Innovator Identification Camp 2006Innovator Identification Camp 2006[VIT – Technology Business [VIT – Technology Business

Incubator]Incubator]

ChennaiChennaiSeptember 26, 2006September 26, 2006

Presentation byPresentation byR.V. Dilip Kumar R.V. Dilip Kumar

SIDBI Venture Capital LtdSIDBI Venture Capital Ltd

SIDBI Venture Capital Ltd. SIDBI Venture Capital Ltd. (SVCL)(SVCL)

Wholly Owned Subsidiary of SIDBI Wholly Owned Subsidiary of SIDBI Established to carry out business Established to carry out business

of setting up, advising and of setting up, advising and managing Venture Capital fundsmanaging Venture Capital funds

Professionally managed AMC Professionally managed AMC Currently managing Rs.600 cr of Currently managing Rs.600 cr of

VC funds as Investment ManagerVC funds as Investment Manager

Venture CapitalVenture Capital Equity/ Equity type Investments in Equity/ Equity type Investments in

unlisted companiesunlisted companies Profit and risk sharingProfit and risk sharing Flexible financingFlexible financing Detailed due diligenceDetailed due diligence High level of handholdingHigh level of handholding

Venture Capital (contd..)Venture Capital (contd..) High risk – high returnHigh risk – high return Selective InvestmentSelective Investment Hands-on ApproachHands-on Approach Ownership & control sharedOwnership & control shared Little returns in early yearsLittle returns in early years Repeat financingRepeat financing

Traditional Bank Finance vsTraditional Bank Finance vsVenture CapitalVenture Capital Focus on entrepreneur, project and growth Focus on entrepreneur, project and growth

prospects rather than securityprospects rather than security High risk, high return & high failure scenarioHigh risk, high return & high failure scenario Instruments – Debt vs EquityInstruments – Debt vs Equity In case of failure – returns nil/negligibleIn case of failure – returns nil/negligible Time horizon for returns – LongTime horizon for returns – Long Asset based financing vs Strength of IdeaAsset based financing vs Strength of Idea Focus on security vs Growth ProspectsFocus on security vs Growth Prospects

National Venture Fund for National Venture Fund for Software and IT Industry Software and IT Industry (NFSIT)(NFSIT) Set up as a Trust Fund registered with SEBISet up as a Trust Fund registered with SEBI Inaugurated by the Hon’ble Prime Minister in Inaugurated by the Hon’ble Prime Minister in

December 1999December 1999 11stst fund with Government contribution fund with Government contribution Tenure - 10 years (close ended)Tenure - 10 years (close ended) Corpus - Rs.100 croreCorpus - Rs.100 crore Contributors - SIDBI, MCIT (GoI) and IDBI Contributors - SIDBI, MCIT (GoI) and IDBI AMC – SIDBI Venture Capital Ltd. AMC – SIDBI Venture Capital Ltd. Trustee – SIDBI Trustee Company Ltd.Trustee – SIDBI Trustee Company Ltd.

NFSITNFSIT Rs.100 cr corpusRs.100 cr corpus Dedicated to Software & IT IndustryDedicated to Software & IT Industry Investment by way of equity/ equity Investment by way of equity/ equity

type instruments type instruments Several hundred business plans Several hundred business plans

examinedexamined Co-investment with other funds Co-investment with other funds Investments in software services, products, Investments in software services, products,

ITES, Internet initiatives etc.ITES, Internet initiatives etc.

Major EventsMajor Events NFSIT assisted unit selected for NFSIT assisted unit selected for

case study on VC funding in case study on VC funding in developing countries by John developing countries by John Hopkins University, USAHopkins University, USA

SIDBI Growth FundSIDBI Growth Fund Structured as a unit scheme of SIDBI SME Structured as a unit scheme of SIDBI SME

Venture Fund, registered under Trusts Act and Venture Fund, registered under Trusts Act and with SEBIwith SEBI

Corpus size Rs.500 croreCorpus size Rs.500 crore Initial corpus of Rs.100 crore committed by Initial corpus of Rs.100 crore committed by

SIDBISIDBI Balance Rs.400 cr contributed by commercial Balance Rs.400 cr contributed by commercial

banks.banks. 8-year close-ended fund.8-year close-ended fund. Registered with SEBI.Registered with SEBI.

SIDBI Growth FundSIDBI Growth Fund To meet the long term risk capital of SME units and To meet the long term risk capital of SME units and

to provide mentoring supportto provide mentoring support Focus on growth sectors like – Focus on growth sectors like –

Biotech, Biotech, IT, IT, Pharma, Pharma, Food processing, Food processing, Retailing, Retailing, Service sector projectsService sector projects Light Engineering etcLight Engineering etc

SIDBI Growth FundSIDBI Growth Fund Proven technology or business modelProven technology or business model Sound Management TeamSound Management Team Sustainable competitive IPR and a Sustainable competitive IPR and a

well differentiated market positioningwell differentiated market positioning Clear exit plans for VC investorsClear exit plans for VC investors Potential of being market leader Potential of being market leader

Exit StrategyExit Strategy Preferred exit route – IPO Preferred exit route – IPO Strategic investorStrategic investor Buy backBuy back M&AsM&As Bigger VC Fund investing etc.Bigger VC Fund investing etc.

Role of SVCL Role of SVCL SMEs require high level of handholdingSMEs require high level of handholding Active management participation by SVCLActive management participation by SVCL Nominee directors appointed on all investee Nominee directors appointed on all investee

cos.cos. Quarterly internal audit by outside CA firm, Quarterly internal audit by outside CA firm,

progress reports and visits progress reports and visits Help create systems, provide strategic input Help create systems, provide strategic input

for key functional areasfor key functional areas Help in resource mobilisation and fund raisingHelp in resource mobilisation and fund raising