VENTURE CAPITALIST IN INDIA BY ALOKIK BHASIN 09107076 BAKUL GUPTA 09107016 LAKSHAY SAINI 09107078 RAJAN KASHYAP 09107048

SHOAIB AHMED 09107079 UJJWAL KANGO 09107081

Table Of Contents . . . . . . . . . . . . . . . . . . . . VENTURE CAPITAL Introuction Concept Of Venture Capital History Of VC in India Features of VC Advantages of VC s Disadvantages of VC s Raising Funds of VC Stages Of Finance Process Of Investment The players Business Model Structure Of Fund & Roles Top VC s in India Case Study 1: PVCL Case Study 2: Helion Ventures Case Study 3: Credit Guarentee Scheme Case Study 4: ICICI Ventures Case Study 5: Aavishkar India Fund Case Study 6: Sequoai Annexure: VC s in Indis

Acknowledgement

On the successful completion of our project, if we say it is our sole creation it would be a little unfair. We would take this opportunity to thank all those who have helped us in completing our project successfully. Firstly, Professor Lipika, our teacher and mentor, who helped us throughout the whole month. Hats off to her. We are really blessed to have met such a knowledgeable and sweet teacher like her. We would also like to thank all the VC s who took time out to helpus understand their business model. Even though they are such busy people, they still took some time out to help us students. Finally, our parents whose blessings have been with us and who have motivated us throughout. Thanks to all who have been a part of this project.

If I had a dime for every time an entrepreneur told me that they were going to raise angel capital because it is easier than venture capital, I woudn t have to run advertisements on my blog

o Guy Kawasaki

Entrepreneurship mentor and member of the Apple Macintosh team

VENTURE CAPITAL INTRODUCTION And CONCEPT

Venture Capital

There is a tide in the affairs of men, which taken at the flood, leads on to fort une. And we must take the current when it serves, or lose our ventures." - William Shakespeare

Growth is the process that only happens when the untread is tried and the undone is materialized. For any new venture we undertake there is always apprehension of m isses than hitting the bull s eye and this apprehension for years has curbed the entrepr eneurs from innovating and growing. Venture Capital is the conduit for giving the entreprene urs wings to fly when they are willing to jump of the cliff. Simply put, Venture Capital is a term coined for the capital required by an ent repreneur to =venture into something new, promising and unconventional. Investing in a budding company has always been a risky proportion for any financier. The risk of the bu siness failure and the apprehensions of an all together new project clicking weighed do wn the small entrepreneurs to get the start-up fund. The Venture Capitalists or the angel inv estors then came to the forefront with an appetite for risk and willingness to fund the vent ures.

How does it work?

Venture Capital financing is a process whereby funds are pooled in for a period of around 10 years and investing it in venture capital undertakings for a period of 3 to 5 ye ars with an expectation of high returns. To protect the funds of the investors against the r isk of losses, venture capital fund provides its expertise, undertake advisory function and inv

est in the =patient capital of the undertaking equities. Venture Capital financing had been a popular source of funding in many countries and served as a lucrative bait to create a s imilar industry in India as well.

Concept of Venture Capital The term venture capital comprises of two words that is, .Venture. and .Capital. . Venture is a course of processing, the outcome of which is uncertain but to which is attend ed the risk or danger of .loss.. .Capital. means resourses to start an enterprise. To connote t he risk and adventure of such a fund, the generic name Venture Capital was coined. Venture capital is considered as financing of high and new technology based ente rprises. It is said that Venture capital involves investment in new or relatively untried te chnology, initiated by relatively new and professionally or technically qualified entrepre neurs with inadequate funds. The conventional financiers, unlike Venture capitals, mainly f inance proven technologies and established markets. However, high technology need not b e prerequisite for venture capital. Venture capital has also been described as =unsecured risk financing . The relativ ely high risk of venture capital is compensated by the possibility of high returns usuall y through substantial capital gains in the medium term. Venture capital in broader sense i s not solely an injection of funds into a new firm, it is also an input of skills needed to s et up the firm, design its marketing strategy, organize and manage it. Thus it is a long term as sociation with successive stages of company s development under highly risk investment conditions , with distinctive type of financing appropriate to each stage of development. Investor s join the entrepreneurs as co-partners and support the project with finance and business s kills to exploit the market opportunities. Venture capital is not a passive finance. It may be at any stage of business/pro duction cycle, that is, start up, expansion or to improve a product or process, which are assoc iated with both risk and reward. The Venture capital makes higher capital gains through app reciation in the value of such investments when the new technology succeeds. Thus the primary return sought by the investor is essentially capital gain rather than steady interest i ncome or dividend yield. The most flexible definition of Venture capital is.The support by investors of entrepreneurial talent with finance and business s kills to exploit market opportunities and thus obtain capital gains..

Venture capital commonly describes not only the provision of start up finance or =seed corn capital but also development capital for later stages of business. A long term c ommitment of funds is involved in the form of equity investments, with the aim of eventual ca pital gains rather than income and active involvement in the management of customer s business .

VENTURE CAPITAL HISTORY IN INDIA

Historical Evolution

The development of the organised venture capital industry in India, as is in exi stence today, was slow and belaboured, circumscribed by resource constraints resulting from th e overall framework of the socialistic economic paradigms. Although funding for new busine sses was available from banks and government owned development financial institutions, it was provided as collateral-based money on project-financing basis, which made it dif ficult for most new entrepreneurs, especially those who were technology and services based, to raise money for their ideas and businesses. Most entrepreneurs had to rely on their ow n financial resources, and those of their families and well wishers or private financiers to realise their entrepreneurial dreams.

Early Beginnings

In 1972, a committee on Development of Small and Medium Enterprises highlighted the need to foster venture capital as a source of funding new entrepreneurs and tech nology. This resulted in a few incremental steps being taken over the next decade-and-ahalf to facilitate venture capital funds into needy technology oriented small and medium Enterprises (SMEs), namely: . Risk Capital Foundation, sponsored by IFCI, was set-up in 1975 to promote and support new technologies and businesses. . Seed Capital Scheme and the National Equity Scheme were set up by IDBI in 1976 . . Programme for Advancement of Commercial Technology (PACT) Scheme was introduced by ICICI in 1985.

These schemes provided some succour to a limited number of SMEs but the activity of venture capital industry did not gather momentum due to the following reasons:

. The funding was based on investment evaluation processes that remained largely collateral based, rather than being holistic, and the policy framework remained

unaltered, without the instruments to inject dynamism in the VC industry. . There was no policy in place to encourage and involve the private sector in th e venture capital activity.

Setting-up of TDICI and Regional Funds: 1987-1994

For all practical purposes, the organised venture capital industry did not exist in India till almost 1986. The role of venture capitalists till then was played by individual investors and development financial institutions. The idea of venture capital gained momentum after it found mention in the budget of 1986-87. Later, a study was undertaken by the Wor ld Bank to examine the possibility of developing venture capital in the private sector, bas ed on which the Government of India took a policy initiative and announced guidelines for ve nture capital funds (VCFs) in India in 1988. Soon many other funds followed. The pioneers of the Indian venture capital indus try were largely government-owned banks and financial institutions, with some contributio n from the financial services companies in the private sector. The following VC funds were the pioneers which laid the foundations of India s VC industry:

Venture Capital Funds Set Up during 1987-1994 S no. V C Fund Set up by Year Size (million) 1 Venture Capital Fund Scheme IDBI 1987 Rs. 543.6 2 India Investment Fund Grindlays 3i Invest. Services Ltd. 1987 US$ 7.5 3 Venture Capital Unit Scheme I TDICI 1989 Rs. 300 4 Canbank Venture Capital Fund Canbank Financial Services Ltd. 1989 Rs. 156 5

All Industry Fund Credit Capital Venture Fund (I) Ltd. 1990 Rs. 120.6 6 Second India Investment Fund Grindlays 3i Invest. Services Ltd. 1990 US$ 13.5 7 Venture Capital Unit Scheme II TDICI 1990 Rs. 1000 8 APIDC Venture capital Fund 1990 APIDC Venture Capital Ltd. 1990 Rs. 135 9 Gujarat Venture Capital Fund Gujarat Venture Finance Ltd. 1990 Rs. 240

10 Fund20th Century Fund 20th Century Venture Capital Corp. Ltd. 1991 Rs. 287 11 Indus Venture Capital Fund I Indus Venture Management Ltd. 1991 Rs. 210 12 IL&FS Venture IL&FS Venture Corporation Ltd. 1991 Rs. 500 13 Venture Capital Unit Scheme III RC&TF Corporation 1991 Rs. 300 14 FB Venture Capital I IFB Venture Finance Ltd. 1992

Rs 100 15 Information Technology Fund Credit Capital Venture Fund (I) Ltd. 1993 Rs 100

Entry of Foreign Venture Capital Funds: 1995-1998 Thereafter, the Government of India issued guidelines in September 1995 for over seas investment in venture capital in India. For tax-exemption purposes, guidelines w ere also issued by the Central Board of Direct Taxes (CBDT) and the investments and flow of foreign currency into and out of India was governed by the Reserve Bank of India s (RBI) requirements. Further, as a part of its mandate to regulate and to develop the I ndian capital markets, the Securities and Exchange Board of India (SEBI) framed the SEBI (Vent ure Capital Funds).

