VENTURE CAPITAL

WE ARE LISTENING THESE NEWS NOW-A DAYS IN THE MARKET.

"Infosys Technologies' co-founder and chief mentor N R Narayana Murthy sold shares worth Rs 180 crore to start a venture capital firm".

"Indian firms see $77 mn VC funding in July-Sept(2009)".

"Sudha Murthy sold 20 lakh company shares owned by her for over Rs 430 crore in the open market for Narayan Murthy VC Firm".


WHAT IS THIS VENTURE CAPITAL FIRM?


Venture capital (also known as VC or Venture) is a type of private equity capital typically provided for early-stage, high-potential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. It is typical for venture capital investors to identify and back companies in high technology industries such as biotechnology and ICT (information and communication technology).

Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms.

Venture capital firms typically comprise small teams with technology backgrounds (scientists, researchers) or those with business training or deep industry experience. VC has a reputation of being a particularly impenetrable career path, employing only those who bring expert value.

A core skill within VC is the ability to identify novel technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital (thereby differentiating VC from buy out private equity which typically invest in companies with proven revenue), and thereby potentially realizing much higher rates of returns.

A venture capitalist (also known as a VC) is a person or investment firm that makes venture investments, and these venture capitalists are expected to bring managerial and technical expertise as well as capital to their investments. A venture capital fund refers to a pooled investment vehicle (often an LP or LLC) that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans.

Venture capital is also associated with job creation, the knowledge economy and used as a proxy measure of innovation within an economic sector or geography.

Venture capital is most attractive for new companies with limited operating history that are too small to raise capital in the public markets and are too immature to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).

Young companies wishing to raise venture capital require a combination of extremely rare yet sought after qualities, such as innovative technology, potential for rapid growth, a well-developed business model, and an impressive management team. VCs typically reject 98% of opportunities presented to them, reflecting the rarity of this combination.

FOR MORE INFORMATION ABOUT THIS TOPIC VISIT THE FOLLOWING LINK:-
http://en.wikipedia.org/wiki/Venture_capital



Venture Capital Organization in INDIA


Venture Capital (VC) financing started in India in 1988 with the formation of Technology Development and Information Company of India Ltd. (TDICI) - promoted by ICICI and UTI. The first private VC fund was sponsored by Credit Capital Finance Corporation (CFC) and promoted by Bank of India, Asian Development Bank and the Commonwealth Development Corporation viz. Credit Capital Venture Fund. At the same time Gujarat Venture Finance Ltd. and APIDC Venture Capital Ltd. were started by state level financial institutions.

Venture capitalists take higher risks by investing in an early-stage company with little or no history, and they expect a higher return for their high-risk equity investment. Internationally, VCs look at an Internal Rate of Return (IRR) of 40% plus . However, in India the ideal benchmark is in the region of an Internal Rate of Return (IRR) of 25% for general funds and more than 30% for IT-specific funds. Most firms require large portions of equity in exchange for start-up financing

VC financing differs from the conventional bank financing in the following ways:

VC financing invests in equity of the company while conventional financing generally extends term loans
Conventional financing looks to current income i.e. dividend and interest, while in VC financing returns are by way of capital appreciation
Assessment in conventional financing is conservative i.e. lower the risk, higher the chances of getting loan. But, VC financing is a risk taking finance where potential returns outweigh risk factors.
VCs are in for long run and rarely exit before 3 years while a bank will fund a project as long as it is sure that enough cash flow will be generated to repay the loans.
In addition, Venture Capitalists lend management support and provide entrepreneurs with many other facilities. They even participate in the management process. VC generally invests in unlisted companies and make profit only after the company obtains listing. VC extends need based support in a number of stages of investments unlike single round financing by conventional financiers.

VCs carry out very detailed due diligence and make 2-7 year investments. The VCs also hand-hold and nurture the companies they invest in besides helping them reach IPO stage when valuations are favourable. VCFs help entrepreneurs at four stages viz., idea generation, start-up, ramp-up and finally in the exit.

