finance ppt final
TRANSCRIPT
-
7/30/2019 Finance Ppt Final
1/106
PREPARED BY:-
Aditya Paul Sharma
Akhil Gour
Akhil Gupta
Aman Talla
1THE BUSINESS SCHOOL , UNIVERSITY OF JAMMU
-
7/30/2019 Finance Ppt Final
2/106
2
-
7/30/2019 Finance Ppt Final
3/106
A share is one unit into which the total sharecapital is divided. Share capital of the companycan be explained as a fund or sum with which acompany is formed to carry on the business andwhich is raised by the issue of shares.
Shares are the marketable instruments issued bythe companies in order to raise the requiredcapital.
These are very popular investments which aretraded every day in the stock market and thevalue of the share at the end of the day decidesthe value of the firm.
3
-
7/30/2019 Finance Ppt Final
4/106
The shares which are issued by companies are
of two types:
Equity Shares
Preference Shares
4
-
7/30/2019 Finance Ppt Final
5/106
Equity Shares are issued and are traded everyday in thestock market.
Equity share holders only get dividend after preferenceshareholders & debenture holders.
The returns on the equity shares are not at all fixed. Itdepends on the amount of profits made by the company.
The board of directors decides on how much of thedividends will be given to equity share holders. Shareholders can accept to it or reject the offer during theannual general meeting.
Equity shareholders have the right to vote on anyresolution placed before the company.
5
-
7/30/2019 Finance Ppt Final
6/106
The Equity share is a common name, some of the
types of equity shares are:
Blue Chip Shares
Income Shares Growth shares
Cyclical Shares
Defensive shares
Speculative shares
6
-
7/30/2019 Finance Ppt Final
7/106
One more classification of shares is givenby one of the most successful andrespected investor all around the worldPeter Lynch. According to him the sharescan be classified into 6 types:
Slow Growers
Fast Growers
Stalwarts Cyclical
Turn-around
Asset plays
7
-
7/30/2019 Finance Ppt Final
8/106
ADVANTAGES DISADVANTAGES
High Return
Easily Transferable.
These can be easily
liquidated.
Right to vote
Right to choose the board of
directors.
Equity share holders have the
right to oppose any of the
decisions taken by the boardof directors. ( for e.g. This is
what happened when Mr.
Ramalinga Raju tried to buy
Maytas company)
High Risk
In worst cases less privilege
given to equity share holders.
8
-
7/30/2019 Finance Ppt Final
9/106
It involves selling of ordinary shares to the
existing shareholders.
Law in India requires that the new ordinaryshares must be first issued to the existing
shareholders on a priority basis.
No. of rights = existing share/ new share
9
-
7/30/2019 Finance Ppt Final
10/106
These are other type of shares. The preference shares are
market instrument issued by the companies to raise the
capital. Preference shares have the characteristics of both
equity shares and debentures. Fixed rate of dividends are
paid to the preference share holder as in case of
debentures, irrespective of the profits earned company is
liable to pay interest to preference share holders.
10
-
7/30/2019 Finance Ppt Final
11/106
Preference shares are divided into:
Cumulative & Non cumulative shares
Redeemable & Non-redeemable
Convertible & Non-convertible shares
Participating and non-participating
11
-
7/30/2019 Finance Ppt Final
12/106
ADVANTAGES DISADVANTAGES
These yield fixed rate of
returns
Its a hybrid instrument having
some of the characteristics of
debentures and equityshares.
They do not provide the
investor with any of the
voting rights.
If the company gets huge
profits then they wont getany extra bonus.
12
-
7/30/2019 Finance Ppt Final
13/106
Every member of a company holding any
preference shares has a right to vote only on
resolutions placed before the company which
directly affect attached to his preferenceshares
Apart from this preference shareholders are
entitled to vote if dividend has remained
unpaid in case of cumulative as well as noncumulative for two years.
13
-
7/30/2019 Finance Ppt Final
14/106
A shareholder (or stockholder) is an individual orcompany (including a corporation) that legally owns one
or more shares of stock in a joint stock company.
Shareholders are granted special privileges depending
on the class of stock, including the right to vote (usually
one vote per share owned) on matters such as electionsto the board of directors,
the right to share in distributions of the company's
income,
the right to purchase new shares issued by the companyand the right to a company's assets during a liquidation
of the company.
However, shareholder's rights to a company's assets are
subordinate to the rights of the company's creditors.