Policy Support

1999 Onwards

With globalisation policies and practices resulting in India getting increasingl y linked with the world, the policy framers realised the tremendous potential of venture capital a ctivity and its resultant impact on the country s growth. In his 1999 budget speech, the finance m inister of India announced that for boosting high-tech sectors and supporting first generation entrepreneurs, there is an acute need for higher investment in ventur e capital activities. He also announced that the guidelines for registration of ven ture capital

activity with the Central Board of Direct Taxes would be harmonized with those f or registration with the Securities and Exchange Board of India (SEBI). The Government of India constituted a SEBI committee headed by K. B. Chandrasekh ar to make recommendations to facilitate the growth of VC industry in India. This comm ittee submitted its report in July 2000 with the following salient recommendations, al l of which were accepted and implemented:

. SEBI should be the nodal regulator for VC funds in India providing a smooth, s ingle window, problem-free regulatory framework for quick and efficient flow of money into VC funds in India.

. Tax pass-through status should be granted to all regulatory compliant VC funds , similar to that which is provided to mutual funds, ensuring that at the .pool-level. (VC Fund) profits are tax exempt.

. Foreign venture capital investors (FVCI) should also be registered with SEBI. This registration should enable them to have the same facilities as the foreign insti tutional level of easy investments and disinvestments without any FIBP/RBI approvals.

INDUSTRY LIFE CYCLE:

From the industry life cycle we can know in which stage we are standing. On the basis of this management can make future strategies of their business.

INTRODUCTION GROWTH Figure: 4.1 Industry life cycle

The growth of VC in India has four separate phases: Phase I - Formation of Technology Development and Information Company of India (TDICI) in the 80 s and regional funds as GVFL & APIDC in the early 90s. The TDICI may pro vide financial assistance to venture capital undertakings which are set up by technoc rat entrepreneurs, or technology information and guidance services. Phase II - Entry of Foreign Venture Capital funds (VCF) between 1995 -1999 Phase III - (2000 onwards) - VC becomes risk averse and activity declines Phase IV 2004 onwards - Global VCs firms actively investing in India

VENTURE CAPITAL FEATURES

Features of Venture Capital High Risk

By definition the Venture capital financing is highly risky and chances of failu re are high as it provides long term start up capital to high risk-high reward ventures. Venture c apital assumes four types of risks, these are: . Management risk - Inability of management teams to work together. . Market risk - Product may fail in the market. . Product risk - Product may not be commercially viable. . Operation risk - Operations may not be cost effective resulting in increased cost decreased gross margins. High Tech As opportunities in the low technology area tend to be few of lower order, and h i-tech projects generally offer higher returns than projects in more traditional areas, venture capital investments are made in high tech. areas using new technologies or producing inn ovative goods by using new technology. Not just high technology, any high risk ventures where the entrepreneur has conviction but little capital gets venture finance. Venture cap ital is available for expansion of existing business or diversification to a high risk area. Thus technology financing had never been the primary objective but incidental to venture capital .

Equity Participation & Capital Gains Investments are generally in equity and quasi equity participation through direc t purchase of shares, options, convertible debentures where the debt holder has the option to convert the loan instruments into stock of the borrower or a debt with warrants to equity in vestment. The funds in the form of equity help to raise term loans that are cheaper source of funds. In the early stage of business, because dividends can be delayed, equity investment imp lies that investors bear the risk of venture and would earn a return commensurate with suc cess in the form of capital gains.

Participation In Management Venture capital provides value addition by managerial support, monitoring and fo llow up assistance. It monitors physical and financial progress as well as market develo pment initiative. It helps by identifying key resource person. They want one seat on t he company s board of directors and involvement, for better or worse, in the major decision a

ffecting the direction of company. This is a unique philosophy of .hands on management. where Venture capitalist acts as complementary to the entrepreneurs. Based upon the experience other companies, a venture capitalist advise the promoters on project planning, monito ring, financial management, including working capital and public issue. Venture capita l investor cannot interfere in day today management of the enterprise but keeps a close con tact with the promoters or entrepreneurs to protect his investment.

Length of Investment Venture capitalist help companies grow, but they eventually seek to exit the inv estment in three to seven years. An early stage investment may take seven to ten years to m ature, while most of the later stage investment takes only a few years. The process of having significant returns takes several years and calls on the capacity and talent of venture capitalist and entrepreneurs to reach fruition.

Illiquid Investment Venture capital investments are illiquid, that is, not subject to repayment on d emand or following a repayment schedule. Investors seek return ultimately by means of cap ital gains when the investment is sold at market place. The investment is realized only on enlistment of security or it is lost if enterprise is liquidated for unsuccessful working. It may take several years before the first investment starts to locked for seven to ten years. Ventu re capitalist understands this illiquidity and factors this in his investment decisions.

VENTURE CAPITAL ADVANTAGES

WHY VC S ADVANTAGES OF VENTURE CAPITAL

In addition to being a source of funding, an advantage of venture capital is tha t a number of value-added services are provided to companies:

. Mentoring Venture capitalists provide companies with ongoing strategic, operat ional and financial advice. They will typically have nominee directors appointed to the co mpany s board and often become intimately involved with the strategic direction of the company .

. Alliances - Venture capitalists can introduce the company to an extensive netw ork of strategic partners both domestically and internationally and may also identify p otential acquisition targets for the business and facilitate the acquisition.

. Facilitate exit - Venture capitalists are experienced in the process of prepar ing a company for an initial public offering (IPO) of its shares onto the Australian Stock Exc hange (ASX) or overseas stock exchange such as NASDAQ. They can also facilitate a trade sale.

. Amount of Investment Venture capitalists invest very large sums of money into businesses, significantly more than business angels

. Future Investment If your business is capable of attracting venture capital fu nding, it makes investing much more attractive for other investors, banks and lenders.

. Experience Whilst venture capitalists are rarely as hands on as business angel s, they can have a huge amount of experience that they are able to bring to your busines s. Some venture capitalists will help with the planning and strategy side of your b usinesses.

Disadvantages of Venture Capital

Securing venture capital typically means that you have to give up something in exchange. Most venture capital firms are not interested in merely receiving the capital that they have invested along with a standard interest rate. In fact, there are some things that venture capital firms may ask for that may surprise you. These include: . Management Position - In many cases, a venture capital firm will want to add a member of their team to the start up company's management team. This is generally to ensure that the company can be successful, though this can also create internal problems. . Equity Position - Most venture capital firms require that the company give up an equity position to them in return for their funding. This amount is not small, in many cases it can be as much as 60% of the equity in the company. In effect, this means that the entrepreneur is not controlling their business; it is being controlled by the venture capital firm. . Decision Making - One of the biggest problems that many entrepreneurs face when they agree to accept venture capital is that they often are giving up many key decisions in how their company will operate. Venture capital firms that have taken an equity position want a "seat at the table" when any major decision is made and they often have the power to override decisions. . Business Plans - When a business plan is written and submitted for financing considerations, most finance companies will agree to sign a non-disclosure agreement. This is not the case in most venture capital firms. Venture capital firms will nearly always refuse to sign a non-disclosure agreement due to the legal ramifications of doing so. This can put ideas from an entrepreneur at risk. . Funding Plan - If an entrepreneur writes their business plan and determines that they need $500,000 to get the business launched, they may be lulled into thinking that these funds will come up front. This is simply not the case. Venture capital firms almost always set goals and milestones for releasing funds. Funding from venture capital firms is typically done in stages with an eye on the expansion of the business.

Why Businesses prefer VCFs as their source of Capital?(Advantages) Venture capital has a number of advantages over other forms of finance, such as . It injects long term equity finance which provides a solid capital base for fu ture growth. . The venture capitalist is a business partner, sharing both the risks and rewar ds. Venture capitalists are rewarded by business success and the capital gain. . The venture capitalist is able to provide practical advice and assistance to t he company based on past experience with other companies which were in similar situations. . The venture capitalist also has a network of contacts in many areas that can a dd value to the company, such as in recruiting key personnel, providing contacts in international markets, introductions to strategic partners, and if needed coinvestments with other venture capital firms when additional rounds of financing are required. . The venture capitalist may be capable of providing additional rounds of fundin g should it be required to finance growth. Also Assist in the development of new products or services; . Venture capitalist generally invests in new ventures started by technocrats wh o generally are in need of entrepreneurial aid and funds. . Venture capitalists generally invest in companies that are not listed on any s tock exchanges. They make profits only after the company obtains listing. . The most important difference between a venture capitalist and conventional investors and mutual funds is that he is a specialist and lends management suppo rt and also helps in: . Financial and strategic planning . Recruitment of key personnel . Obtain bank and other debt financing . Introduction to strategic partners and acquisition targets in the region . Regional expansion of manufacturing and marketing operations . Obtain a public listing

C:\Users\GUNJEE~1\AppData\Local\Temp\msohtmlclip1\01\clip_image001.png Raising Venture Capital

Begin by identifying a list of venture capitalists whose investment preferences match your needs and company profile with regards to size of investment, stage of development, industry and geographic location. Over 600 active institutional venture capital firms manage over $35 billion of capital available for investment in early, expansion and late stage growth companies.