Generally a Venture Capitalist looks at the following aspects before investing in any venture.

i) A strong management team - each member of the team must have adequate level of skills, commitment and motivation that creates a balance between members in areas such as marketing, finance, and operations, research & development, general management, personnel management, and legal and tax issues.

ii) A viable idea - establish the market for the product or service, why customers will purchase the product, who the ultimate users are , who the competition is, and the projected growth of the industry.

iii) Business plan: the plan should concisely describe the nature of the business, the qualifications of the members of the management team, how well the business has performed, and business projections and forecasts.

So while approaching a venture fund one needs to be fully prepared and keep the above requirements in mind while submitting the business plan.

ICICI Venture Funds Management Company Limited

ICICI Venture (formerly TDICI Limited) was founded in 1988 as a joint venture with the Unit Trust of India. Subsequently, ICICI bought out UTI's stake in 1998 and ICICI Venture became a fully owned subsidiary of ICICI. ICICI Venture also has an affiliation with the Trust Company of the West (TCW), which provides it a platform for networking Indian companies with global markets and technology. Strong parentage and affiliates for ICICI Venture also translates into access to a broad spectrum of financial and analytical resources thus enabling a keen understanding of the Indian financial markets and entrepreneurial ethos.

For more details please visit : www.iciciventure.com/

IFCI VENTURE CAPITAL FUNDS LTD. (IVCF)

IFCI Venture Capital Funds Ltd. (IVCF) was originally set up by IFCI as a Society by the name of Risk Capital Foundation (RCF) in 1975 to provide institutional support to first generation professionals and technocrats setting up their own ventures in the medium scale sector, under the Risk Capital Scheme. In 1988, RCF was converted into a company, Risk Capital and Technology Finance Corporation Ltd. (RCTC), when it also introduced the Technology Finance and Development Scheme for financing development and commercialisation of indigenous technology. To reflect the shift in the company's activities, the name of RCTC was changed to IFCI Venture Capital Funds Ltd (IVCF) in February 2000.

For more details please visit : www.ifciltd.com/SubsidiariesAssociates/IFCIVentureCapitalFundsLtd/tabid/93/Default.aspx

SIDBI Venture Capital Limited (SVCL)

SIDBI Venture Capital Limited (SVCL) is a wholly owned subsidiary of SIDBI, incorporated in July 1999 to act as an umbrella organisation to oversee the Venture Capital operation of SIDBI. SVCL mission is to catalyse entrepreneurship by providing capital and other strategic inputs for building businesses around growth opportunities and maximize returns on investment. SVCL will manage the various Venture Capital Funds launched/ being launched by SIDBI.

For more details please visit : www.sidbiventure.co.in

IL & FS Group Businesses

IL&FS Investment Managers Limited (IIML), a subsidiary of Infrastructure Leasing & Financial Services Limited (IL&FS), is one of the oldest and largest private equity fund managers in India, with over $ 1.7 bn under management.

Established in 1989, IIML has been an early and in many instances, the first investor across various sectors such as Telecom, City Gas Distribution, Shipyards, Retail, and Media. Funds managed by IIML now span General Purpose Private Equity, Real Estate and Infrastructure.

For more details please visit : www.ilfsinvestmentmanagers.com/

Gujraj Venture Finance Limited (GVFL)

Started in July 1990, at the initiative of the World Bank, GVFL Ltd. is regarded as a pioneer of Venture Capital in India. Over the past ten years, GVFL Ltd. has provided financial and managerial support to over 57 companies with a high growth potential.

GVFL Ltd invests all over India and across industries. It has created a niche for itself in small and medium scale companies. Investment and monitoring such companies require considerable effort and involvement as compared to large projects. Over the last ten years GVFL Ltd. has been developing an edge, dealing in such investments.

For more details please visit : www.gvfl.com

How to form a Company in India?

Before we could analyse the procedures for incorporating a company in India, let us have a quick view of some of the basic particulars.

WHAT IS A COMPANY?

1. A Company can be termed as a voluntary association of person incorporated for the purpose of carrying out some business.

2. In the eyes of law, a company is considered as a juristic person.

3. The company can sue and it can be sued.

4. It has its own name and a separate legal entity, distinct from its members who constitute it.

5. A company has its own property; the members (shareholders) can not claim the property of the company as their own property.

6. Though a company is treated as a legal person, it is not considered as a citizen; hence, it doesn't hold any citizenship in this country.