14
-
7/30/2019 Finance Ppt Final
15/106
Detail of a Company & Shares in Prospectus.
90 % application is necessary
If access application received then
company issue shares by pro rata basis
full amount can be called up by company atthe time of application or it can be paid upin installments also (calls)
share of the company may be issued in anyof the following three ways: At par;
At premium; and
At discount.
15
Prospectus
Application
Repayment/
dividend
Allotment
-
7/30/2019 Finance Ppt Final
16/106
Issue of shares for consideration other than cash (For
example: issue of shares to vendors, to promoters etc.)
Forfeiture of shares
Buy Back of Shares
Right Shares
Redemption of preference shares/ Debenture
16
-
7/30/2019 Finance Ppt Final
17/106
A provision contained in an underwriting agreement that gives
the underwriter the right to sell investors more shares than
originally planned by the issuer. This would normally be done if
the demand for a security issue proves higher than expected.
Legally referred to as an over-allotment option.
It provides additional price stability to a security issue becausethe underwriter has the ability to increase supply and smooth out
price fluctuations if demand surges.
Green Shoe options typically allow underwriters to sell up to 15%
more shares than the original number set by the issuer.
However, some issuers prefer not to include green shoe options intheir underwriting agreements under certain circumstances, such
as if the issuer wants to fund a specific project with a fixed
amount of cost and does not want more capital than it originally
sought.
The term is derived from the fact that the Green Shoe Company
was the first to issue this type of option.17
-
7/30/2019 Finance Ppt Final
18/106
Issue price of shares: the price at which share is issued inthe market.
Paid up share capital = issue price * no. of ordinary shares.
Issue price has two components Par value
Share premium Par value is the price per ordinary share stated in the
memorandum of association.
Generally they are in the denomination of 10 or 100.
Any amount in excess of par value is called the share premium.
Shareholders equity = paid up share capital + share
premium + reserves and surplus = Net worth Book value per share = Net worth / no. of ordinary shares
Market value of a share is the price at which it trades inthe market. It is generally based upon the expectationsabout the performance of the economy in general andcompany in particular.
18
-
7/30/2019 Finance Ppt Final
19/10619
-
7/30/2019 Finance Ppt Final
20/106
Instrument of debt executed by the company
A certificate of loan
Company pays pre specified percentage ofinterest
Part of the company's capital structure
Debentures are generally secured against thecompanys assets
Convertible debentures can be either fully orpartly converted into Shares
Convertible debentures may carry a lowerrate of interest
20
-
7/30/2019 Finance Ppt Final
21/106
Security Point of View Secured Debentures
Unsecured Debentures
Tenure Point of View Redeemable Debentures
Perpetual Debentures
Mode of Redemption Point of View Convertible Debentures
Non-Convertible Debentures
21
-
7/30/2019 Finance Ppt Final
22/106
Control of company is not surrendered to
debenture holders because they do not have
any voting rights.
Interest on debenture is an allowableexpenditure under income tax act, hence
incidence of tax on the company is
decreased.
Debenture can be redeemed when companyhas surplus funds.
22
-
7/30/2019 Finance Ppt Final
23/106
Cost of raising capital through debentures is
high of high stamps duty.
Common people cannot buy debenture as
they are of high denominations. They are not meant for companies earning
greater than the rate of interest which they
are paying on the debentures.
23
-
7/30/2019 Finance Ppt Final
24/106
It is a document which evidences a loan made toa company.
It is a fixed interest bearing security whereinterest falls due on specific dates.
Interest is payable at a predetermined fixedrate, regardless of the level of the profit.
The original sum is repaid at a specified futuredate or it is converted into shares or otherdebentures.
It may or may not create a charge on the assetsof a company as security.
It can generally be bought or sold through thestock exchange at a rice above or below its facevalue.
24
-
7/30/2019 Finance Ppt Final
25/106
Issue of redeemable debentures can be
categorized into the following:
Debenture issued at a par and redeemable at
par or at discount.
Debenture issued at a discount and redeemable
at par or at discount.
Debenture issued at a premium and redeemable
at par or at discount.
Debenture issued at par and redeemable at
premium.
Debenture issued at a discount and redeemable
at premium.
25
-
7/30/2019 Finance Ppt Final
26/106
A person having the debentures is called debentureholder whereas a person holding the shares is calledshareholder.
Debenture holder is a creditor of the company andcannot take part in the management of the companywhile a shareholder is the owner of the company. It isthe basic distinction between a debenture and ashare.