Make contact with prospective investors through a respected referral such as an attorney, accountant, consultant or business broker. As a rule, over one hundred investment proposals are reviewed for every one company that receives venture funding. Most venture capitalists will respond to a cold call or business plan which arrives "across the transom", but a respected referral will usually establish a higher standard of quality and accelerate a response.

Limit your search to a manageable number of investor candidates, preferably six or less. Educating investors requires substantial senior management time and distracts attention from day to day business operations. Choosing venture firms located in close geographic proximity will expedite initial meetings and screening.

A business plan and executive summary should be developed by the CEO with input from senior management. Allow ample time to complete fundraising, usually two to six months, and budget the maximum time for business planning purposes to avoid negotiating from weakness. Investment banks will assist companies raising $5 million or more for a fee, which helps to mitigate distraction from business operations. Smaller financings are routinely completed independently by management without outside assistance. Accountants, lawyers and business brokers frequently act as advisors or agents on small financings, and can facilitate the process, particularly for managers who are new to fund-raising.

VENTURE CAPITAL STAGES OF INVESTMENT

Stages of Venture Capital Financing in an entreprise The requirements of funds vary with the life cycle stage of the enterprise. Even before a business plan is prepared the entrepreneur invests his time and resources in sur veying the market, finding and understanding the target customers and their needs. At the s eed stage the entrepreneur continue to fund the venture with his own or family funds. Next the funds would be required for development of the product/process and prod ucing prototypes, hiring key people and building up the managerial team. This is follo wed by funds for assembling the manufacturing and marketing facilities in that order. Finally the funds are needed to expand the business and attaint the critical mass for profit generatio n. Venture capitalists cater to the needs of the entrepreneurs at different stages of their enterprises. Depending upon the stage they finance, venture capitalists are call ed angel investors, venture capitalist or private equity supplier/investor. Different venture capital firms have different attributes and aptitudes for diff erent types of Venture capital investments. Hence there are different stages of entry for diffe rent Venture capitalists and they can identify and differentiate between types of Venture cap ital investments, each appropriate for the given stage of the investee company, These are:1. Early Stage Finance . . . . Seed Capital Startup Capital Early/First Stage Capital Later/Third Stage Capital

2. Later Stage Finance . . . . . Expansion/Development Stage Capital Replacement Finance Management Buy Out and Buy ins Turnarounds Mezzanine/Bridge Finance

The table below shows risk perception and time orientation for different stages of venture capital financing. Financing Stage Period (funds locked in years)

Risk perception Activity to be financed Early stage finance Seed 7-10 Extreme For supporting a concept or idea or R & D for product development Start up 5-9 Very high Initializing operations or developing prototypes First stage 3-7 High Start commercial production and marketing Second stage 3-5 Sufficiently high Expand market & growing working capital need Later stage finance 1-3 Medium Market expansion, acquisition & product development for profit making company Buy out-in 1-3 Medium

Acquisition financing Turnaround 3-5 Medium to high Turning around a sick company Mezzanine 1-3 Low Facilitating public issue

1. Seed Capital It is an idea or concept as opposed to a business. European Venture capital asso ciation defines seed capital as .The financing of the initial product development or cap ital provided to an entrepreneur to prove the feasibility of a project and to qualify for start up capital.. The characteristics of the seed capital may be enumerated as follows: . . . . Absence of ready product market Absence of complete management team Product/ process still in R & D stage Initial period / licensing stage of technology transfer

Broadly speaking seed capital investment may take 7 to 10 years to achieve reali zation. It is the earliest and therefore riskiest stage of Venture capital investment. The new technology and innovations being attempted have equal chance of success and failure. Such p rojects, particularly hi-tech, projects sink a lot of cash and need a strong financial su pport for their adaptation, commencement and eventual success. However, while the earliest stage of financing is fraught with risk, it also provides greater potential for realizing significant gains in long term. Typically seed enterprises lack asset base or track record to obtain finance from conventional sources and are largely dependent upon entrepreneur s personal resour ces. Seed capital is provided after being satisfied that the entrepreneur has used up his own resources and carried out his idea to a stage of acceptance and has initiated re search. The asset underlying the seed capital is often technology or an idea as opposed to h uman assets (a good management team) so often sought by venture capitalists. Volume of Investment Activity It has been observed that Venture capitalist seldom make seed capital investment and these are relatively small by comparison to other forms of venture finance. The absenc e of interest in providing a significant amount of seed capital can be attributed to the follo wing three factors: 1. Seed capital projects by their very nature require a relatively small amount of capital. The success or failure of an individual seed capital investment will have little impact on the performance of all but the smallest venture capitalist s portfolio. Larger venture capitalists avoid seed capital investments. This is because the small investment

s are seen to be cost inefficient in terms of time required to analyze, structure and manage them. 2. The time horizon to realization for most seed capital investments is typicall y 7-10 years which is longer than all but most long-term oriented investors will desire . 3. The risk of product and technology obsolescence increases as the time to real ization is extended. These types of obsolescence are particularly likely to occur with h igh technology investments particularly in the fields related to Information Technol ogy.

2. Startup Capital It is the second stage in the venture capital cycle and is distinguishable from seed capital investments. An entrepreneur often needs finance when the business is just start ing. Here the business concept has been fully investigated and the business risk now becom es that of turning the concept into product. Startup capital is defined as: .Capital needed to finance the product developmen t, initial marketing and establishment of product facility. . The characteristics of start-up capital are: . Establishment of company or business. The company is either being organized or is established recently. New business activity could be based on experts, experi ence or a spin-off from R & D. . Establishment of most but not all the members of the team. The skills and fitn ess to the job and situation of the entrepreneur s team is an important factor for sta rt up finance.

. Development of business plan or idea. The business plan should be fully developed yet the acceptability of the product by the market is uncertain. The company has not yet started trading. In the startup preposition venture capitalists investment criteria shifts from id ea to people involved in the venture and the market opportunity. Before committing any financ e at this stage, Venture capitalist however, assesses the managerial ability and the capac ity of the entrepreneur, besides the skills, suitability and competence of the managerial t eam are also evaluated. If required they supply managerial skills and supervision for impleme ntation. The time horizon for start up capital will be typically 6 or 8 years. Failure rate f or start up is 2 out of 3. Start up needs funds by way of both first round investment and subsequent follow-up investments. The risk tends to be lower relative to seed capital situation. The risk is controlled by initially investing a smaller amount of capital in start-ups. The decision on additional financing is based upon the successful performance of the company. Ho wever, the term to realization of a start up investment remains longer than the term of finance normally provided by the majority of financial institutions. Longer time scale f or using exit route demands continued watch on start up projects. Volume of Investment Activity Despite potential for specular returns most venture firms avoid investing in sta rt-ups. One reason for the paucity of start up financing may be high discount rate that vent ure capitalist applies to venture proposals at this level of risk and maturity. They often pref er to spread their risk by sharing the financing. Thus syndicates of investor s often participa te in start up finance.

3. Early Stage Finance It is also called first stage capital is provided to entrepreneur who has a prov en product, to start commercial production and marketing, not covering market expansion, de-ris king and acquisition costs. At this stage the company passed into early success stage of its life cycle. A p roven management team is put into this stage, a product is established and an identifi able market is being targeted.

British Venture Capital Association has vividly defined early stage finance as: .Finance provided to companies that have completed the product development stage and requ ire further funds to initiate commercial manufacturing and sales but may not be gene rating profits.. The characteristics of early stage finance may be: . Little or no sales revenue. . Cash flow and profit still negative. . A small but enthusiastic management team which consists of people with technic al and specialist background and with little experience in the management of growin g business. . Short term prospective for dramatic growth in revenue and profits. The early stage finance usually takes 4 to 6 years time horizon to realization. Early stage finance is the earliest in which two of the fundamentals of business are in plac e i.e. fully assembled management team and a marketable product. A company needs this round o f finance because of any of the following reasons: . Project overruns on product development. . Initial loss after start up phase. The firm needs additional equity funds, which are not available from other sourc es thus prompting venture capitalist that, have financed the start up stage to provide f urther financing. The management risk is shifted from factors internal to the firm (lac k of management, lack of product etc.) to factors external to the firm (competitive p ressures, in sufficient will of financial institutions to provide adequate capital, risk of p roduct obsolescence etc.) At this stage, capital needs, both fixed and working capital needs are greatest. Further, since firms do not have foundation of a trading record, finance will be difficult to o btain and so

Venture capital particularly equity investment without associated debt burden is key to survival of the business. The following risks are normally associated to firms at this stage: . The early stage firms may have drawn the attention of and incurred the challen ge of a larger competition. . There is a risk of product obsolescence. This is more so when the firm is invo lved in high-tech business like computer, information technology etc.

