m
 



  


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u m
  
(m) is financial capital
provided to early-stage, high-potential,
growth start up companies.

u Êt is the money provided by professionals

u Êmportant source of equity.

m
  


u inance new and rapidly growing companies

u Purchase equity securities
u Assist in the development of new products or
services
u Add value to the company through active
participation
u Take higher risks with the expectation of
higher rewards
u Have a long-term orientation
Ê
 



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m
  

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u Êntroduced in Êndia in mid 80s

u Ênauguration of Risk Capital oundation
u There are around thirty venture capital funds,
which have garnered over Rs.5000 Crores.
u 0.1 percent of GDP,
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u menture capitalists are very selective in

deciding what to invest in.
u They are only interested in ventures with high
growth potential.
u They invest in companies in different
industries and different countries
u Ên good times, the funds that do succeed may
offer returns of 300 to 1000% to investors.
u ëost venture capital funds have a fixed life of
ten years
u The investors have a fixed commitment to
the fund that is "called downDz
u Because a fund may run out of capital prior to
the end of its life.
Ú 
m
  

u Êt is only in the past 12 to 18 months, they

have come into the limelight.
u The rejection ratio is very high, about 10 in
100 get beyond pre evaluation stage, and 1
gets funded.
u menture capital funds are broadly of two
kinds - generalists or specialists.
u it is important to choose the right venture
capitalist.
 
 


u menture capitalists will insist on a professional

team coming in, including a CEO to execute
the idea.
u Êntegrity and commitment are attributes
sought for.
u The venture capitalist can provide the
strategic vision, but the team executes it.
   

u The idea and its potential for

commercialization are critical. menture funds
look for a scalable model, at a country or a
regional level.
u or example, it is very easy for Hindustan
Lever to double sales of Liril - a soap without
incremental capex, while Gujarat Ambuja
needs to spend at least Rs4bn before it can
increase sales by 1mn ton.
m

u Deal origination
u Screening
u Due diligence Evaluation
u Deal structuring
u Post-investment activity
u Exit
Ê
  

Ym
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u   
 estimates the credit worthiness

of an individual, corporation, or even a
country

u An evaluation of a potential borrower's ability

to repay debt

u A poor credit rating indicates a high risk of

defaulting on a loan
 

  


u ability to pay a loan

u interest
u amount of credit used
u saving patterns
u spending patterns
u debt
u The ratings are expressed in code numbers
which can be easily comprehended by the lay
investors.
u Credit rating, as exists in Êndia, is done for a
specific security and not for a company as a
whole.
u A debt rating is not one time evaluation of
credit risk, which can be regarded as valid for
the entire life of the security.
è
   


u  uick investment decision

u Êndependent investment decision
u Ênvestor protection
u Superior information
u Basis for proper risk, return and Trade off
è
   


u Sources of additional certification

u Êncrease the investor population
u Encourages financial Discipline
u ëerchant bankers job made easy
u oreign collaborations made easy
u Benefits the industry as a whole
u Low cost borrowing
u Rating as a marketing tool
  
 
 

u ·hat is Debenture?
A debenture is defines as a certificate of
agreement of loans which is given under the
companyǯs stamp.
A bond issued by a corporation which is
secured by the integrity of the borrowers.
A long term loan usually repayable at a fixed
date with a fixed rate of interest.
 

u CRAs appraise the financial health, especially

capacity to honor debt obligation of
companies and even govt.
u People who invest in the debt instruments;
such as bonds, debentures, commercial
papers, etc of these entities rely on the report
of CRAs and decide to invest.
Ê
 
^
 

u Ên Êndia SEBÊ has recognized only four CRAǯs

namely:
(1) Credit Rating Ênformation Services Limited
(CRÊSÊL),
(2) Ênvestment Ênformation and Credit Rating
Agency of Êndia (ÊCRA),
(3) Credit Analysis and research (CARE),
(4) ÊTCH
u There is one more CRA in Êndia name ONÊCRA.
But it doesnǯt seem to have official recognition.
Ê^Ê

u The first credit agency floated on January 1,

1988.
u Êt was jointly started by ÊCÊCÊ and UTÊ with an
equity capital of 4 crores.
u CRÊSÊL is Êndiaǯs leading rating agency, and is
the fourth largest in the world.
u ·ith over 60% share of the Êndian Ratings
market, CRÊSÊL Ratings is the agency of
choice for issuers and investors.