Each financing is made up of one or more investments, depending on the presence of co-investors. Venture capital investment means a type of investment activity pursuant to which equity investment are injected mainly into high and new-tech enterprises that have not been publicly listed. Venture Capital funds should be made easier by establishing Private Venture Capital funds. In this article we will talk about the venture capital investment and the venture capital industry in India. Thus, the investments made by Venture Capitalists generally involves - - Financing new and rapidly growing companies. So under this method no third party is involved. So if one is not good at managing the business, this is a significant benefit.
These benefits have been discussed later in this article. For venture capital investors, this may be the opportune time to look at India as an attractive investment destination. The offshore investors can either use an 'offshore structure' or a 'unified structure'. At the recently held Global AgInvesting Conference, data released indicated that agro businesses would provide better returns of about 11%, compared to 3-5% yield from bonds and equities. It is an important avenue where the venture capitalist keeps an open eye. Now let us see the scenario of venture capital investment in India.
Department of Management The Chinese University of Hong Kong Shatin, N. It requires strong management team to make the process a success. Earlier the stage, higher is the risk and hence the return. The 1958 Act officially allowed the U. There have been instances in the past where the use of Mauritius as a conduit for investing into India has been looked upon unfavourably by the Indian tax authorities.
The domestic investors would directly contribute to the trust whereas overseas investors pool their investments in an offshore vehicle and this offshore vehicle invests in the domestic trust. The duration of such finance may be one to three years. Earlier there were only commercial banks and some financial institutes but now with venture capital investment institutes, India has grown a lot. Lui of The City University of Hong Kong, and Marc Ahlstrom of Burlington County College for their comments on earlier versions of this manuscript. Risk at this stage is still decreasing because venture relies on the income from the sales of the current product. Portfolio analysis involves analysis of the size; stage, location and industry of the investment proposal for all these are closely connected with portfolio. No Confidentiality: Generally Venture Capitalist treat information confidentially.
Therefore, it acts as an important source of finance for entrepreneurs with new ideas. Venture capitalists have differing operating approaches. Loss of control: Venture Capital firms add one of their team members to your management team, while this is usually done for ensuring the success of the business, it can also create internal problems. This all came out as institutional inadequacies and resulted in the evolution of Venture Capital. Venture capital is provided to any business firm by those who are willing to invest in the projects that are risky but have a promising future prospect. The study is carried out around different sources of data regarding Venture Capital Finance in India. Researchers and practitioners have, however, expressed doubts as to whether what is being reported as venture capital in Asia can really be classified as such.
At this stage of financing, working capital is provided for the expansion of the business in terms of growing accounts and inventory. The 'trust' structure has been more commonly used since the company structure does have some drawbacks mostly arising from the provisions of the Companies Act, 1956 which may conflict with some of the basic underlying principles of venture capital investments. The rise of new digital industrial technology is referred to Industry 4. Agriculture could well become the new Mecca for venture capital investments. In case of non-resident investors the tax rate could be as high as 40% exclusive of surcharge.
The offshore investors can either use an 'offshore structure' or a 'unified structure'. Quick Liquidity: Most Venture Capitalists seek to realize their investment in the company in three to five years. As a matter of fact, Mauritius has become the largest investor into India. The two companies have signed a Memorandum of Understanding that will see them work together to develop technological solutions and jointly launch innovation projects to improve industrial processes. Therefore, Venture Capitalists are having positive response to do business in Indian. Selection of investment decision is very important both for the entrepreneur and the capitalists.
Importance of Venture Capital Venture Capital institutions lets entrepreneurs convert their knowledge into viable projects with the assistance of such Venture Capital institutions. Broadly speaking, venture capital is a source of necessary risk capital like financing for shares. It is highly risky than buy-outs. Offshore funds Commonly there are two alternatives available to offshore investors participating in Indian venture capital investments. At this stage of financing, working capital is provided for the expansion of the business in terms of growing accounts and inventory. Length of Investment: The investors eventually seek to exit in three to seven years.
The prices of the assets are arrived at using pre-determined formula. In s Investment banks Financial institutions that organise the provision of medium to longer-term loans, usually for larger amounts than clearing banks. Venture Capitalists draw their investment funds from a pool of money raised from public and private investors. Further, the withholding tax on dividend also gets reduced to 5% or 15% as against normal applicable withholding tax of 20%. The structure is depicted in figure 1 below. In the Finance Bill 2004, which is yet to be passed by both the houses of the parliament and needs the assent of the President before it becomes an act which is expected to happen by sometime by the end of May, 2003 , it has been proposed that long term capital gains on securities i.
Though some of the above shortcomings of the 'company' structure can be addressed by carefully structuring the investment instruments, Indian venture capitalists have found the 'trust' structure to be more favourable as it offers them more flexibility. Additional capital to overcome manufacturing teething problems. At this stage, risk factor decreases as the product is not developing at the former start-up stage. Disadvantages of Venture Capital Complex Process: It is a lengthy and complex process which needs a detailed business plan and financial projections. So if one is not good at managing the business, this is a significant benefit.