Debenture holders will get interest on debenturesand will be paid in all circumstances, whether thereis profit or loss will not affect the payment ofinterest on debentures. Shareholder will get a portionof the profits called dividend which is dependent onthe profits of the company. It can be declared by thedirectors of the company out of profits only.
26
-
7/30/2019 Finance Ppt Final
27/106
Shares cannot be converted into debentures whereas
debentures can be converted into shares.
Debentures will get priority is getting the money back
as compared to shareholder in case of liquidation of acompany.
There are no restriction on issue of debentures at a
discount, whereas shares at discount can be issued
only after observing certain legal formalities. Convertible debentures which can be converted into
shares at the option of debenture holder can be
issued whereas shares convertible into debentures
cannot be issued.
There can be mortgage debentures i.e. assets of the
company can be mortgaged in favor of debenture
holders. But there can be no mortgage shares. Assets
of the company cannot be mortgaged in favor of
shareholders.27
IPO EXAMPLE
-
7/30/2019 Finance Ppt Final
28/106
28
Jaypee Infratech Ltd.
Sector 128, , District Gautam Budh Nagar , Noida , Uttar Pradesh - 201304
Phone: 4609000 Fax: 4609783
Public Issue of 224799496 Equity Shares of Rs 10 each for Cash at a Premium
of Rs 92 per share.
Issue Open Date Issue Closing Date Application Money Allotment Money29/04/2010 04/05/2010 102 -
Listed atBSE, NSE
Object of the issue
.
The Issue comprises a Fresh Issue and an Offer for Sale. The Proceeds of Fresh Issue
The activities for which funds are being raised by our Company through this Issue, afterdeducting the proceeds from the Offer for Sale: (i) to partially finance the YamunaExpressway Project; and(ii) general corporate purposes. (collectively referred to herein as the "Objects"). Inaddition, our Company expects to receive the benefits of listing of the Equity Shares onthe Stock Exchanges.
IPO EXAMPLE
-
7/30/2019 Finance Ppt Final
29/106
29
NTPC Limited (Company) enter market with FPO
FPO opens on February 03' 10
Indias largest power generation company NTPC Limited (Company) will
enter the capital markets on February 3, 2010 with its further public offer
(FPO) of 412,273,220 equity shares of Rs 10 at prices to be determined
through an alternative book building process under part D of Schedule XI of
the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2009.The FPO will close on February 5, 2010.
FPO EXAMPLE
-
7/30/2019 Finance Ppt Final
30/106
A company can make 100% retail issues providedit satisfies all the following conditions
It has a net tangible asset of at least Rs 3 crorein each of the preceding three years.
It has a track record of distributable profit forat least three out of immediately proceeding 5years.
It has a net worth of at least Rs1 crore in eachof the preceding 3 financial years.
The issue size (offer through offer document +firm allotment + promoters contributionthrough offer document) does not exceed fivetimes the pre-issue net worth
30
-
7/30/2019 Finance Ppt Final
31/106
31
-
7/30/2019 Finance Ppt Final
32/106
Typically, it means mobilizing and allocating
SAVINGS.
It includes all activities involved in the
transformation of SAVINGS intoINVESTMENTS.
Financial Services can also be called Financial
Intermediation.
-
7/30/2019 Finance Ppt Final
33/106
It is a process by which funds are mobilized from a
large number of savers and make them available to
those who are in need of it.
Particularly to Corporate Customers.
-
7/30/2019 Finance Ppt Final
34/106
Economic Growth
Promotion of Savings
Capital Formation
Provision of Liquidity Financial Intermediation
Contribution to GNP
Creation of Employment Opportunities
-
7/30/2019 Finance Ppt Final
35/106
1. CAPITAL MARKET:
Term Lending Institutions
Investing Institutions
Long Term Funds
-
7/30/2019 Finance Ppt Final
36/106
2. MONEY MARKET:
Consists of Commercial banks, Co-operative
banks and other agencies.
Short term funds.
-
7/30/2019 Finance Ppt Final
37/106
A. TRADITIONAL ACTIVITIES
1. FUND BASED ACTIVITIES: includes
Underwriting
Dealing in secondary market activities Participating in money market instruments
Leasing, hire-purchase, venture capital, etc.
