PRESENTED BY:

ARJUN GUPTA(09)
GEETANJALI SHARMA(15)
KARISHMA KHULLAR(17)
MEGHNA JAMWAL(21)
SHWETANSHU GUPTA(49)
SIDHARTH GUPTA(50)

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* FINANCIAL SERVICES
* FINANCIAL INTERMEDIATION
* 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.

* FINANCIAL SERVICES
* It means mobilizing and allocating SAVINGS

* It includes all the activities involved in the transformation
of SAVINGS into INVESTMENTS

* It can also be called as financial intermediation.
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* IMPORTANCE OF FINANCIAL SERVICES

* Economic Growth (Employment)
* Promotion of Savings (Interest)
* Capital Formation (used in industries)
* Provision of Liquidity (providing to those who need
it)
* Financial Intermediation
* Contribution to GNP


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* SCOPE OF FINANCIAL SERVICES
1. FUND BASED ACTIVITIES: includes
* Underwriting (subscription of shares and debentures)
* Dealing in secondary market activities. (stock
market)(selling of already sold shares)
* Participating in money market instruments. (short term
funds)
* Leasing, hire-purchase, venture capital, etc.

2. FEE BASED ACTIVITIES: includes
* Managing the capital issues
* Arrangements for placement of capital and debt instruments
* Arrangement of funds from financial institutions
* Assisting in Government and other clearance










B. MODERN ACTIVITIES
It includes
* Rendering project advisory services. (consultancy fee)
* Planning for mergers and acquisitions
* Acting as trustee to the debenture-holder
* Hedging of risks. (avoidance of future risk)
* Managing the portfolio of large public sector companies.
* Undertaking risk management services.







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* FINANCIAL SERVICES AND PROMOTION
OF INDUSTRIES

* Industrial promotion through Merchant Banking
Services
* Working Capital Finance Through Factoring
Services
* Equipment Finance through Leasing
* Financial resources through Mutual Funds
* Long-term Risk Capital through Venture Capital


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* FINANCIAL INSTRUMENTS

* Commercial Papers
* Treasury Bills
* Certificates of Deposit
* Inter-bank Participation(IBPs)
* Option Bonds
* Medium Term Maturity
* Equity with 100% Safety Net
* Convertible Bonds
* Flip-Flop Notes
* Loyalty Notes
* Convertible Bonds with a Premium Put
* Debentures with Call and Put features
* Easy Exit Bonds


.
*Leasing is an arrangement that provides firm with the use
and control over assets without buying and owing the same.
*It is a contract between the owner of asset (lessor) and the
user of asset(lessee)
*The lessee agrees to pay a number of fixed or flexible
installments over an agreed period to the lessor called as
lease rental.
*LEASING
* STEPS IN LEASING
*FEATURES
*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 the item in one go.

*TYPES OF LEASING
Sale and leaseback Direct leasing
Leveraged lease Operating lease
Finance lease
*FINANCIAL LEASE
*Long-term, non-cancellable lease contracts are known as
financial leases.

*The essential point - it contains a condition whereby the
lessor agrees to transfer the title for the asset at the
end 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.



*The lease agreement is irrevocable.

*All the risks incidental to the asset ownership are
transferred to the lessee who bears
the cost of maintenance,
insurance and repairs.

*Only title deeds remain with the lessor.



*SALE AND LEASEBACK

*Sub-part of finance lease
*The 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.
*This enables a firm to receive cash from sale of asset and
also retain the economic use of asset in consideration of
lease rental.




*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 lessee and the buyer
assumes the role of a lessor.

*The seller gets the agreed selling price and the buyer gets the
lease rentals.






*OPERATING LEASE

*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.


*LEVERAGED LEASE
*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.



*LEVERAGED LEASE
*DIRECT LEASING

*Under direct leasing, a firm acquires the right to use an
asset from the manufacturer directly.

*The ownership of the asset leased out remains with the
manufacturer itself.


*ADVANTAGES OF LEASING
*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.
*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



*DISADVANTAGES OF LEASING
*No Ownership
*Costly option - high interest rates,
costlier than straight buying
*Long Term Expense
*Maintenance
*No working capital



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*HIRE-PURCHASE
*An agreement under which goods are let on hire and under
which the buyer (hirer) has an option to purchase them from
vendor (hiree) in accordance with the terms of the agreement

*Hire purchase is used to buy expensive items which 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).