4. Second Stage Finance It is the capital provided for marketing and meeting the growing working capital needs of an enterprise that has commenced the production but does not have positive cash flo ws sufficient to take care of its growing needs. Second stage finance, the second t rench of Early State Finance is also referred to as follow on finance and can be defined as the provision of capital to the firm which has previously been in receipt of external capital but whose financial needs have subsequently exploded. This may be second or even third injection of capital. The characteristics of a second stage finance are: . A developed product on the market . A full management team in place . Sales revenue being generated from one or more products . There are losses in the firm or at best there may be a break even but the surp lus generated is insufficient to meet the firm s needs. Second round financing typically comes in after start up and early stage funding and so have shorter time to maturity, generally ranging from 3 to 7 years. This stage of fin ancing has both positive and negative reasons. Negative reasons include: 1. Cost overruns in market development. 2. Failure of new product to live up to sales forecast. 3. Need to re-position products through a new marketing campaign. 4. Need to re-define the product in the market place once the product deficiency is revealed. Positive reasons include:

1. Sales appear to be exceeding forecasts and the enterprise needs to acquire as sets to gear up for production volumes greater than forecasts. 2. High growth enterprises expand faster than their working capital permit, thus needing additional finance. Aim is to provide working capital for initial expansion of a n enterprise to meet needs of increasing stocks and receivables. It is additional injection of funds and is an acceptable part of venture capital . Often provision for such additional finance can be included in the original financing package as an option, subject to certain management performance targets.

5. Later Stage Finance It is called third stage capital is provided to an enterprise that has establish ed commercial production and basic marketing set-up, typically for market expansion, acquisiti on, product development etc. It is provided for market expansion of the enterprise. The ente rprises eligible for this round of finance have following characteristics. . Established business, having already passed the risky early stage. . Expanding high yield, capital growth and good profitability. . Reputed market position and an established formal organization structure. .Funds are utilized for further plant expansion, marketing, working capital or d evelopment of improved products.. Third stage financing is a mix of equity with debt or subord inate debt. As it is half way between equity and debt in US it is called .mezzanine. finance. I t is also called last round of finance in run up to the trade sale or public offer. Venture capitalist s prefer later stage investment vis a vis early stage investm ents, as the rate of failure in later stage financing is low. It is because firms at this sta ge have a past performance data, track record of management, established procedures of financia l control.

The time horizon for realization is shorter, ranging from 3 to 5 years. This hel ps the venture capitalists to balance their own portfolio of investment as it provides a runnin g yield to venture capitalists. Further the loan component in third stage finance provides tax advantage and superior return to the investors. There are four sub divisions of later stage finance. 1. 2. 3. 4. Expansion / Development Finance Replacement Finance Buyout Financing Turnaround Finance

VENTURE CAPITAL INVESTMENT PROCESS

2.5 Venture Capital Investment Process

Venture capital investment process is different from normal project financing. I n order to understand the investment process a review of the available literature on ventur e capital finance is carried out. Tyebjee and Bruno in 1984 gave a model of venture capita l investment activity which with some variations is commonly used presently.

As per this model this activity is a five step process as follows:

1. Deal Organization 2. Screening 3. Evaluation or due Diligence 4. Deal Structuring 5. Post Investment Activity and Exit

Figure 2.2: Venture Capital Investment Process

Deal origination: In generating a deal flow, the VC investor creates a pipeline of deals or invest ment opportunities that he would consider for investing in. Deal may originate in var ious ways. referral system, active search system, and intermediaries. Referral system is an important source of deals. Deals may be referred to VCFs by their parent organisaions, tra de partners, industry associations, friends etc. Another deal flow is active search through n etworks, trade fairs, conferences, seminars, foreign visits etc. Intermediaries is used by vent ure capitalists in developed countries like USA, is certain intermediaries who match VCFs and th e potential entrepreneurs. Screening: VCFs, before going for an in-depth analysis, carry out initial screening of all projects on the basis of some broad criteria. For example, the screening process may limit proje cts to areas in which the venture capitalist is familiar in terms of technology, or product, or market scope. The size of investment, geographical location and stage of financing could also be used as the broad screening criteria. Due Diligence: Due diligence is the industry jargon for all the activities that are associated with evaluating an investment proposal. The venture capitalists evaluate the quality of entrepre neur before appraising the characteristics of the product, market or technology. Most ventur e capitalists ask for a business plan to make an assessment of the possible risk and return on the venture. Business plan contains detailed information about the proposed venture. The evaluation of ventures by VCFs in India includes; Preliminary evaluation: The applicant required to provide a brief profile of the proposed venture to establish prima facie eligibility. Detailed evaluation: Once the preliminary evaluation is over, the proposal is ev aluated in greater detail. VCFs in India expect the entrepreneur to have:- Integrity, longterm vision, urge to grow, managerial skills, commercial orientation. VCFs in India also make the risk analysis of the proposed projects which include s: Product risk, Market risk, Technological risk and Entrepreneurial risk. The final decisi on is taken in terms of the expected risk-return trade-off as shown in Figure.

Deal Structuring: In this process, the venture capitalist and the venture company negotiate the te rms of the deals, that is, the amount, form and price of the investment. This process is te rmed as deal structuring. The agreement also include the venture capitalist's right to contro l the venture company and to change its management if needed, buyback arrangements, acquisitio n, making initial public offerings (IPOs), etc. Earned out arrangements specify the entrepreneur's equity share and the objectives to be achieved. Post Investment Activities: Once the deal has been structured and agreement finalised, the venture capitalis t generally assumes the role of a partner and collaborator. He also gets involved in shaping of the direction of the venture. The degree of the venture capitalist's involvement dep ends on his policy. It may not, however, be desirable for a venture capitalist to get involv ed in the day-to-

day operation of the venture. If a financial or managerial crisis occurs, the ve nture capitalist may intervene, and even install a new management team. Exit: Venture capitalists generally want to cash-out their gains in five to ten years after the initial investment. They play a positive role in directing the company towards particula r exit routes. A venture may exit in one of the following ways: There are four ways for a venture capitalist to exit its investment:

. . . .

Initial Public Offer (IPO) Acquisition by another company Re-purchase of venture capitalist s share by the investee company Purchase of venture capitalist s share by a third party

Promoter s Buy-back

The most popular disinvestments route in India is promoter s buy-back. This route is suited to Indian conditions because it keeps the ownership and control of the promoter intact. The obvious limitation, however, is that in a majority of cases the market value of the shares of the venture firm would have appreciated so much after some years that the promot er would not be in a financial position to buy them back.

In India, the promoters are invariably given the first option to buy back equity of their enterprises. For example, RCTC participates in the assisted firm s equity with sui table agreement for the promoter to repurchase it. Similarly, Canfina-VCF offers an op portunity to the promoters to buy back the shares of the assisted firm within an agreed perio d at a predetermined price. If the promoter fails to buy back the shares within the sti pulated period, Canfina-VCF would have the discretion to divest them in any manner it deemed app ropriate. SBI capital Markets ensures through examining the personal assets of the promote rs and their associates, which buy back, would be a feasible option. GVFL would make disinvestments, in consultation with the promoter, usually after the project has settled down, to a profitable level and the entrepreneur is in a position to avail of finance

under conventional schemes of assistance from banks or other financial institutions.

Initial Public Offers (IPOs)

The benefits of disinvestments via the public issue route are, improved marketab ility and liquidity, better prospects for capital gains and widely known status of the ven ture as well as market control through public share participation. This option has certain limit ations in the Indian context. The promotion of the public issue would be difficult and expensi ve since the first generation entrepreneurs are not known in the capital markets. Further, di fficulties will be caused if the entrepreneur s business is perceived to be an unattractive invest ment proposition by investors. Also, the emphasis by the Indian investors on short-te rm profits and dividends may tend to make the market price unattractive. Yet another difficulty in India until recently was that the Controller of Capital Issues (CCI) guidelines for determin ing the premium on shares took into account the book value and the cumulative average EP S till the date of the new issue. This formula failed to give due weight age to the expecte d stream of earning of the venture firm. Thus, the formula would underestimate the premium. The Government has now abolished the Capital Issues Control Act, 1947 and consequent ly, the office of the controller of Capital Issues. The existing companies are now free to fix the premium on their shares. The initial public issue for disinvestments of VCFs hold ing can involve high transaction costs because of the inefficiency of the secondary mark et in a country like India. Also, this option has become far less feasible for small ven tures on

account of the higher listing requirement of the stock exchanges. In February 19 89, the Government of India raised the minimum capital for listing on the stock exchange s from Rs 10 million to Rs 30 million and the minimum public offer from Rs 6 million to Rs 18 million.

