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Venture Capital represents financial investment in a highly risky projects with the objective of earning a high rate of return .There is significant scope for venture capital companies in our country because of increasing emergence of technocrat entrepreneurs who lacked capital to be risked. Such a high risk capital is provided by Venture Capital Funds in the form of long term equity finance with the hope of high rate of Return primarily in the form of Capital Gain.
The government of India has been instrumental in setting up of a number of new financial agencies to serve the need of the entrepreneurs in area of venture capital .These includes:-
1. 2. 3. 4.
Venture Capital Scheme of IDBI Venture Capital Scheme of ICICI Risk Capital and Technology Corporation Ltd.(RCTC) Infrastructure Leasing and Financial Services Ltd.(IF and FS) 5. Stock Holding Corporation of India Ltd.(SHCIL) to provide help in the transfer of shares and debentures. 6. The Credit Rating Information Services of India Ltd.(CRISIL) 7. The National Venture Fund for Software and IT industry(NVFSIT) launched in the Year 1999-2000.
Indian Scenario
2.Selection Of Investment
Stage Of Financing Early Stage Financing Later stage Financing Conventional Venture Capital The First Chicago Method Revenue Multiplier Method Financial Instruments to Structure a Deal Debt Instruments Equity Instruments
Selection Of Investment
2(1)Stage of financing
Early stage financing :Seed capital Start up Second round financing Later stage financing :Development capital Bridge Buyouts Turnouts
Structure a deal
Equity Instruments:Non Voting Equity Shares Deffered Ordinary Shares Preference Shares Participating Preference Shares Debt Instruments:Conditional Loans Conventional Loans Income Notes Partly Convertible DEbenture
Investment Aftercare
VALUATION OF PORTFOLIO
EQUITY INVESTMENTS COST METHOD MARKET VALUE BASED METHOD QUOTED MARKET VALUE METHOD FAIR MARKET VALUE METHOD
DEBT INSTRUMENTS
CONVERTIBLE DEBT MARKET VALUE METHOD FAIR VALUE METHOD NON CONVERTIBLE DEBT FIXED INTEREST NON-CONVERTIBLE DEBT NON INTEREST NON-CONVERTIBLE DEBT HIGHLY LEVERAGED INVESTMENTS
STRUCTURAL ASPECTS
While deciding upon a structure,the objectives sought are: Limited liability of investors Simple operation of funds Tax transparency of the fund Maximum tax benefit to investors
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ALTERNATIVE FORMS IN WHICH VCIs CAN BE STRUCTURED LIMITED PARTNERSHIP INVESTMENT COMPANY INVESTMENT TRUST OFFSHORE INVESTMENT COMPANY OFFSHORE UNIT TRUST SMALL BUSINESS INVESTMENT COMPANY
EXIT
DISINVESTMENTS OF EQUITY GOING PUBLIC SALE OF SHARES TO ENTREPRENEURS TRADE SALES SELLING TO A NEW INVESTOR LIQUIDATION
REGISTRATION INVESTMENT CRITERIA GENERAL OBLIGATION AND RESPONSIBILITIES INSPECTION AND INVESTIGATION ACTION IN CASE OF DEFAULT SUSPENSION OF REGISTRATION CANCELLATION OF REGISTRATION