7. The liability of the members (shareholders) of the company is limited to the amount of shares they hold in the company.

8. Shares of a company are easily transferable to any person. It means the business can be transferred from one hand to another.

AUTHORISED SHARE CAPITAL:

The Companies act, 1956 limits the powers of board to issue share within the limit of Authorised Share Captial. It can be increased at any time after complying with certain formalities prescribed under the Act.

The minimum authorised share capital for incorporating a Private Limited company is INR 100,000.

The minimum authorised share capital for incorporating a Public Limited company is INR 500,000.

PAID UP SHARE CAPITAL

Paid-up Share Capital is that portion of Authorised Share Capital for which shares have been issued by the company and shareholders had paid for those shares.

PROMOTERS:

As the name indicates, Promoters are the persons who promote / float / incorporate a company. They stand as the primary persons to take through a company. Promoters are normally been appointed as directors of the company.

Number of Promoters

For incorporating a Private Limited Company a minimum of two promoters are required.

For incorporating a Public Limited Company a minimum of seven promoters are required

NUMBER OF DIRECTORS

For incorporating a Private Limited Company a minimum of two directors are required.

For incorporating a Public Limited Company a minimum of three directors are required.

FORMATION OF COMPANIES UNDER THE COMPANIES ACT, 1956

1. As per the Company law, the name of each company should be unique. As such, the proposed name of the company has to be approved by the Registrar of Companies and blocked till registration. The following is the process to get availability of name

a. Promoters / Directors have to file an application in Form 1A giving the following particulars:

b. Names and addresses of promoters

c. Proposed name of the company

d. Two Alternative names of the proposed company is required if the proposed name is not available

e. Type of company - Private or Public

f. Brief objectives of the company

g. Proposed Directors and their addresses

h. Proposed address of the company

i. Authorised Share Capital

j. Details of Group companies, if any

k. Details of fees paid for name availability

l. Note about significance of the proposed name. This is because regulations have some criteria based on which names are to be allowed

m. Director Identification Number:It is a unique Identification Number allotted to an individual who intends to be appointed as director of a company pursuant to section 266A & 266B of the Companies Act, 1956. DIN is mandatory for all directors

2. Digital Signature Certificate:
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed
electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.

Application for the availability of name: Apply to the jurisdictional Registrar of Companies to ascertain the availability of name in Form- 1A along with fee of Rs. 500/-. Registrar of Companies normally informs the status of the application within 4 days. If the name proposed is not available, apply again for a fresh name. On approval of name, the Registrar will issue a name allotment letter and will block the name.
3. Memorandum and Articles of Association:

I. Arrange for drafting of the Memorandum and Articles of Association, vetting of the same by the Registrar of the Companies and printing of the same.

II. Arrange for stamping of the Memorandum and Articles of Association as per instructions of Registrar of Companies

III. Get the Memorandum and Articles of Association (MoA & AoA) signed by Directors, and each shall also write in his own hand his name, father's name, occupation and address and number of shares subscribed for, and duly witnessed by at least one person who shall also write in his own hand his name, father's name, occupation and address.

IV. In case the Memorandum and Articles is to be signed by any of the promoters out side India, then the signing should be done in the presence of Consul of India at the Indian Consulate. The MoA & AoA should be dated on a date after the date of stamping

4. Fee Structure: Fee required to be paid to the ROC for incorporation of the company.

5 The following forms are to be filled and signed:

I. Statutory declaration by Company - Form No.1.

II. Notice of situation of Registered Office of the Company - Form No. 18.

III. Particulars of Directors, Manager or Secretary - Form No. 32.

IV. Consent to act as Directors - Form No. 29.

6 File the following documents with the Registrar of Companies:

I. Stamped and signed copy of Memorandum and Articles of Association.

II. Form No. 1, 18, 32, and 29 in duplicate.

III. Certified true copy of the Registrar of Companies letter intimating availability of name.

IV. Power of attorney in favour of any person for making corrections on their behalf in the documents and papers filed for registration.

7 Certificate of Incorporation:

I. Once all these procedures are through, Registrar of Companies will issue a Certificate of Incorporation

II. In case of Private Limited Companies, they can commence business immediately on receipt of the certificates of incorporation from the Registrar of Companies.