Sale on the OTC Market

An active secondary capital market provides the necessary impetus to the success of the venture capital. VCFs should be able to sell their holdings, and investors shoul d be able to trade shares conveniently and freely. In the USA, there exist well-developed OTC markets where dealers trade in shares on telephone/terminal and not on an exchange floor . This mechanism enables new, small companies which are not otherwise eligible to be li sted on the stock exchange, to enlist on the OTC markets and provides liquidity to inves tors. The National Association of Securities Dealers Automated Quotation System (NASDAQ) i n the USA daily quotes over 8000 stock prices of companies backed by venture capital.

The OTC Exchange in India was established in June 1992. The Government of India had approved the creation for the Exchange under the Securities Contracts (Regulatio ns) Act in 1989. It has been promoted jointly by UTI, ICICI, SBI Capital Markets, Can bank Financial Services, GIC, LIC and IDBI. Since this list of market-makers (who will decide d aily prices and appoint dealers for trading) includes most of the public sector venture fina nciers, it should pick up fast, and it should be possible for investors to trade in the sec urities of new small and medium size enterprises.

The other disinvestments mechanisms such as the management buyouts or sale to ot her venture funds are not considered to be appropriate by VCFs in India.

The growth of an enterprise follows a life cycle as shown in the diagram below. The requirements of funds vary with the life cycle stage of the enterprise. Even bef ore a business plan is prepared the entrepreneur invests his time and resources in surveying th e market,

finding and understanding the target customers and their needs. At the seed stag e the entrepreneur continue to fund the venture with his own or family funds. At this stage the funds are needed to solicit the consultant s services in formulation of business p lans, meeting potential customers and technology partners. Next the funds would be req uired for development of the product/process and producing prototypes, hiring key people a nd building up the managerial team. This is followed by funds for assembling the ma nufacturing and marketing facilities in that order. Finally the funds are needed to expand t he business and attaint the critical mass for profit generation. Venture capitalists cater t o the needs of the entrepreneurs at different stages of their enterprises. Depending upon the stage they finance, venture capitalists are called angel investors, venture capitalist or p rivate equity supplier/investor.

The players:

Troubleshooting Expansion Established The company

Idea

Investing In Technology

Turnaround IPO Break Even-point Business Concept

Medium venture funds

Small venture funds Corporate investors Angels

Big venture funds + Financial funds

Figure: 2.3 players in venture capital industry

The players There are following groups of players: Angels and angel clubs Venture Capital funds - Small - Medium - Large Corporate venture funds Financial service venture groups

Angels and angel clubs Angels are wealthy individuals who invest directly into companies. They can form angel clubs to coordinate and bundle their activities. Besides the money, angels often provide their personal knowledge, experience and contacts to support their investees. With ave rage deals sizes from USD 100,000 to USD 500,000 they finance companies in their early stag es. Examples for angel clubs are Media Club, Dinner Club , Angel's Forum

Small and Upstart Venture Capital Funds These are smaller Venture Capital Companies that mostly provide seed and start-u p capital. The so called "Boutique firms" are often specialised in certain industries or ma rket segments. Their capitalization is about USD 20 to USD 50 million (is this deals size or total money under management or money under management per fund?). As for the small an d medium Venture Capital funds strong competition will clear the marketplace. Ther e will be mergers and acquisitions leading to a concentration of capital. Funds specialise d in different business areas will form strategic partnerships. Only the more successful funds will be able to attract new money. Examples are: Artemis Comaford Abbell Venture Fund

 Acacia Venture Partners

Medium Venture Funds The medium venture funds finance all stages after seed stage and operate in all business segments. They provide money for deals up to USD 250 million. Single funds have up to USD 5 billion under management. An example is Accel Partners

Large Venture Funds As the medium funds, large funds operate in all business sectors and provide all types of capital for companies after seed stage. They often operate internationally and f inance deals up to USD 500 million The large funds will try to improve their position by merg ers and acquisitions with other funds to improve size, reputation and their financial mu scle. In addition they will to diversify. Possible areas to enter are other financial ser vices by means of M&As with financial services corporations and the consulting business. For th e latter one the funds have a rich resource of expertise and contacts in house. In a declinin g market for their core activity and with lots of tumbling companies out there is no reason w hy Venture Capital funds should offer advice and consulting only to their investees. Examples are: AIG American International Group Cap Vest Man 3i

Corporate Venture Funds These Venture Capital funds are set up and owned by technology companies. Their aim is to widen the parent company's technology base in an win-win-situation for both, the investor and the investee. In general, corporate funds invest in growing or maturing comp anies, often when the investee wishes to make additional investments in echnology or product development. The average deals size is between USD 2 million and USD 5 million. The large funds will try to improve their position by mergers and acquisitions with other funds to improve size, reputation and their financial muscle. In addition they will to di versify. Possible

areas to enter are other financial services by means of M&As with financial serv ices corporations and the consulting business. For the latter one the funds have a ri ch resource of expertise and contacts in house. In a declining market for their core activit y and with lots of tumbling companies out there is no reason why Venture Capital funds should of fer advice and consulting only to their investees. Examples are: Oracle Adobe Dell Kyocera As an example, Adobe systems launched a $40m venture fund in 1994 to invest in companies strategic to its core business, such as Cascade Systems Inc and Lantan a Research Corporation.- has been successfully boosting demand for its core produc ts, so that Adobe recently launched a second $40m fund.

Financial funds: A solution for financial funds could be a shift to a higher securisation of Vent ure Capital activities. That means that the parent companies shift the risk to their custome rs by creating new products such as stakes in an Venture Capital fund. However, the success of such products will depend on the overall climate and expectations in the economy. As long as the sownturn continues without any sign of recovery customers might prefer less risk y alternatives.

VENTURE CAPITAL BUSINESS MODEL, STRUCTURE TYPES ROLES

pe-performance_544x420.jpg BUSINESS MODEL Venture capitalists are compensated through a combination of management fees and carried interest (often referred to as a "two and 20" arrangement): . Management fees an annual payment made by the investors in the fund to the fun d's manager to pay for the private equity firm's investment operations.[28] In a typ ical venture capital fund, the general partners receive an annual management fee equal to up to 2% of the committed capital. . Carried interest a share of the profits of the fund (typically 20%), paid to t he private equity fund s management company as a performance incentive. The remaining 80% of the profits are paid to the fund's investors[28] Strong limited partner interest in top-tier venture firms has led to a general trend toward terms more favorable to the vent ure partnership, and certain groups are able to command carried interest of 25 30% on their funds. Because a fund may be run out of capital prior to the end of its life, larger ve nture capital firms usually have several overlapping funds at the same time; doing so lets the larger firm keep specialists in all stages of the development of firms almost constantly eng aged. Smaller firms tend to thrive or fail with their initial industry contacts; by th e time the fund cashes out, an entirely-new generation of technologies and people is ascending, whom the general partners may not know well, and so it is prudent to reassess and shift i ndustries or personnel rather than attempt to simply invest more in the industry or people th e partners already know.

Structure Venture capital firms are typically structured as partnerships, the general part ners of which serve as the managers of the firm and will serve as investment advisors to the v enture capital funds raised. Venture capital firms in the United States may also be str uctured as limited liability companies, in which case the firm's managers are known as m anaging members. Investors in venture capital funds are known as limited partners. This constituency comprises both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowment s, foundations, insurance companies, and pooled investment vehicles, called funds o f funds (FoF).

Types Venture Capitalist firms differ in their approaches. There are multiple factors, and each firm is different.[26] Some of the factors that influence VC decisions include: . Business situation: Some VCs tend to invest in new ideas, or fledgling compani es. Others prefer investing in established companies that need support to go public or grow. . Some invest solely in certain industries. . Some prefer operating locally while others will operate nationwide or even glo bally. . VC expectations often vary. Some may want a quicker public sale of the company or expect fast growth. The amount of help a VC provides can vary from one firm to t he next.

Roles Within the venture capital industry, the general partners and other investment p rofessionals of the venture capital firm are often referred to as "venture capitalists" or "V Cs". Typical career backgrounds vary, but, broadly speaking, venture capitalists come from ei ther an operational or a finance background. Venture capitalists with an operational bac kground tend to be former founders or executives of companies similar to those which the partnership finances or will have served as management consultants. Venture capitalists with finance backgrounds tend to have investment banking or other corporate finance experienc e. Although the titles are not entirely uniform from firm to firm, other positions at venture capital firms include: . Venture partners Venture partners are expected to source potential investment opportunities ("bring in deals") and typically are compensated only for those de als with which they are involved. . Principal This is a mid-level investment professional position, and often cons idered a "partner-track" position. Principals will have been promoted from a senior assoc iate position or who have commensurate experience in another field, such as investmen t banking or management consulting. . Associate This is typically the most junior apprentice position within a ventu re capital firm. After a few successful years, an associate may move up to the "senior asso ciate" position and potentially principal and beyond. Associates will often have worked for 1 2 years in another field, such as investment banking or management consulting. . Entrepreneur-in-residence (EIR) EIRs are experts in a particular domain and perform due diligence on potential deals. EIRs are engaged by venture capital fi rms temporarily (six to 18 months) and are expected to develop and pitch startup ide as to their host firm although neither party is bound to work with each other. Some EI Rs move on to executive positions within a portfolio company.

