture Capital Fund 8 Punjab Venture Capital Limited 9 Rajasthan Venture Capital Fund 10 SICOM Venture Capital 11 SIDBI Venture Capital Limited (SVCL) Address Chief Executive Officer PUNJAB VENTURE CAPITAL LIMITED, Udyog Bhawan, 18- Himalaya Marg, Sector-17, Chandigarh (INDIA) Chief Executive Officer Rajasthan Asset Management Company Pvt. Ltd.III Floor, RIICO Wing,Udyog Bahwan.Tilak Marg,Jaipur, Pin: Rajasthan,India Sicom Capital Management Private Limited Dr. Herekar Park Building, Near Kamala Nehru Garden, Bhandarkar Road Pune , India SIDBI Venture Capital Ltd. 'Jolly Maker Chambers II', 107,10th Floor, Nariman Point, Mumbai Nova Star 4012,1st Cross HAL II Stage, Indiranagar Bangalore ICICI Venture South Tower, 8* Floor, Bandra-Kurla Complex, Mumbai AAVISHKAAR Aavishkaar India Micro Venture Capital Fund, 512, Fifth Floor, Palm Spring, Beside D-Mart Link Road, Malad (West), Mumbai Kerala Venture Capital Fund Kerala Venture Capital Fund Pvt. Limited, #604, Pioneer Towers (6th Floor)Marine Drive Kochi Websites http :// Activities, organisation and other particulars of these venture capital firms are given below. Baring Private Equity Partners India Limited Baring Private Equity Partners India commenced investment management activities in 1998 as part of the Baring Private Equity Partners Group. It provides investment advisory services to Baring Funds, which have 168

15 cumulative assets under management in excess of $275 Million, in the manufacturing, pharmaceutical, information technology and services sectors. Baring is a pioneer in providing private equity capital in India. It has a track record of over 30 successful transactions in more than 20 companies, and a reputation for building outstanding businesses in India over the last 10 years. Baring has a series of firsts to its credit - Baring was the first Fund to conclude a management buy-out of a listed company in Asia, the first cross-border M&A in the country and the first venture capital to invest in the Indian BPO sector. Funds primarily focus on mid-market transactions, aiming to provide capital to organizations for expansion and financial restructuring. Baring Private Equity Fund can make individual investments up to $100 million with the backing it enjoys from renowned institutional investor groups. The Fund seeks positions in investee companies from significant minority stakes to control. It also seeks a Board position and will often reserve the right to influence the appointment of key managerial staff. To achieve liquidity at the appropriate time and at attractive terms, the Funds control the exit decision or have well defined exit rights. There have been several cases of successful public market listings within the region as well as highly successful listings of Asian companies on Western stock exchanges such as NASDAQ or the NYSE. Therefore, the Funds do not discount the possibility of an IPO exit route and aim to take advantage of any window of opportunity that opens up in various market cycles in order to maximize returns. 169

16 CANBANK Venture Capital Funds Limited Canbank Venture Capital Fund is India s First and Only Public Sector Bank sponsored Venture Capital Fund, set up in Four Venture Capital Funds with an aggregate corpus of INR 1120 Million launched till date, assisting 65 companies across various Industrial sectors. The fund's corpus is contributed by International Development Financial Institutions, Public Sector Banks and Financial Institutions. Over the last 17 yearn Canbank Venture has invested in 78 companies across various sectors. We invest up to Rs.9 crores in technologically innovative companies which promise substantial capital appreciation in the long term. Canbank Venture has recently launched a new fund, Bharath Nirman Fund, which would invest in mid sized companies, which have a potential for significant growth. Four funds managed by Canbank Venture are, Canbank Venture Capital Fund I, a general fund was setup in 1989 and had investments in 40 projects covering various sectors. 12 companies have since been listed in various stock exchanges in India. The fund has divested in 40 companies and the corpus has been redeemed to the extent of per cent. Canbank Venture Capital Fund II, a general fund was set up in 1998 and the fund has invested in 8companies and has a well diversified portfolio. Canbank Venture Capital Fund III, a general fund was set up in 2001 and the Fund has so far invested in 23 companies across various sectors. The fund has a preference for small scale units with a focus on the IT sector. 170