-
7/30/2019 Finance Ppt Final
38/106
2. FEE BASED ACTIVITIES: includes
Managing the capital issues
Arrangements for placement of capital and debt
instrumentsArrangement of funds from financial institutions
Assisting in Government and other clearance
-
7/30/2019 Finance Ppt Final
39/106
B. MODERN ACTIVITIES
Few of them are:
1. Rendering project advisory services
2.
Planning for Mergers and Acquisitions3. Acting as trustees to the Debenture-holders
4. Hedging of risks
5. Managing the portfolio of large public sector
companies.6. Undertaking risk management services.
-
7/30/2019 Finance Ppt Final
40/106
Industrial promotion through Merchant Banking
Services
Working Capital Finance Through Factoring
ServicesEquipment Finance through Leasing
Financial resources through Mutual Funds
Long-term Risk Capital through Venture Capital
-
7/30/2019 Finance Ppt Final
41/106
Risk Management through Derivatives
Debenture issue through Credit rating
Development Finance through Development
Banking Sector Industrial Development through Specialized
Services
-
7/30/2019 Finance Ppt Final
42/106
Merchant Banking
Loan Syndication
Leasing
Mutual Funds Factoring
Venture Capital
Custodial Services
-
7/30/2019 Finance Ppt Final
43/106
Corporate Advisory Services
Securitization
Reverse Mortgage
Derivatives:
- Forward Contract- Options
- Futures
- Swaps
-
7/30/2019 Finance Ppt Final
44/106
Commercial Papers
Treasury Bills
Certificates of Deposit
Inter-bank Participation(IBPs)Option Bonds
Medium Term Maturity
Equity with 100% Safety Net
-
7/30/2019 Finance Ppt Final
45/106
Convertible Bonds
Flip-Flop Notes
Loyalty Notes
Convertible Bonds with a Premium PutDebentures with Call and Put features
Easy Exit Bonds
-
7/30/2019 Finance Ppt Final
46/106
-
7/30/2019 Finance Ppt Final
47/106
A written agreement under which a propertyowner
allows a tenant to use the property for a specified
period of time and rent.
The lessee (person taking out a lease) agrees to pay a
number of fixed or flexible installments over an
agreed period to the lessor, who remains the owner of
the asset (item) throughout the period of the lease.
http://www.businessdictionary.com/definition/agreement.htmlhttp://www.investorwords.com/3900/property.htmlhttp://www.businessdictionary.com/definition/owner.htmlhttp://www.investorwords.com/4937/tenant.htmlhttp://www.investorwords.com/3669/period.htmlhttp://www.investorwords.com/4177/rent.htmlhttp://www.anz.com/edna/dictionary.asp?action=content&content=lesseehttp://www.anz.com/edna/dictionary.asp?action=content&content=leasehttp://www.anz.com/edna/dictionary.asp?action=content&content=lessorhttp://www.anz.com/edna/dictionary.asp?action=content&content=assethttp://www.anz.com/edna/dictionary.asp?action=content&content=assethttp://www.anz.com/edna/dictionary.asp?action=content&content=lessorhttp://www.anz.com/edna/dictionary.asp?action=content&content=leasehttp://www.anz.com/edna/dictionary.asp?action=content&content=lesseehttp://www.investorwords.com/4177/rent.htmlhttp://www.investorwords.com/3669/period.htmlhttp://www.investorwords.com/4937/tenant.htmlhttp://www.businessdictionary.com/definition/owner.htmlhttp://www.investorwords.com/3900/property.htmlhttp://www.businessdictionary.com/definition/agreement.html -
7/30/2019 Finance Ppt Final
48/106
-
7/30/2019 Finance Ppt Final
49/106
-
7/30/2019 Finance Ppt Final
50/106
-
7/30/2019 Finance Ppt Final
51/106
Leasing a product is similar to renting it
A contract lasts over a number of years,
usually between 2 and 10, depending on
the cost and usable life of the product.
Have the full use of a piece of equipment
without having to pay the full cost of theitem in one go.
TYPES OF LEASING
-
7/30/2019 Finance Ppt Final
52/106
TYPES OF LEASING
Lease
Finance
leaseOperating
lease
Sale and
Lease
Back
Leveraged
leasing
Direct
leasing
-
7/30/2019 Finance Ppt Final
53/106
Long-term, non-cancellable leasecontracts are known as financial leases.
The essential point - it contains a
condition whereby the lessor agrees to
transfer the title for the asset at theend of the lease period at a nominal
cost.