VENTURE CAPITAL TOP VC S IN INDIA

TOP VC s of INDIA

Number of Investments Investor 2005 2006 2007 2008 2009 Total Sequoia Capital India 7 12 13 18 3 53 Ventureast 5 11 4 9 3 32 Intel Capital 3 7 4 8 1

23 Helion Venture Partners 0 4 8 8 2 22 DFJ India 0 3 3 9 2 17 Nexus India Capital 0 1 4 9 2 16 NEA IndoUS Ventures 0 0 5 9 0 14

IDG India Ventures 0 0 6 5 0 11 Kleiner Perkins 1 3 0 6 0 10 Norwest Venture Partners 1 3 1 2 3 10 Canaan Partners 0 1 4 4 1 10 Inventus Capital Partners

3 3

Value Of Investments ($ mn) Investor 2005 2006 2007 2008 2009 Total Sequoia Capital India 42 184 114 138 26 504 Intel Capital 19 37

15 53 7 131 Norwest Venture Partners 13.9 8.1 24.1 17.7 92.8 156.6 Helion Venture Partners 30 30 30 10 100 Nexus India Capital 7.5 16 45 7 75.5 DFJ India 13.75 4

33 10 61 Ventureast 7 19 2 17 9 54 NEA IndoUS Ventures 24 26 50 Canaan Partners 4 10 12 4 30 Kleiner Perkins 2 8 19 -

29 IDG India Ventures 14 8 22 Inventus Capital Partners -

Total Funds Raised ($ mn) Investor 2005 2006 2007 2008 2009 Total Sequoia Capital India 200 400 300 725 1,625 Helion Venture Partners 140 210 350 Nexus India Capital 100 220

320 Ventureast 136 86 222 NEA IndoUS Ventures 189 189 IDG India Ventures 150 150 Inventus Capital Partners 125 -

125 Norwest Venture Partners DFJ India Kleiner Perkins Intel Capital -

Canaan Partners -

VENTURE CAPITAL CASE STUDY 1 PVCL

CASE STUDY

PUNJAB VENTURE CAPITAL LIMITED (PVCL)

Venture Capital for Knowledge Based Sector A Rs. 200 million, 10 year, close-ended IT dedicated Venture Capital Fund has be en conceptualized and positioned by the Small Industries Development Bank of India (SIDBI) as the major contributor and the State Government of Punjab through its' corporate Bodies viz; the Punjab State Industrial Development Corporation Limite d (PSIDC), the Punjab Financial Corporation (PFC) and the Punjab Information & Communication Technology Corporation Limited (PICTC) CL - Your Partner Punjab Venture Capital Limited (PVCL) is an 'Asset Management Company' which is entrusted with the overall management of the Venture Capital Fund - Punjab Infot ech Venture Fund (PIVF) acting as its' Investment Manager and has the necessary auth ority to consider/ evaluate a given proposal for investment from the Fund - PIVF. Further PVCL is empowered to supervise the investment and exercise all rights wi th respect to investment from the Fund, identification of projects, carrying-out appraisal/ risk-analysis and detailed due diligence of projects / proposals as also engage professionally experienced personnel/ outside independent consultants for carrying-out detailed appraisal/ due diligence besides for advisory and managerial support and / or guidance purpose. In short, PVCL has all the authority and is empowered to prepare scheme (s) and approve investment from the Fund as well as make disbursements thereof. Status of I PVCL has since approved and disbursed investment from the Fund 1. PIVF to the extent of Rs.7.60 Mn towards equity/ debt to M/s. SM Lawdigest.Co m Limited, Jalandhar for start-up of a 'Law Portal'. 2. Rs. 8.5 Mn as equity/debt to M/s. American Heartcare Limited (erstwhile Ameri can Heartcare Private Limited) for setting-up a "Trans-telephonic computerised cardiac monitoring & healthcare related software development centre. with manufacturing facilities for supportive hardware equipment (cardio station & monitors)" at Mohali. 3. Rs.8 Mn towards OCCPs to M/s. Smart Data Enterprises (India) Limited for establishing its' 'Software Development Centre' at Mohali 4. Rs. 7.5 Mn to acquire OCCPs of M/s S.E.-Biz Infotech limited for it's 'Softwa re & Product Development Centre' 5. Rs 3 Mn to M/s Twenty First Century Battery Limited for its project facilitie s located at Mohali.

Thus, PVCL has till date released Rs. 34.61 Mn as equity/equity related instrume nts and debt to five companies against Rs.62.70 Mn sanctioned to them to meet requiremen ts of funds towards first & second phases of their respective projects. Besides, investment to the extent of Rs.50 Mn has been approved to four companie s for their projects.

Questionnaire

How does a Company approach PIVF/PVCL for venture funding ? Details of PVCL and the Fund - PIVF are given in the website -http://www.pvcl.or g. The prospective companies are advised to submit their 'Business Plan' in the format for executive summary given in the website. After preliminary evaluation of the 'Bus iness Plan' so submitted, PVCL shall decide on further action.

How does a Company submit a plan to PIVF/PVCL ? 'Business Plan' highlighting the project salient features, profile of the manage ment team, technology competitiveness, market potential etc; can be forwarded to PVCL for preliminary assessment though email. The company is advised to simultaneously forward a hard copy of the 'Business Plan' along with supporting documents to en able us to expedite the process for taking an early decision on a specific proposal.

What sort of Companies does PIVF/PVCL associate with ? We intend to invest from PIVF primarily in unlisted companies engaged in high en d Software/IT, telecommunication and hi-tech healthcare areas falling under knowledge based sector with a focus on small scale sector including Companies th ose are graduating to medium sector. The company should have high growth potential s o that it can scale up sufficiently to make an IPO within 5 years from the date of investment from PIVF. Investment segments shall mainly include IT enabled services/Business Process Outsourcing, Internet based value added products & services, Software development (Domestic & Exports), Multi-media/content development and Value added communication services.

At what stage does PIVF/PVCL invest ? PIVF/PVCL are focusing on all stages of investment viz; new ventures-cutting edg e established technology/innovative idea based generating employment, expansion/up-graduation/diversification, pre-lPO and turnaround. However, it is

imperative that the Company at the time of investment be unlisted with its' faci lities in place in the State of Punjab and is in operations having revenue activities .

Is there any geographic focus to PIVF/PVCL ? PIVF is a regionally focused IT dedicated Fund and investment from the Fund shal l be only in Companies who have its' facilities located in the State of Punjab.

What is the project evaluation process followed by PIVF/PVCL ? Process of evaluation of a given proposal involves scrutiny of business plan/executive summary, appraisal/risk-analysis of the detailed proposal includi ng preliminary due diligence, visit to existing facilities/operation site, referenc e check, feedback from clients etc. All proposals after evaluation are reviewed by an 'Investment Management Committee' (IMC) which also involves a presentation on the proposal by the promoters. Once the investment is recommended by IMC, the proposal is put up to the Board of PVCL for final approval.

How long does it take PIVF/PVCL to make an investment or participation decision ?

On an average it should be possible to complete the full cycle of processing of a proposal including short listing, sanction, post-sanction detailed due diligence , execution & documentation etc. between 6-8 months. However, it is difficult to s pecify time frame as it depends on a numbers of factors including the availability of i nformation with the promoters and the speed with which additional information is furnished there to.

Does PIVF/PVCL always take a Board seat ? PVCL acts as a partner in its' investee companies and insists on the Board seat. The Board seat is primarily to ensure transparency of operation and facilitating monitoring.

What is PIVF/PVCL's role after an investment is made ? Besides, finance PVCL provides networking and management support as well with the objective to make the company grow rapidly. PVCL also assists investee companies to attract investment from other venture capitalists in subsequent rounds of financing. However, the Fund/PVCL shall not be regarded or categorised as the Promoter of t he Company nor shall the Company be regarded as a Joint Venture between the Promoters and the Fund/PVCL and accordingly, the statutory provisions, if any, r elating to promoter's liability/responsibility shall not be deemed to be applicable to t he Fund/PVCL.

What documentation is required to be entered into by the investee companies/thei r promoters precedent to disbursement of investment from the Fund PIVF? We have formulated a set of documentation which includes term sheet, subscriptio n agreement, undertakings, affidavits, deed of guarantee, hypothecation agreement, agreement for pledge of promoters shareholding, special power of attorney for pledged shares etc; which the companies/promoters are required to execute before release of any monies as investment from the Fund.

Besides, the companies/promoters are required to comply with various terms & con ditions as stipulated in the =Term Sheet issued by PVCL to the investee companies after sanc tion of investment.