17 Bharath Nirman Fund- Fund IV Bharath Nirman Fund, the latest fund of Canbank Venture Capital Fund, with a corpus of INR 600 Million, was launched in November The Period of Maturity of the Fund is 8 years. The Core Contributors are the leading nationalized banks viz., Canara Bank, Allahabad Bank, Corporation Bank, Indian Overseas Bank, Oriental Bank of Commerce, Vijaya Bank, Andhra Bank and Small Industries Development Bank of India (SIDBI) Bharath Nirman Fund has been formed for promoting entrepreneurship, with a view to providing an impetus to the Manufacturing and Services Sectors in the country and the average size of investment is targeted at INR 50 Million - 90 Million. The objectives and focus of the Fund shall be to invest in Emergmg Indian Businesses in IT/ITES/BPO, Telecom, Biotechnology, Healthcare, Pharmaceuticals, Engineering, Auto and Auto Components, Textiles; Infrastructure led Sectors and Domestic Demand Driven Segments. Gujarat Venture Capital Limited GVFL Ltd. (formerly Gujarat Venture Finance Limited) is widely regarded as the pioneer of venture capital in India. GVFL Ltd. is an independent, board-managed, autonomous venture finance company based at Ahmedabad, Gujarat (India). Started in 1990 at a World Bank initiative under the aegis of Gujarat Industrial and Investment Corporation (GIIC), GVFL Ltd. is a classical venture capital company focused on funding small and medium technology-based enterprises. Over the past 17 years, GVFL Ltd. has raised five Venture Capital Funds with a cumulative corpus of Rs million and is currently in the process of raising a SME Fund. These funds are invested in 60 companies across the country, which are systematically provided financial and managerial support by GVFL Ltd. Today, GVFL Ltd. has divested from 52 out of 60 investee companies. 171

18 GVFL is a multi-sector player, having evolved operating procedures, which are well adapted to environments characterized by uncertainty and high risk. In this scenario, we act as a catalytic agent to further growth. We add value to our companies by strategically addressing their organizational and business challenges through active participation in recruiting, strategic direction, international relationships and financial advice. GVFL makes investments throughout India. Till date GVFL has invested in 60 companies across the country, which is systematically provided financial and managerial support by GVFL Ltd. GVFL builds businesses across the country by making investments and adding value by: Investing and nurturing technology based companies. Investing in growing SME technology companies Supporting new technologies and innovation Supporting first generation entrepreneurs Supporting sustainable competitive edge Providing good returns to the investors The distinctive factor of GVFL is that it has remained focused to the original role of venture capitalists, namely, investing in technology-oriented start-ups, at a time when many have veered off-course. At GVFL, we pride ourselves on having the courage to back first-mover companies. We attribute much of our success to a passion for detailed assessment of market viability and management credentials. Identifying and unveiling the potential of a company has become our forte. 172

19 GVFL seek to develop the next generation of business leaders and forge long-term partnerships to build sustainable organizations, deliver better results and share rewards. Its unique hands-on approach and personal involvement in each portfolio company is reflected in dedicated and informal working relationships with entrepreneurs. It has primarily focused on financing companies in the SME segment. GVFL is a venture capital company, focusing on high-risk, and start-up ventures. Its area of expertise is the first stage of funding, when a venture is just taking off. GVFL believes that the role of a venture capitalist extends far beyond just making an investment. Its job does not end with making an investment; it really commences post-investment. GVFL handhold investee companies and value-add to them by constant monitoring and by providing them crucial inputs on how best to manage their ventures. These could range from suggestions on how to revise market strategies, when (and if) to change management, develop new products, go for acquisitions and alignments and the like. GVFL has managed over Rs. 136 crores in five venture funds namely, GVCF-1990, GVCF-1995, GVCF-1997, Gujarat IT Fund, and Gujarat Biotechnology Venture Fund. The Funds were invested in 60-technology start up companies. During 2006, GVFL has liquidated its first fund GVCF-1990 with profits. In order to harness its long experience of technology in India, GVFL has launched a new Venture Fund - "SME Technology Venture Fund", with a target corpus of Rs million. The Fund would be focusing on early and growth state technology companies in India. ILABS Labs is a Private Equity firm managing $300 million of capital across two funds for investments in companies which are India-centric. ilabs aims to 173