At lease it must give an option to the lessee
to purchase the asset he has used at the
expiry of the lease.
High cost high tech equip.
-
7/30/2019 Finance Ppt Final
54/106
-
7/30/2019 Finance Ppt Final
55/106
Contrast to the financial lease
A lease agreement gives to the lessee only a
limited right to use the asset.
The lessor is responsible for the upkeep and
maintenance of the asset.
The lessee is not given any uplift to purchase
the asset at the end of the lease period.
-
7/30/2019 Finance Ppt Final
56/106
Sub-part of finance leaseThe owner of an asset sells the asset to a
party (the buyer), who in turn leases back
the same asset to the owner in
consideration of lease rentals.
Under this arrangement, the assets are
not physically exchanged but it all
happens in records only.
-
7/30/2019 Finance Ppt Final
57/106
Sale and lease back transaction is
suitable for those assets, which are
not subjected depreciation but
appreciation, like land.
The seller assumes the role of a lesseeand the buyer assumes the role of alessor.
The seller gets the agreed selling priceand the buyer gets the lease rentals.
-
7/30/2019 Finance Ppt Final
58/106
-
7/30/2019 Finance Ppt Final
59/106
A third party is involved beside lessor and
lessee.
The lessor borrows a part of the purchase cost (say
8 0 %) of the asset from the third party i.e., lender
The asset so purchased is held as security against
the loan.
The lender is paid off from the lease rentals
directly by the lessee and the surplus after meeting
the claims of the lender goes to the lessor.
-
7/30/2019 Finance Ppt Final
60/106
-
7/30/2019 Finance Ppt Final
61/106
Under direct leasing, a firm acquires the rightto use an asset from the manufacturer directly.
The ownership of the asset leased out remains
with the manufacturer itself.
-
7/30/2019 Finance Ppt Final
62/106
No large outlay:
The cost is spread over a number of
years; there is no need to pay the entire
amount upfront.
Security:
The product is still owned by the leasing
company, meaning that they have
better security on finance.
-
7/30/2019 Finance Ppt Final
63/106
Flexibility and convenience
The lease agreement can be tailor-
made in respect of lease period
and lease rentals according to the
convenience and requirements of all
lessees
-
7/30/2019 Finance Ppt Final
64/106
1. No Ownership
2. Costly option - high interest rates, costlier than
straight buying
3. Long Term Expense
4. Maintenance
5. No working capital
-
7/30/2019 Finance Ppt Final
65/106
A document under which a landlord and tenant set
forth the rights and obligations of each party with
respect to an apartment, rental unit, or other real
property owned by the landlord and used by the
tenant.
An instrument conveying the possession of real
property for a fixed period in consideration of the
payment of rent.
-
7/30/2019 Finance Ppt Final
66/106
66
-
7/30/2019 Finance Ppt Final
67/106
Hire purchase is used to buy expensive itemswhich a person cannot afford to pay outright:
e.g. a car A down payment is usually paid
and the balance is paid over several months
(monthly installments).
-
7/30/2019 Finance Ppt Final
68/106
Goods are let out on finance by a financecompany to the hire purchaser customer
Buyer is required to pay an equal amount of
periodic installments during a given period
Ownership transfers at the payment of the
last installment
-
7/30/2019 Finance Ppt Final
69/106
An agreement under which goods are let onhire and under which the hirer has an option
to purchase them in accordance with the
terms of the agreement.
-
7/30/2019 Finance Ppt Final
70/106
In hire purchase the purchase has to followthe agreement and he cannot terminate the
contract. The seller can however, terminate
the agreement in case of default of
purchaser hire purchase price is higher thancash price, because interest element is
added in this price
-
7/30/2019 Finance Ppt Final
71/106
The Dealer, contracts with finance co. forfinancing his hire purchase deals.
The customer selects the goods for HP, and
dealer arranges for the complete set of
documents
Down payment by customer on completion of
proposal form
Dealer sends documents to finance co. withrequest to purchase the goods, and accept
the HP transaction.
-
7/30/2019 Finance Ppt Final
72/106
The finance co. signs the agreement and sends
copy a long with EMI details to dealer.
Dealer delivers the goods to the customer, property
passes on to the finance co.
Hirer pays EMIs, and on last payment , the
ownership passes on to him, with loan completion
certificate by the finance co.
-
7/30/2019 Finance Ppt Final
73/106
Many kinds of business asset are suitable for
financing using hire purchase or leasing , including:-
Plant and machinery
Business cars
Commercial vehicles Agricultural equipment.