Some Data and Stistics Extent of investment from PIVF :

* Single investment not to generally exceed 10% of the Fund corpus * Investment range to be generally between Rs. 2.0 to Rs. 20 million * Investments to be generally restricted to 40% of the equity share capital of a Company or the capital cost of a project in the event of it being financed entir ely through equity/equity related instruments.

The 'Fund Management Process', briefly delineated hereunder :. Deal sourcing and identification . Initial screening to short list proposals . Preparation of 'Investment Memorandum' in-house and/or by outside independent consultants of repute . Recommendation of the proposal by 'IMC' and its' approval by the Board of PVCL . Detailed due diligence (technical, secretarial, legal, financial and accountancy ) to be carried-out by panelist consultants

. Legal documentation . Presentation of due diligence reports prepared by independent consultants . Acceptance of due diligence report(s) as prepared by the consultants appointed f or the purpose . Disbursement of funds to the investee company - part or full . Project monitoring and exit planning

Further, a general over-view in respect to time schedule is also given hereunder :. Four weeks after receipt of 'Executive Summary' - No or in principle agreement t o process further a given proposal . Two months for detailed appraisal and placing the 'Investment Memorandum' before the 'Investment Management Committee' . Three weeks from the date of preparation of a memorandum, final approval or reje ction . One month for execution of documentation from the date of acceptance of 'Term Sh eet' by the investee company .

Four weeks for due diligence from the date of appointment of panelist consultant s . Three weeks for disbursement of investment (in part or full as may be approved b y the Board of PVCL) from the date of acceptance of the detailed due diligence report( s) as submitted by the consultants appointed for the purpose and compliance of terms & conditions of sacntion by the Company.

a) PVCL-PROPOSALS ALREADY APPROVED/DISBURSEMENT MADE THEREOF S. No. Name of the Company Project Description Estimated Capital Cost in Rs. Mn Investment sanctioned from the Fund in Rs.Mn Remarks 1 SM Lawdigest.Com Limited Law Portal 8.60 (21.30 revised) 7.60 Fully disbursed 2 American Heartcare Limited Trans telephonic cardio monitoring & software development centre with manufacturing facilities for supportive hardware equipments 25.80 8.5

Fully disbursed 3 Smart Data Enterprises (India) Limited Software Development Centre 39.40 15 Mn (Rs 8 Mn towards 1st phase & Rs.7 Mn-llnd phase) > Disbursed Rs.8 Mn towards first phase > Has since made exit 4 S.E.-Biz Infotech Limited Software & Product Development Center 38.50 12 > Partially Disbursed > Under Exit 5 Twenty First Century Battery Limited Plastic Lithiumlon Polymer Rechargeble Batteries 347.50

20.00 Partially Disbursed

Total 459.80 (472.50) 63.10

b) PVCL-PROPOSALS APPROVED/UNDER DETAILED DUE DILIGENCE S. No. Name of the Company Project Description Estimated Capital Cost in Rs.Mn Investment approved from the Fund in Rs.Mn Remarks 1 Connect Broadband Services Limited Value added telecom servicesvoice, data & video 363.50

20.00 Term sheet issued/ accepted

2 KMG Infotech Private Limted Off-shore development/ high end insurance related BPO/ training in insurance related segment 61.80 20.00 Term sheet issued/ accepted 3 Netcradle India Private Limited Innovative based content/ software development/ produnctization 36.45 10.00 Term sheet issued

461.75 50.00

VENTURE CAPITAL CASE STUDY 2 HELION

HELION CORPORATE PRESENTATION HELION QUESTIONNAIRE HELION INVESTEE COMPANY 1: MAKE MY TRIP

HELION QUESTIONNAIRE Ritesh Bangalani

1. Tell me a little about Helion? Helion Ventures Partners is a $350 Million India-focused, early to mid-stage ven ture fund, investing in technology-powered and consumer service businesses in sectors like Outsourcing, Internet, Mobile, Technology Products, Retail Services, Education a nd Financial Services. 2. How long have you been in the field and a little background about yourself? I work as Vice President Helion Ventures. I have been with Helion since 2009. Ea rlier I worked as Vice President at IDG Ventures. I hold a B.Tech in Electrical Engineering from IIT Delhi and an MBA from INSEAD. I also serve as Guest Faculty at IIM Bangalore, where I teach Innovation Strategy. 3. Does a company approach you for Funding or do you approach them? We are very approachable. Anyone can submit a Business plan on our website. Alternatively we do a lot of Outbound Research also. 4. How does a company approach you? Any interested company/ individual can approach us by submitting his bplan onlin e on the website or alternatively visiting us at our office 5. What are the various sectors that excite you? Some of the sectors that excite us our Outsourcing, Internet, Mobile, Technology Products, Retail Services, Education and Financial Services. 6. What is a typical token size of investment? Our size of Investment varies between $2 million- 10 Million and we also go in f or higher rounds in a consortium 7. How long do you typically invest for? We are long term investors typically 7-10 years

8. Are you an Early Stage or a wait and watch investor? Early Stage to Mid Stage ventures 9. Any geographic focus? All are investees are based out of India 10. What is that one thing that you see in a business plan? The Entrepreneur and his team! 11. The other important things. The business, experience of the entrepreneur, scope of business 12. How long is an investment or participation decision Typically 3-5 months 13. Do you go in for minority or majority share holding and do you take a board seat? We always go in for a minority stake but with a bard seat. However our involveme nt depends on the entrepreneur. Our Partners are more of a mentor to the entreprene ur. 14. Role after an investment is made? We help the entrepreneur to recruit his team. But we never go into daily operati ons of the business

INVESTEE COMPANY:= MAKE MY TRIP MakeMyTrip.com is an Indian online travel agency that holds a major market share , with one-out-of-every-twelve domestic flights in India booked via it. MakeMyTrip.com offers its customers a variety of travel services and products, with international and dome stic airline tickets, Indian Railways tickets, domestic bus tickets, international and domest ic hotel reservations, car rentals, international and domestic holiday packages, MICE (Me eting Incentives, Conferencing, Exhibitions), visa services, B2B services, and more. F ounded in April, 2000, MakeMyTrip.com today has offices in 20 cities across India and 2 in ternational offices in New York and San Francisco, in addition to several franchise location s. Founded in 2000 by Deep Kalra, MakeMyTrip.in had its beginnings in a small offic e in Okhla, New Delhi. Deep Kalra, formerly V.P. Business Development for GE Capital had the mandate to develop and partner new distribution channels for the company s consume r financial products. The internet appeared as an interesting choice with untapped potential and his role at GE Capital provided him the opportunity to be closely involved w ith the then nascent internet industry in India Deciding that the Indian market was not yet r eady for an online travel agency, MakeMyTrip.com instead concentrated on the US India travel sector. In a relatively short span, MakeMyTrip.com grew to emerge as a major travel website in the US to India sector, and today has an approximate 4% share of the NRI market, which is pegged at Rs. 4500 crore (USD 1 billion). With the revolution in the Indian travel indu stry caused by the emergence of the domestic Low Cost Carriers, MakeMyTrip launched its website for the Indian travel market in September 2005. In its first year of operation, it was I ndia s largest ecommerce company. Board of Directors of MakeMyTrip comprises investor and independent board member s. Financial Investors include SAIF Partners, Helion Venture Partners, and Sierra V entures. Independent Members comprise such illustrious entrepreneurs and travel professio nals as Philip C. Wolf (President and CEO of PhoCusWright Inc.), and Frederic Lalonde (F ounder and CEO of Openplaces.org). The firm is raised around $43 million from the sale of fresh shares besides the offer for sale by existing investors in the issue that is expected to peg the valuation of the firm around

$450 million post issue. The company has indicated that the issue would be price d in the $12-14 per share bracket. Post issue SAIF Partner s 51.2% stake hascome down to 43.79%, Kalra s holding(14.45% to 11.62%), Helion(11.97% to 10.2%), Sierra Ventures(7.98% to 6.81%). The firm to get a valuation of $14 per share, SAIF s stake has valued at $209 mill ion(post IPO & its partial selloff). This has become as much as 10x SAIF s total investment till date. Gurgaon based MakeMyTrip has raised over $40 million through multiple rounds of venture capital funding. SAIF Partners made the first major round of fund infusion of $1 0 million five years ago when the travel services firm started its India operations. PhoCusWright estimates that the total "business-to-customer" online travel agenc y market (i.e. businesses serving end consumers with travel products and/or services thro ugh an online channel) in India is valued at $1 billion and is dominated by four player s MakeMyTrip, Yatra, Clear trip and Travel guru (acquired by Travelocity in August 2009). Of these, MakeMyTrip commands a market share of 48%, followed by Yatra at 24% and C lear trip at 18%, based on gross bookings for 2009. The company has entered into a shareholders' agreement and share subscription an d purchase agreement with My Guest House Accommodations Private Limited (MGH) and its existing shareholders. Pursuant to these agreements, MakeMyTrip can acquire 100 per cent of MGH's ordinary shares through an earn-out structure based upon the achievemen t of

various business parameters spread over eight years. The firm expects the first closing to take place this month, pursuant to which it will acquire an approximately 29 per cent stake in MGH against a cash investment of approximately $1.0 million. In August, MakeMyTrip teamed up with its largest shareholder private equity firm SAIF Partners, to acquire a majority stake in Gurgaon-based Le Travenues Technology P vt Ltd, which owns and operates travel search engine iXiGO. While MakeMyTrip is picking 19.9 per cent for a cash consideration of $4.8 million, SAIF is acquiring 56.7 per cent f or $13.7 million. MakeMyTrip.com has expanded its footprint in India by adopting a Hybrid OTA Mode l, with 20 regional offices across the country, apart from several franchise offices. Th is is intended to help the company serve those customers who prefer making their travel and hol iday plans directly in person with the travel expert, rather than through the telephone, re al-time chat, or e-mail channels also offered by the company. In February 2007, Amadeus IT Group announced that MakeMyTrip had chosen Amadeus as technology provider. In August 2007, the company allied with Nokia to let custom ers book air tickets on their mobile phones. In March 2011, MakeMyTrip underwent re-branding, wherein its brand tagline/sloga n was changed from Wish, Click, Go to MEMORIES UNLIMITED.