III. In case of Public Limited Companies, following additional steps are to be completed.

8. Arrange for payment of application and allotment money in cash by the Directors on the shares taken or agreed to be taken by them

9. File the statement in lieu of prospectus with the Registrar of Companies in accordance with Schedule IV of the Companies Act, 1956

10. File a declaration in Form No.20 with the Registrar of Companies to the effect that the application and allotment monies have been paid/will be paid in respect of shares taken up/agreed to be taken up by the Directors

11. After these formalities are over, the Registrar of Companies will issue Certificate of Commencement of Business




WRITTEN BY:-Bala Murgan

An I for an I

It is not often that you meet a head of state, rarer still to meet a head of state who is an elder statesman with wisdom and special insights. So it was a rare privilege this week to meet Shimon Peres, the Israeli president, along with a CII team that was in Tel Aviv and Jerusalem to continue a CEOs' dialogue. Peres' mind ranged far and wide. Agriculture is technology-intensive, he said, which is why 100,000 cows in Israel produce as much milk as 4 million cows in Ethiopia. "We have increased milk yield 30-40 times," he explained. Slipping smoothly to another field, he said "making spare parts for the human body" is the science of the future. He meant stem cell research, of course, and added that Israel is trying to be a leader in the field, having recently replaced a damaged heart muscle by using cells taken from the skin.

Switching subjects again, he got more adventurous. "Why not make the army into a university?" All young Israelis have to serve their time in the army, but Peres said only one in seven soldiers is a fighting man, the rest are in what he called services. "We give them housing, a salary, other facilities—so why not educate them while they are in uniform? Normally, it takes 1,300 hours of study to get a degree. If you do it properly, it can be done in 650 hours." And, of course, he touched on oil and energy, pointing out that the sun was a more reliable, long-term source of energy than hydrocarbons, and that Israel was investing a lot of money in solar energy research.

The sub-text to these and many other stimulating thoughts was that Israel seeks to become an R&D-intensive country, with cutting-edge technology in a variety of fields. "We are only 8 million people, you are more than a billion. We can't possibly produce to feed your market…how many shoes can we make, and how many people to make those shoes? Better for us to do the research and create the technologies that you can use in your production system." Peres was echoing what the CEOs had already discussed, that Israeli technology and Indian production were a perfect match. At dinner the previous night, a former Israeli chief of staff who now heads a water company talked of his company desalinating water at a cost of no more than 3 paise per litre. Then there was the recycling of urban sewage—which his company "bought" and then recycled. Once all the plants under construction come on stream, a third of Israel's total water consumption will be recycled, and the country will actually be recharging its aquifers. It is easy to see the application of these and other technologies (as in drip irrigation and solar energy) in India.

It is not widely known outside Israel as to just how much the country has become a research-intensive and technology-oriented country—and not just in defence technology (the country is now the second-most important source of defence supplies for India). A single Technion university has 15,000 tech students, perhaps more than all our IITs put together.

Doing business for Israel and India (I to I) is easy because there is enormous goodwill for India in the country, not least because India has no history of anti-Semitism—one reason why tens of thousands of Israelis come holidaying to India every year. The Slumdog Millionaire book, for instance, has sold over 100,000 copies in its Hebrew translation, perhaps more than it has sold in India! All of Amitav Ghosh's books, Arundhati Roy's masterpiece, Adiga's White Tiger, all have a ready and large market. Israelis have discovered India. It is time Indians discovered Israel.

by T N NINAN(chief editor Business Standard)

how rain is affecting industrial growth!

All the indusries are directly dependent on the agriculture sector. Because of delay in monsoon agriculture sector is surviving a lot. This inturn affecting all the indstries connected to it. Prices of grains, vegetables & fruits going high day-by-day. because of this people are not spending on other things which again leads to defficiency in demand and lowers the IIP.

but in opposite of this we can see a growth in cement and coal industry by 10.6% & 9.7% respectively. This could be attributed to the weak monsoon which resulted in a delay in maintenance shutdowns.

So we can conclude that during weak monsoon investors can get good returns by investing in coal and cement companies.