Hotel equipment
Medical and dental equipment
Computers, including software packages
Office equipment
-
7/30/2019 Finance Ppt Final
74/106
Bi-partite arrangement:
- two parties viz. borrower/consumer and
dealer/financier.Tripartite Transaction:
- three parties viz. dealer, financier, and
customer. The dealer arranges the credit
from the financier
-
7/30/2019 Finance Ppt Final
75/106
-
7/30/2019 Finance Ppt Final
76/106
Venture capital means funds made availablefor startup firms and small businesses with
exceptional growth potential.
Venture capital is money provided byprofessionals who alongside management invest
in young, rapidly growing companies that have
the potential to develop into significant
economic contributors.
-
7/30/2019 Finance Ppt Final
77/106
Venture Capitalists generally:
Finance new and rapidly growing companies
Purchase equity securities
Assist in the development of new products or services
Add value to the company through active participation.
-
7/30/2019 Finance Ppt Final
78/106
The SEBI has defined Venture Capital Fund in its
Regulation 1996 as a fund established in the form
of a company or trust which raises money through
loans, donations, issue of securities or units as the
case may be and makes or proposes to make
investments in accordance with the regulations.
-
7/30/2019 Finance Ppt Final
79/106
Long time horizon
Lack of liquidity
High risk
Equity participation
Participation in management
-
7/30/2019 Finance Ppt Final
80/106
It injects long term equity finance which provides asolid capital base for future growth.
The venture capitalist is a business partner, sharing both
the risks and rewards. Venture capitalists are rewardedby business success and the capital gain.
The venture capitalist is able to provide practical
advice and assistance to the company based on past
experience with other companies which were in similarsituations.
-
7/30/2019 Finance Ppt Final
81/106
-
7/30/2019 Finance Ppt Final
82/106
-
7/30/2019 Finance Ppt Final
83/106
The financing pattern of the deal is the mostimportant element. Following are the various
methods of venture financing:
Equity
Conditional loan Income note
Participating debentures
Quasi equity
-
7/30/2019 Finance Ppt Final
84/106
-
7/30/2019 Finance Ppt Final
85/106
The concept of venture capital was formallyintroduced in India in 1987 by IDBI.
The government levied a 5 per cent cess on all
know-how import payments to create theventure fund.
ICICI started VC activity in the same year
Later on ICICI floated a separate VC
company - TDICI
-
7/30/2019 Finance Ppt Final
86/106
VCFs in India can be categorized into following fivegroups:
1) Those promoted by the Central Government
controlled development finance institutions. Forexample:
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)
-
7/30/2019 Finance Ppt Final
87/106
2) Those promoted by State Government controlled
development finance institutions.
For example:- Punjab Infotech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks.
For example:
- Canbank Venture Capital Fund
- SBI Capital Market Ltd
-
7/30/2019 Finance Ppt Final
88/106
4)Those promoted by private sector
companies.
For example:
- IL&FS Trust Company Ltd
- Infinity Venture India Fund
5)Those established as an overseas venture capital fund.For example:
- Walden International Investment Group
- HSBC Private Equity
management Mauritius Ltd
-
7/30/2019 Finance Ppt Final
89/106
AS PER SEBI
AS PER INCOME TAX ACT,1961
-
7/30/2019 Finance Ppt Final
90/106
VCF are regulated by the SEBI (VentureCapital Fund) Regulations, 1996.
The following are the various provisions:
A venture capital fund may be set up by acompany or a trust, after a certificate of
registration is granted by SEBI on an
application made to it. On receipt of the
certificate of registration, it shall bebinding on the venture capital fund to abide
by the provisions of the SEBI Act, 1992.
-
7/30/2019 Finance Ppt Final
91/106
A VCF may raise money from any investor,Indian, Non-resident Indian or foreign,
provided the money accepted from any
investor is not less than Rs 5 lakhs. The VCF
shall not issue any document oradvertisement inviting offers from the public
for subscription of its security or units
-
7/30/2019 Finance Ppt Final
92/106
SEBI regulations permit investment byventure capital funds in equity or equity
related instruments of unlisted companies
and also in financially weak and sick
industries whose shares are listed or unlisted
-
7/30/2019 Finance Ppt Final
93/106
At least 80% of the funds should be investedin venture capital companies and no other
limits are prescribed.