20 build a leading investment firm that values a disciplined investment style that can withstand the ebb-and-flow of the markets. Operating out of Hyderabad and Chennai, ilabs helps build fundamentally stronger and better companies through its extensive operating, entrepreneurial and mentoring experience. ilabs was founded in 2000 by Srini Raju and Sandeep Reddy. The ilabs investment team has built its core relationships and reputation in India and understands the dynamics of the Indian business culture. The firm s partners have a commendable network of deep, high-profile relationships within India, work with leading private equity groups as co-investors and have created a world class Advisory Board to assist in supporting portfolio companies. ilabs drives value through operational excellence with its pro-active involvement in portfolio companies. With over a 100 years of combined operational experience in sales, marketing, operations, product development, finance and strategy, the team leverages its people skills to help recruit, management, motivate and build strong management teams in addition to structuring the financial elements of investments. The ilabs investment strategy represents a nimble approach that allows the disciplined pursuit of a broad range of value propositions. ilabs benefits from an established local India presence, the broad networks of the Principals, and the Principals own management and operational skills as experienced entrepreneurs and value creators. ilabs targets proven early-stage, expansion-stage and restructuring/buyout opportunities, primarily in the sectors of Technology driven Products and Services, Telecom, Media & Entertainment, and Consumer & Financial 174

21 Services. ilabs investment size typically ranges from $5-$20 million; however, the firm has the ability to lead larger transactions through a proven network of syndicate partners. ilabs finds value in transactions presenting unique complexities, which could only be addressed by an experienced local investment team with proven operational skills. ilabs has established a strong reputation based on its expertise in sourcing compelling investment opportunities and enabling portfolio companies to scale up their businesses. To date, ilabs has invested in over 15 businesses including Sify, DQ Entertainment, Intelligroup, Cibemet, Megasoft, Associated Broadcasting, among others. Infinity Venture Capital Company Founded in November 1999, Infinity is India's first institutionalized angel fund which brought together Indian entrepreneurs and overseas entrepreneurs together - to fuel growth of start ups in India. Infinity closed fund raising in February 2000 and has invested in about 18 companies - mostly in Series A or Seed round. The core investment philosophy of Fund-I has been - a) to invest in technology companies; be it services or product or internet related companies b) follow a research based methodology to identify potential investment areas and understand emerging technologies/market; c) generate deals proactively through vast network within the Indian and US technology market and d) and be very engaged with every portfolio company - by nominating a person, either from the pool of Infinity advisors or Infinity Partner, Principal, whose strengths best match the requirements of the portfolio company. 175

22 IFCI Venture Capital Funds Ltd. (IVCF) IVCF -(formerly known as Risk Capital & Technology Finance Corporation Ltd.) is a subsidiary of IFCI Ltd. and is a public financial institution. It was promoted with the objective of broadening entrepreneurial base in the country by providing funds to fill gap in promoters contribution in project. IVCF promoted as a society - Risk Capital Foundation in 1975, was corporatised in IVCF had initially started providing financial assistance by way of soft loans to promoters under its Risk Capital Scheme. Since 1988, it also started providing finance under Technology Finance and Development Scheme to projects for commercialization of indigenous technology for new processes, products, market or services. Over the years, IVCF acquired great deal of experience of investing in technology-oriented projects. The Mission of IVCF is to act as catalyst in enlarging entrepreneurial base by funding/facilitating funding to ventures involving innovative product/process/technology with entry barriers and aiming to maximize wealth of stakeholders. Based on IVCF's credentials and strengths, UTI entrusted it with the management of a new venture capital fund named Venture Capital Unit Scheme (VECAUS-III) in The size of VECAUS-III was Rs.80 crores, contributed by UTI and IFCI. The main objectives of IFCI are, To enlarge entrepreneurial base in the country Identification of Projects Due Diligence & Technical Evaluation 176

23 Deal Structuring Investment Post Investment Monitoring Exit Planning & Implementation Investment Instruments: Equity, Personal loan, Company loan through conditional and conventional loan. KITVEN Fund KITVEN Fund is a Rs. 15 Crore, 10 year, close-ended Venture Capital Fund conceptualized and funded by Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC), Karnataka State Financial Corporation (KSFC) and Small Industries Development Bank of India (SIDBI). KITVEN Fund is registered with Securities and Exchange Board of India (SEBI) and is dedicated to investing in companies in the Information Technology industry. Investment Situation KITVEN Fund's primary objective is to make available long-term funds to unlisted companies in the IT sector to: Develop competitive products and cutting-edge technology. Manufacture and commercialize the product development. Move up in the value chain. Expand & upgrade existing capabilities to cater to a wider clientele. About 85.0 per cent of the Fund invested in Small Scale Industry (SSI) Start-ups Mezzanine Units. KITVEN Fund would also cater to 177