*HIRE-PURCHASE FEATURES
*Goods are let out on finance by a finance company 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





*TERMS OF HIRE-PURCHASE
*In hire purchase the hiror has to follow the
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
than cash price, because interest element is added in
this price






*PROCESS OF HIRE-PURCHASE
*The vendor, contracts with finance co. for
financing 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. with request to purchase
the goods, and accept the HP transaction.
*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.










*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










VENTURE CAPITAL
*MEANING

Venture capital is an investment in the form of equity, quasi
equity and sometimes debt-straight or conditional made in
new and untried technology or high risk venture promoted
by technically or professionally qualified entrepreneur where
the venture capitalist

expects the enterprise to have a very high growth rate
provides management and business skills to enterprise










*Venture capital finance is often thought of as the early stage
finance of new and young enterprises seeking to grow
rapidly. It usually implies an involvement by the venture
capitalist in the management of the client enterprises.

*In broad terms, venture capital is the investment of the long
term equity finance where the venture capitalist earn his
return primarily in the form of capital gains. The venture
capitalist and the entrepreneur would act together in the
interest of the enterprise as partners.








*ACCORDING TO SEBI:

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.









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*CHARACTERSTICS

*Long time horizon

*High risk

*Equity participation

*Participation in management










STAGES IN VENTURE FINANCING
Early stage financing
Start up capital
Financing for full-scale production
R&D financing for product development
Expansion financing
Financing for working capital
Development financing

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Acquisition financing
Financing for acquiring another firm
Turn around financing for turning around a
sick point
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PROCESS OF VENTURE CAPITAL
FINANCING
1. Deal origination
Referral system
Active search
Intermediaries
2. Screening
3. Evaluation
Preliminary evaluation
Detailed evaluation


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4. Deal structuring: Once the venture has been
evaluated as viable, the venture capitalist
and the company negotiate the terms of the
deal viz., the amount, form and price of the
investment.
5. Post investment activities: Once the deal has
been structured and agreement finalized, the
venture capitalist generally assumes the role
of partner and collaborator and he also gets
involved in shaping the direction of the
venture.

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6. Exit plan: venture capitalists generally want to
cash-out their gains in five to ten years and
they play a positive role in directing the
company towards particular exit routes.
Initial public offerings
Acquisition by another company
Purchase of the venture capitalists share by
the promoter
Purchase of venture capitalists share by an
outsider

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*METHOD OF VENTURE FINANCING

*Equity

*Conditional loan

*Income note

*Participating debentures










*DEVELOPMENT OF VENTURE
CAPITAL IN INDIA
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*DEVELOPMENT OF VENTURE
CAPITAL IN INDIA

*The concept of venture capital was formally
introduced in India in 1987 by IDBI.

*The government levied a 5 per cent cess on all
know-how import payments to create the venture
fund.

*ICICI started VC activity in the same year












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*VENTURE CAPITAL FUNDS IN INDIA

1) Those promoted by the Central Government controlled
development finance institutions.
for example;
- Risk capital and technology finance corporation (RCTFC)
- Industrial finance corporation of India (IFCI)
- Risk capital fund by IDBI

2) Those promoted by State Government controlled
development finance institutions.
For example:
- Punjab Infotech Venture Fund
- Gujarat industrial investment corporation (GIIC)
- Kerala Venture Capital Fund Pvt Ltd.












3. Promoted by the public sector banks
for example:
- Canfina by Canara bank
- SBI-cap by State bank of India
4. Promoted by the foreign banks
for example:
- Indus venture fund
- Credit capital venture fund
- Grindlays India development fund
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*ADVANTAGES

*It injects long term equity finance which provides a
solid capital base for future growth.

*The venture capitalist is a business partner, sharing
both the risks and rewards. Venture capitalists are
rewarded by 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
similar situations.










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*VC can help in the rehabilitation of sick units.
*VC can assist small ancillary units to upgrade their
technologies
*VCFs can play a significant role in developing countries in
the service sector including tourism, publishing, health care
etc.
*They can provide financial assistance to people coming out
of universities, technical institutes, etc thus promoting
entrepreneurial spirits
*FUTURE PROSPECTS OF VC IN INDIA
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