Venture Capitalists in India

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Venture Capitalists in India ICICI Bank vs. Canara Bank :Venture Capitalists in India ICICI Bank vs. Canara Bank By: **************

Objective :Objective To assess the reliability of ICICI bank as a source of venture finance to entrepreneurs in comparison with other commercial bank (Canara Bank) while taking into consideration current Indian scenario.

Outline :Outline Introduction to Venture Capital 1 Sources of Venture Financing 2 ICICI Bank 3 Canara Bank 4 Conclusion 5

Venture Capital :Venture Capital Venture capital is a type of private equity capital typically provided to early-stage, high-potential, growth companies in the interest of generating a return. Venture capital investments are generally made as cash in exchange for shares in the invested company. 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.

Venture Capital :Venture Capital A Venture Capitalist 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 that primarily invests the financial capital of third-party investors in enterprises that are too risky for the standard capital markets or bank loans.

Different Stages of a Business :Different Stages of a Business

Sources of Venture Finance :Sources of Venture Finance 1 Promoted by All -India Development Financial Institutions 2 Promoted by State Level Financial Institutions 3 Promoted by Commercial Banks 4 Private Venture Capitalists

ICICI Bank :ICICI bank has an well spread out network of over 1300 commercial branches and about 3950 ATMs in India. In addition it has branches in 18 nations. ICICI Bank offers variegated services to individual and corporate clients through its delivery channels, affiliates and subsidiaries. Together with commercial banking services, this bank provides insurance, asset management, venture capital and investment banking services. ICICI Bank was promoted by ICICI (Industrial Credit and Investment Corporation of India) Limited in 1994 as its wholly owned subsidiary. ICICI's share holding reduced to 46% after a public issue in 1998 and a subsequent equity offering of American depository receipts (ADR) listed in New York stock exchange in 2000. ICICI Bank

How ICICI Bank chooses entrepreneurs? :On the basis of human capital supply :- eg. ICICI bank helps IT exports India which began with “body-shopping,” also known as contract programming. In such contracts, the amount of code was specified in the contract and there was relatively little risk. 2) On the basis of financial capital supply: When the entrepreneurs are supported by long-term debt suppliers. There are no domestic funds in this category. 3) Governance and exit issues In governance and exit issues in Indian venture capital there is “god to dog” phenomenon. After being treated like gods during the borrowing process, the venture capital firm is thereafter treated as a pariah dog, and tends to have no ongoing relationship with the investee firm once it has handed out the money. In most cases, Indian entrepreneurs, are not provided with the collateral to secure them. How ICICI Bank chooses entrepreneurs?

Role of ICICI Bank :Helps Limited Partnerships Amends Trusts – Quiet advantageous for companies since it is helpful for them to achieve exemptions while paying taxes. It taps the environment in which the firm works. It also assess the goodwill of the firm in the market. It attains information on the suppliers, stakeholders of the company or firm. Role of ICICI Bank

Canara Bank :Canara Bank Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port in Karnataka. The Bank has gone through the various phases of its growth curve over hundred years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level player in terms of geographical reach and clientele segments. Today, Canara Bank occupies a premier position in the comity of Indian banks. Canbank Venture Capital Fund Ltd (CVCFL) is a wholly owned Subsidiary of Canara Bank, set up in 1989. The Fund is registered with SEBI. CVCFL is ISO 9001:2000 Certified. It invest in businesses with an established technological or market positioning edge and good growth potential. The company has a well qualified team to invest, manage and create value in its investee companies.

Role of Canara Bank :Role of Canara Bank Increased working capital limits, for elongated operating cycle. Reduction in margin on advances against book debts by 10% Relaxations in cash margin on LCs and guarantees. Extension in halt period in respect of Term Loans wherever project implementation has been delayed for reasons beyond the control of the borrower. Book debts outstanding upto 180 days may be considered for financing.

Investment Criteria of Canara Bank :Investment Criteria of Canara Bank a) ACTIVITY: Growth and Expansion financing . b) TECHNOLOGY AND BUSINESS: Businesses with established technological or market positioning edge with sustainable competitive advantage, operating efficiencies and attractive profit margins. c) MANAGEMENT TEAM: Strong Management Team with a demonstrated track record of performance, integrity, commitment and enterprise. d) SECTOR: Investment will be in sectors with sustainable high growth potential. e) NATURE AND SIZE OF ASSISTANCES: Participation will be in the form of investment in equity, equity related instruments, debt instruments in unlisted companies. f) OUR ROLE IN THE VENTURE: Board Representation

Role of Government :Role of Government It should remove tariff barriers, It must create the right regulatory, legal, tax, and institutional environment for innovative start-ups to flourish. The government can play a positive role in creating financing and research initiatives.

Summing Up :Summing Up In the current economic slowdown, the entrepreneurs should opt for commercial banks in order to raise fund for financing the SME.

Slide 16:Thank You !