24 Growth and expansion of an established company including product diversification and forward / backward integration. Turnaround financing. As a new avenue, KITYEN Fund is also open to exploring select growth oriented buy-out situations with modest leverage. Punjab Venture Capital Limited (PVCL) Punjab Venture Capital Limited (PVCL) is an 'Asset Management Company' which is entrusted with the overall management of the Venture Capital Fund - Punjab Infotech Venture Fund (PIVF) acting as its' Investment Manager and has the necessary authority to consider/ evaluate a given proposal for investment from the Fund - PIVF. Further PVCL is empowered to supervise the investment and exercise all rights with respect to investment from the Fund, identification of projects, carrying-out appraisal/risk-analysis and detailed due diligence of projects / proposals as also engage professionally experienced personnel/ outside independent consultants for carrying-out detailed appraisal/ due diligence besides for advisory and managerial support and / or guidance purpose. A Rs. 200 million, 10 year, close-ended IT dedicated Venture Capital Fund has been conceptualised and positioned by the Small Industries Development Bank of India (SIDBI) as the major contributor and the State Government of Punjab through its' corporate Bodies viz; the Punjab State Industrial Development Corporation Limited (PSIDC), the Punjab Financial Corporation (PFC) and the Punjab Information & Communication Technology Corporation Limited (PICTC) 178

25 PVCL has since approved and disbursed investment from the Fund - PIVF to the extent of Rs.7.20 Mn towards equity/ debt to M/s. SM Lawdigest.Com Limited, Jalandhar for start-up of a 'Law Portal'; Rs. 8.5 Mn as equity/debt to M/s. American Heartcare Limited (erstwhile American Heartcare Private Limited) for setting-up a "Trans-telephonic computerised cardiac monitoring & healthcare related software development centre with manufacturing facilities for supportive hardware equipment (cardio station & monitors)" at Mohali; Rs.8 Mn towards OCCPs to M/s. Smart Data Enterprises (India) Limited for establishing its' 'Software Development Centre' at Mohali, Rs. 7.5 Mn to acquire OCCPs of M/s S.E.-Biz Infotech limited for it's 'Software & Product Development Centre' and Rs 3 Mn to M/s Twenty First Century Battery Limited for its project facilities located at Mohali. Thus, PVCL has till date released Rs Mn as equity/equity related instruments and debt to five companies against Rs Mn sanctioned to them to meet requirements of funds towards first & second phases of their respective projects. The Investment Criteria are, Location: To be set up within the State of Punjab and facilities be in position before disbursement of investment from the Fund Technology: Barriers to entry, proprietary technology and sustainable competitive advantage Management: Professionally qualified management with strong committed team - visionary & executors with established Credentials Market: High growth potential areas especially addressing emerging global markets Competitiveness: Long term advantage through high end technologies and uniqueness and scalability of operations Return on Investment: Potential for above average profitability leading to attractive returns 179

26 Exit Routs are, Period of investment to be up to 5 yearn with option for early exit, if warrants IPO Buy-back by the investee company/promoters Strategic sale-mergers & acquisition Rajasthan Venture Capital Fund (RVCF) Rajasthan Asset Management Co. Pvt. Ltd., Managers to Rajasthan Venture Capital Fund is a 5 years old fast growing company having committed corpus of Rs.46 cr. under its management. The Company which is further raising a corpus of Rs.70 cr. is engaged in private equity and venture capital finance on pan India basis with focus on National Capital Region and Rajasthan. Rajasthan State Industrial Development and Investment Corporation (RIICO) and Small Industries Development Bank of India (SIDBI) are the anchor contributors to Rajasthan Venture Capital Fund Rajasthan Trustee Company (RTC) is the policy making and supervising company for the fund. A private sector company, Rajasthan Asset Management Company Private Limited (RAMC) manages the fund. RIICO, SIDBI, Private IT Companies, Bank of Rajasthan and employees are its shareholders. New investment proposals are received, processed and followed by RAMC. RVCF aims at investing in companies in the Information Technology, Bio- Technology, Retail, Tourism, Entertainment and other technology-driven industries in India with focus on Rajasthan and NCR such as Delhi, Gurgaon and Noida. The Fund's investment in companies is through the route of equity, quasi-equity and debt instruments. The Fund seeks to achieve its return through dividends and capital gains at the time of disinvestment through an Initial 180