SEBI Regulations do not provide for anysectoral restrictions for investment except
investment in companies engaged in financial
services.
-
7/30/2019 Finance Ppt Final
94/106
A VCF is not permitted to invest in the equityshares of any company or institutions
providing financial services.
The securities or units issued by a venturecapital fund shall not be listed on any
recognized stock exchange till the expiry of 4
years from the date of issuance .
-
7/30/2019 Finance Ppt Final
95/106
A Scheme of VCF set up as a trust shall bewound up
(a) when the period of the scheme if any, is
over
(b) If the trustee are of the opinion that thewinding up shall be in the interest of the
investors
(c) 75% of the investors in the scheme pass a
resolution for winding up or,(d) If SEBI so directs in the interest of the
investors.
-
7/30/2019 Finance Ppt Final
96/106
The Income Tax Act provides tax exemptions to
the VCFs under Section 10(23FA) subject to
compliance with Income Tax Rules.
Restrict the investment by VCFs only in the equity
of unlisted companies.
VCFs are required to hold investment for aminimum period of 3 years.
-
7/30/2019 Finance Ppt Final
97/106
The Income Tax Rule until now provided that
VCF shall invest only upto 40% of the paid-upcapital of VCU and also not beyond 20% of thecorpus of the VCF.
After amendment VCF shall invest only upto25% of the corpus of the venture capital fundin a single company.
There are sectoral restrictions under the
Income Tax Guidelines which provide that a VCFcan make investment only in specifiedcompanies.
-
7/30/2019 Finance Ppt Final
98/106
It was established in 1993 and is based in Delhi, the
capital of India
It is a member based national organization that
- represents venture capital and private equityfirms
- promotes the industry within India and
throughout the world
- encourages investment in high growthcompanies and
- supports entrepreneurial activity and
innovation.
IVCA members comprise venture capital firms
-
7/30/2019 Finance Ppt Final
99/106
IVCA members comprise venture capital firms,
institutional investors, banks, incubators, angel
groups, corporate advisors, accountants, lawyers,government bodies, academic institutions and other
service providers to the venture capital and private
equity industry.
Members represent most of the active venture
capital and private equity firms in India. These
firms provide capital for seed ventures, early stage
companies and later stage expansion.
-
7/30/2019 Finance Ppt Final
100/106
6.94
7.73
11.5
4.32
27.95
4.82
11.43
12.92
3.36
9.03
Percentage
IT & ITES
Energy
Manufacturing
Media & Ent.
BFSI
Shipping & logistics
Eng. & Const.
TelecomHealth care
Others
Percentage calculated on the total VC investment- 14,234 USB (fig. of 2007)
-
7/30/2019 Finance Ppt Final
101/106
CITIES SECTORS
MUMBAI Software services, BPO, Media,
Computer graphics, Animations,
Finance & Banking
BANGALORE All IP led companies, IT & ITES, Bio-technology
DELHI Software services, ITES , Telecom
CHENNAI IT , Telecom
HYDERABAD IT & ITES, Pharmaceuticals
PUNE Bio-technology, IT , BPO
-
7/30/2019 Finance Ppt Final
102/106
1160937
591 470
16502200
7500
14234
6390
280
110
78
56
71
146
299
387
170
0
50
100
150
200
250
300
350
400
450
0
2000
4000
6000
8000
10000
12000
14000
16000
2000 2001 2002 2003 2004 2005 2006 2007 1st half of 2008
Value of deals No of deals
-
7/30/2019 Finance Ppt Final
103/106
The down market virtually closed the IPO market for
emerging companies.
With less opportunities for getting ROI investors tend to
scale back, adjust their investment focus and/or get more
picky in funding companies.
The investors that put money into their funds became lessaggressive during recession so it was harder for the VCs to
raise money.
-
7/30/2019 Finance Ppt Final
104/106
The increase in weighted deduction of in house R&D
will boost up investment in health care.
46% of the total investment is going toinfrastructure development which is a positive sign
for investors.
-
7/30/2019 Finance Ppt Final
105/106
VC can help in the rehabilitation of sickunits.
VC can assist small ancillary units to upgrade
their technologies
VCFs can play a significant role in developingcountries in the service sector including
tourism, publishing, health care etc.
They can provide financial assistance to
people coming out of universities, technicalinstitutes, etc thus promoting
entrepreneurial spirits
-
7/30/2019 Finance Ppt Final
106/106
THANK YOU