Innovator Identification Camp 2006 VIT Technology Business Incubator Chennai September 26, 2006 Pres

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Innovator Identification Camp 2006VIT
Technology Business IncubatorChennaiSeptember
26, 2006Presentation byR.V. Dilip Kumar
SIDBI Venture Capital Ltd

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SIDBI Venture Capital Ltd. (SVCL)

• Wholly Owned Subsidiary of SIDBI
• Established to carry out business of setting up,
  advising and managing Venture Capital funds
• Professionally managed AMC
• Currently managing Rs.600 cr of VC funds as
  Investment Manager

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Venture Capital

• Equity/ Equity type Investments in unlisted
  companies
• Profit and risk sharing
• Flexible financing
• Detailed due diligence
• High level of handholding

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Venture Capital (contd..)

• High risk high return
• Selective Investment
• Hands-on Approach
• Ownership control shared
• Little returns in early years
• Repeat financing

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Traditional Bank Finance vsVenture Capital

• Focus on entrepreneur, project and growth
  prospects rather than security
• High risk, high return high failure scenario
• Instruments Debt vs Equity
• In case of failure returns nil/negligible
• Time horizon for returns Long
• Asset based financing vs Strength of Idea
• Focus on security vs Growth Prospects

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National Venture Fund for Software and IT
Industry (NFSIT)

• Set up as a Trust Fund registered with SEBI
• Inaugurated by the Honble Prime Minister in
  December 1999
• 1st fund with Government contribution
• Tenure - 10 years (close ended)
• Corpus - Rs.100 crore
• Contributors - SIDBI, MCIT (GoI) and IDBI
• AMC SIDBI Venture Capital Ltd.
• Trustee SIDBI Trustee Company Ltd.

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NFSIT

• Rs.100 cr corpus
• Dedicated to Software IT Industry
• Investment by way of equity/ equity type
  instruments
• Several hundred business plans examined
• Co-investment with other funds
• Investments in software services, products, ITES,
  Internet initiatives etc.

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Major Events

• NFSIT assisted unit selected for case study on VC
  funding in developing countries by John Hopkins
  University, USA

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SIDBI Growth Fund

• Structured as a unit scheme of SIDBI SME Venture
  Fund, registered under Trusts Act and with SEBI
• Corpus size Rs.500 crore
• Initial corpus of Rs.100 crore committed by SIDBI
• Balance Rs.400 cr contributed by commercial
  banks.
• 8-year close-ended fund.
• Registered with SEBI.

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SIDBI Growth Fund

• To meet the long term risk capital of SME units
  and to provide mentoring support
• Focus on growth sectors like
• Biotech,
• IT,
• Pharma,
• Food processing,
• Retailing,
• Service sector projects
• Light Engineering etc

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SIDBI Growth Fund

• Proven technology or business model
• Sound Management Team
• Sustainable competitive IPR and a well
  differentiated market positioning
• Clear exit plans for VC investors
• Potential of being market leader

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Exit Strategy

• Preferred exit route IPO
• Strategic investor
• Buy back
• MAs
• Bigger VC Fund investing etc.

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Role of SVCL

• SMEs require high level of handholding
• Active management participation by SVCL
• Nominee directors appointed on all investee cos.
• Quarterly internal audit by outside CA firm,
  progress reports and visits
• Help create systems, provide strategic input for
  key functional areas
• Help in resource mobilisation and fund raising