27 Public Offering a negotiated sale of its holding to Strategic Investors, Buyback, etc. The Fund endeavors to provide the necessary management inputs towards developing the company's future direction and business strategies without either seeking management control or interfering in day to day activities. The Fund further provides to its investee companies strategic support through its network, active partnership, etc. as a part of value addition and maximization of shareholders wealth. SICOM Venture Capital Sicom Capital Management Private Limited was set up with a vision. A vision shared by our team and the institutional investors to invest in growth companies and support and nurture them with our capital and management resources Over the years, we have invested in companies that have strong pricing power and high growth potential. Many of our portfolio companies have shown consistently high growth rate over the years, with healthy bottom lines. At Sicom Capital Management, we combine the professional ethics of the institutional set-up with the agility of an entrepreneurial organization. Mission Statement of the company is To set up and manage a series of venture capital funds that rank amongst the top three in India in terms of return on investment It is its aspiration to ensure that each fund that we manage ranks amongst the most profitable in its class in India. Small Industries Development Bank of India (SIDBI) Small Industries Development Bank of India (SIDBI) was established in April 1990 as a wholly owned subsidiary of Industrial Development Bank of 181

28 India (IDBI), under an Act of Indian Parliament to serve as the principal financial institution for promotion, financing and development of industry in the small scale sector and -coordinating the functions of other institutions - engaged in similar activities. As a result of an amendment to the SIDBI Act, SIDBI has since been made as an independent financial institution to cater to the wider range of SSI requirements. SIDBI s Assistance to the small scale sector is channelised basically through three routes viz. Indirect Assistance Direct Assistance Development and Support Services SIDBI offers various schemes of assistance, designed to meet every need of small scale industries, under one roof. The unsecured bonds of SIDBI have been rated AAA by leading domestic rating agencies viz. The Credit Rating Information Services of India Ltd. (CRISEL) and Credit Analysis and Research Ltd. (CARE). SIDBI is ranked 23rd in terms of Assets and 24th in terms of Capital among the top 50 Development Banks in the World (Source: The Banker, London, June 2000) SIDBI is placing strong emphasis on technology development and absorption both for modernisation purposes and also for creating new enterprises and strengthening existing enterprises in high tech areas such as information technology. SIDBI and Venture Capital Financing 182

29 SEDBI s Venture Capital Fund constituted in October It is utilised for direct investment in small scale units and contribution to Venture Capital Funds for onward lending to/investment in small scale units-. Promoted 15 State / All India Level Venture Funds. 10 Funds are IT dedicated and the balance 5 is General Funds. Promoted National level Fund NFSIT. SEDBI has so far made an aggregate commitment of Rs. 1.5 billion (US$ million). Further, SIDBI has also taken the initiative in setting up of two Innovation and Incubation Centers in Indian Institute of Technology, Kanpur and Birla Institute of Technology, Mesra. SVCL Relationship - General Investment Criteria Key requirements for the project selection are: A strong management team which has commitment, demonstrated track record and a high degree of integrity Long term competitive advantage Potential for above average profitability leading to attractive returns on investments Subscription to equity/ equity type instruments Unlisted companies preferably in small scale Exit should be established SME Growth Fund (SGF) The SME Growth Fund (SGF) has been set up by Small Industries Development Bank of India (SIDBI) in association with other leading commercial banks such as Punjab National Bank, State Bank of India, 183

30 Bank of Baroda, Bank of India, Central Bank of India, Union Bank of India, Oriental Bank of Commerce and Corporation Bank. It is a close ended 8 year fund dedicated to SME sector with an initial corpus of Rs million/ US$ million. SME Growth Fund focuses at wide range of growth sectors, such as life sciences, retailing, light engineering, food processing, information technology, infrastructure related services, healthcare, logistics and distribution, etc. The main objective of the fund is to invest in companies at early stage as well as in second round financing for those with a track record of proven technology or business model and opportunities for growth and earnings. The fund would endeavor to develop international networking and enable assisted units to attract co-investment from international venture capitalists in subsequent rounds of financing National Venture Fund for Software and IT Industry (NFSIT) At the national level a Rs million (US$ million) National Venture Capital Fund for Software and IT industry (NFSIT) has been set up by SIDBI and is being managed by SIDBI Venture Capital Ltd. SIDBI has contributed Rs. 500 million (US$ million). Ministry of Information Technology, Government of India Rs. 300 million (USS 6.67 million). Rs. 200 million (USS 4.44 million) by IDBI. SME Growth Fund In order to meet the venture capital needs of SME units and enable them to achieve rapid growth by taking advantage of opportunities in the emerging sectors, SIDBI Venture Capital Ltd. has set up SME Growth Fund. The fund 184

31 has a targeted corpus of Rs.500 crore with a life of 8 years. SME Growth Fund is registered with Securities and Exchange Board of India (SEBI) as a Venture Capital-Fund and has been structured as a unit scheme to make primarily equity or equity-related investments in the growth oriented businesses having significant business activity in India. The Fund seeks to achieve attractive riskadjusted returns for its contributors through long-term capital appreciation. Investment Focus SME Growth Fund s focus is to invest in unlisted entities in the small and medium enterprises in manufacturing as well as services sector as also businesses providing infrastructure or other support to SMEs. The Fund will invest in companies at early stage as well as in second round financing for those with a track record of proven technology or business model and opportunities for growth and earnings. SME Growth Fund will focus at wide range of growth sectors, such as life sciences, retailing, light engineering, food processing, information technology, infrastructure related services, healthcare, logistics and distribution, etc. Mode of Investment: SME Growth Fund provides financial assistance primarily by way of equity or equity-linked capital investment. It shall also endeavor to provide mentoring support and other value addition to enable the funded companies to achieve rapid growth and achieve, maintain their competitive edge in domestic and international markets. The Fund seeks a strategic stake in the funded companies with board representation and other rights as venture capital investor. 185

32 SME Growth Fund is looking for investment in projects offering potential for attractive growth and earnings. Key criteria for project selection - are; Strong and committed core team: The Fund will look for businesses managed by a team with a demonstrated performance track record, commitment and energy. Growth potential: The Fund will like to invest in promising businesses having potential for sustainable high growth. Long-term competitive advantage: The Fund will prefer to invest in innovative business operations with a sustainable competitive advantage. Viable business plan: The venture should have a viable business plan which offers above average profitability leading to attractive return on investment. A Clear exit plan: The Fund, being of limited life, will seek to invest in ventures offering a strategy for clear exit within a reasonable time period. The exit could be by way of IPO, offer for sale, merger and acquisition or sale to a strategic or a financial investor. SVCL (SIDBI Venture Capital Limited) Relationship Besides financial assistance SVCL s role is to Help the entrepreneur to manage his business more effectively and achieve rapid growth in internationally competitive environment Use SIDBI s close functional linkages with domestic and international venture capital funds/ companies, Govt, agencies, financial institutions, commercial banks, foreign institutional investors, merchant bankers, 186

33 consultancy agencies, management institutes, R&D organisations, software technology parks etc. to provide strategic support to assisted companies of this fund Provide Indian Small enterprises not only with fund support but also information and market access Technology networking and hand holding required to add value to assisted units so as to enable them to become global companies and aim at future listing on the NASDAQ and other foreign stock exchanges NOVA STAR The firm is managed by leaders and pioneers in the VC and small cap business in India. The managers have a track record of investing in and building a number of Indian companies that are recognized as Stars today. The firm manages funds that invest in profitable small and midcap Indian companies that have the potential to emerge as Stars. The Novastar International Fund invests in small and mid cap companies that satisfy the following key criteria: High quality ethical management Differentiated products and services Large emerging market Profitable operations Well funded significant expansion underway Potential for revenues and net income to ramp up significantly over a three year period Potential for following events over a three year period: PIPE funding 187

34 Strategic investment/corporate acquisition Significant revenue/net income growth through rapid organic and inorganic growth - Re rating of PE due to greater visibility of company, its earnings and greater investor participation ICICI Venture Capital Company ICICI Venture is one of the largest and most successful private equity firms in India with funds under management in excess of USD 2 billion. ICICI Venture, over the years has built an enviable portfolio of companies across sectors including pharmaceuticals, Information Technology, media, manufacturing, logistics, textiles, real estate etc thereby building sustainable value. It has several firsts to its credit in the Indian Private Equity industry. Amongst them are India s first leveraged buyout (Infomedia), the first real estate investment (Cyber Gateway), the first mezzanine financing for a acquisition (Arch Pharmalabs) and the first royalty-based structured deal in Pharma Research & Development (Dr Reddy s). ICICI Venture is a subsidiary of ICICI Bank, the largest private sector financial services group in India. The team at ICICI Venture is a mix of investment professionals, entrepreneurs, industry professionals, and structured finance professionals. The complementary strengths of the various team members ensures not only the best deal sourcing and the most optimum structuring but also the ability to add significant value to the portfolio companies. ICICI Venture has the largest team strength amongst all private equity firms in India. In addition, what makes the team unique is the presence of in- 188

35 house legal, finance, compliance and risk departments. The management team at ICICI Venture has the experience of executing large and complex transactions, structuring innovative deals and creating new investment landscapes through each of its investments. Private Equity India Advantage Fund Series 2 (IAF Series 2) - USD 810 million India Advantage Fund Series 1 (IAF Series 1) - USD 245 million ICICI Emerging Sector Fund / Others - USD 425 million Real Estate: India Advantage Fund (Real Estate Series 1) - USD 550 million Private Equity Practice: The USD 810 million India Advantage Fund Series 2 from which ICICI Venture is currently investing is a broad based Fund and intends to tap the India growth story across various sectors. Growth Capital The Funds managed by ICICI Venture endeavor to provide financial assistance to well established/existing enterprises with robust business models and healthy balance sheets through a variety of investment instruments. The investment philosophy is to pursue transactions with established enterprises that are leaders or potential leaders in their respective markets and where there is a clear proposition for value creation. ICICI Venture, through its earlier Funds has invested in private equity across retail, media, IT/ITES, consumer services, consumer goods, textiles, pharmaceuticals, biotech, oil, non-consumer goods etc. The intention is to broad-base the investments across certain focus sectors and pro actively create deals in these sectors. For the current Fund (IAF Series 2), the investment themes are driven by four broad macro drivers: 189

36 Indian domestic consumption growth The India outsourcing advantage in both services and manufacturing Infrastructural creation and allied services Cross border - Assisting Indian corporate to expand overseas Real Estate Practice: Credited with being the first institutional equity investor in the property space, ICICI Venture Real Estate has built an enviable portfolio comprising premium housing, integrated townships, commercial, retail hospitality and IT real estate, spread across the entire country. ICICI Venture has a strategic long term joint venture with Tishman Speyer Properties, one of the finest owners, developers, and operators of first class real estate in the world, for investments and development of property in India. The JV Company, TSI Ventures Limited, pursues ground-up development of commercial, office, residential and retail properties throughout India. ICICI Venture Real Estate also actively seeks to invest in and partner with leading entrepreneurs and developers, for funding their growth aspirations in this space. The focus of the Fund is to develop, acquire, lease, and sell quality real estate that is attractive to quality consumers, tenants / users. The Fund is strongly diversified and invests in projects in all growing Indian cities. Mezzanine Practice The ICICI Venture Mezzanine practice provides mezzanine finance for buyout opportunities by financial sponsors as well as leveraged acquisition by companies and towards mid-market growth capital. It also looks at suitable turnaround opportunities, real estate, recapitalization and ownership consolidations etc. A characteristic mezzanine investment would be in a high growth, stable margins, stable cash flows company that has favourable business outlook and strong promoter background. However, the Fund is open to look at 190

37 collateralised transactions of shorter maturity and high upside potential. Typically, the investment period is between 18 months to 5 years. Investment Approach of the ICICI venture are, Deal Sourcing: ICICI Venture's investment process starts with the sourcing of deals. Being the premier private equity player in India, ICICI Venture's reputation and brand equity has been attracting investment proposals and deals from entrepreneurs, management teams, promoters and intermediaries. Deals are also directly sourced from industry contacts of the management team. Besides, ICICI Venture also leverages its network with investment banks, fund investors, and also draws upon its access to the ICICI Bank Limited network with its large corporate clientele. Deal Evaluation: ICICI Venture engages in a rigorous and disciplined decision-making process prior to making an investment. When considering a potential transaction, ICICI Venture conducts a timely and thorough due diligence investigation. The skills of the ICICI Venture investment professionals are important to the due diligence process, as they are able to determine the. optimal structure and financing methods for a particular transaction, as well as negotiate favorable acquisition terms. ICICI Venture has an in-house risk, legal and compliance team which provides transactionary support to the investment teams & greatly enhances the response time. The investment proposal would move through various stages of preliminary analysis, initial meeting, internal valuation discussion, valuation negotiation, term sheet negotiation, management committee meeting, and due diligence appraisal meeting before it is proposed in the Investor Committee meeting. Investment Decision: The Investment Committee reviews a deal recommended for investment and either approves or rejects the investment proposal. The 191