C:\Users\RAJAN\Desktop\Deep-Kalra-47_3.jpg Cover Story Interview: Deep Kalra, CEO, MakeMyTrip

As we establish ourselves as the market leaders, it is imperative for us to leve rage it to position ourselves as an =Employer of Choice and also offer our people plethora o f growth opportunities. Therefore managing talent is a prime focus which ensures that our people development strategy and HR processes are in line with organizational needs. Hiring the right people for the right job is another area of focus. Our focus is to hire for people with a constant adrenaline rush that keeps them going tirelessly at all t imes to deliver their best and also challenge themselves each time with a bigger goal. We seek t he best-inclass talent from the market to ensure that the quality of our products and deli veries is world class. Therefore we are conscious to hire only those who fit the MakeMyTrip cult ure and values to 100%. The last crucial priority is building a great workplace. We strongly believe in giving our employees great learning, a career path, and a fun environment. Another concern is that being a growing company, people have their hands full an d are constantly multi-tasking which makes it difficult to pay much attention on inves ting in knowledge enriching activities which do not provide instant visible gains. Thus there is a challenge to motivate them to upgrade their existing knowledge base. Further, it s nascent nature also makes nurturing of talent important because the required talent is n ot readily available in the market. Going forward, HR s biggest responsibility will be to ensure a balance between bus iness goals and people-centricity in all company policies. To keep the uniqueness and essence of MakeMyTrip, the HR team ensures that they offer the employees a culture of freed om, empowerment and excitement. Special care is taken to keep employees engaged and motivated despite the hectic work schedule. This ensures that each morning the e mployee looks forward to reach office and start a new day. All three HR functions - recr uitment, operations and organization development work in tandem to ensure that employees a re kept happy and engaged at the workplace. The HR department is highly responsive and f ollows the philosophy of .happy employees make happy customers.. The SPOC (single-point -ofcontact) model is followed in the organization, wherein at least one HR person s its at every

floor. This ensures that the employees always have someone within their reach to put forward their queries to and get an instant direction/ resolution.

VENTURE CAPITAL CASE STUDY 3 Credit Guarentee Scheme

CGTMSE

THE NEED: Availability of bank credit without the hassles of collaterals / third party gua rantees would be a major source of support to the first generation entrepreneurs to realise their dream of setting up a unit of their own Micro and Small Enterprise (MSE). Keeping this ob jective in view, Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and fac ilitate flow of credit to the MSE sector. To operationalise the scheme, Government of In dia and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CG TMSE). The main objective is that the lender should give importance to project viabilit y and secure the credit facility purely on the primary security of the assets financed. The o ther objective is that the lender availing guarantee facility should endeavor to give composite cr edit to the borrowers so that the borrowers obtain both term loan and working capital facili ties from a single agency. The Credit Guarantee scheme (CGS) seeks to reassure the lender th at, in the event of a MSE unit, which availed collateral free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 75 / 80/ 85 per cent of the credit facility. Any collateral / third party guarantee free credit facility (both fund as well a s non fund based) extended by eligible institutions, to new as well as existing Micro and Small En terprise, including Service Enterprises, with a maximum credit cap of Rs.100 lakh (Rupees Hundred lakh only) are eligible to be covered. The guarantee cover available under the scheme is to the extent of 75% / 80% of the sanctioned amount of the credit facility, with a maximum guarantee cap of Rs.62. 50 lakh / Rs. 65 lakh. The extent of guarantee cover is 85% for micro enterprises for cred it up to Rs.5 lakh. The extent of guarantee cover is 80%(i) Micro and Small Enterprises operated an d/or owned by women; and (ii) all credits/loans in the North East Region (NER)

The lender should cover the eligible credit facilities as soon as they are sanc tioned. In any case, the lender should apply for guarantee cover in respect of eligible credits sanctioned in one calendar quarter latest by end of subsequent calendar quarter. Guarantee wil l commence from the date of payment of guarantee fee and shall run through the agr eed tenure of the term credit in case of term loans / composite loans and for a peri od of 5 years where working capital facilities alone are extended to borrowers, or for such pe riod as may be specified by the Guarantee Trust in this behalf.

The Credit Guarantee Scheme was launched by the Ministry of Micro, Small & Mediu m Enterprises in order to facilitate easy flow of credit to the sector. Under the scheme, the government, along with the Small Industries Development Bank of India (SIDBI), s etup the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

The idea is to assure the lender that even in case of default of payment a larg e percentage of the loan will be paid by the government, thereby reducing the risk of the len ding authority and making them more open to give credit to MSMEs. Banks, on their part, are pro viding loans at lower rates to MSMEs, provided that these loans are covered under the C GTMSE.

The 10th Foundation Day of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) on July 27, 2010.

THE SCHEME:

The scheme was formally launched on August 30, 2000 and is operational with effe ct from 1st January 2000. The corpus of CGTMSE is being contributed by the Government an d SIDBI in the ratio of 4:1 respectively and has contributed Rs.1906.55 crore to t he corpus of the Trust up to March 31,2010. As announced in the Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end of 11th Plan.

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was set up by Ministry of Micro, Small & Medium Enterprises (MSME), Government of India (GOI) and Small Industries Development Bank of India (SIDBI) in August 2000.The GOI and SI DBI as settlers of the Trust have committed to raise a corpus of Rs.2500 crore (approx. USD 520 million @ 1 USD = Rs.48) in the ratio of 4:1 to provide CGTMSE a sound financial base. CGTMSE has guaranteed over 150,000 loans in last 8 years of its inception and is see a fast growth in the adoption of its products.

Category Maximum extent of Guarantee where credit facility is

Upto Rs.5 lakh Above Rs.5 lakh upto Rs.50 lakh Above Rs.50 lakh upto Rs.100 lakh Micro Enterprises 85% of the amount in default subject to a maximum of Rs.4.25 lakh

75% of the amount in default subject to a maximum of Rs.37.50 lakh Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh Women entrepreneurs/ Units located in North East Region (incl. Sikkim) (other than credit facility upto Rs.5 lakh to micro enterprises)

80% of the amount in default subject to a maximum of Rs.40 lakh Rs.40 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.65

lakh All other category of borrowers 75% of the amount in default subject to a maximum of Rs.37.50 lakh Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh

FREQUENTLY ASKED QUESTIONS: Which type of borrowers can be covered under the Scheme? New and existing Micro and Small Enterprises engaged in manufacturing or service activity excluding 'Retail Trade'. Whether borrowers from all service sector enterprises are eligible under the Scheme? As of now, all activities that come under service sector as per RBI's guidelines on 'Lending to Priority Sector' and MSMED Act, 2006 except retail trade are eligible for covera ge under the scheme. Whether credit facility extended to self-help group can be covered under the scheme? No. At present, as per the Scheme, the credit facility extended to Self Help Gro up cannot be covered.

Which are considered as eligible lending institutions under the Scheme? All Scheduled Commercial Banks (either PSU, Private or Foreign Banks), select Regional Rural Banks, or such of those institutions as may be directed by GOI ca n avail of guarantee cover in respect of their eligible credit facilities under th e Scheme. Small Industries Development Bank of India (SIDBI), National Small Industries Corporation Ltd (NSIC) and North Eastern Development Finance Corporation Ltd (NEDFI) have been included as eligible institutions Can a Private sector bank or a foreign bank be eligible for guarantee cover? Yes, provided it is a commercial bank listed in the II Schedule to the Reserve B ank of India Act, 1934. Is Regional Rural Bank eligible for guarantee cover? Yes. But only those Regional Rural Banks, which have been classified by NABARD under the 'Sustainable Viable' category and currently viable category with posit ive networth.The Trust shall cover credit facilities (Fund based and/or Non fund bas ed) extended by select RRB(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility not exceeding Rs. 50 lakh by way of term loan and/or working capital facilities on or after entering into an agreement with th e Trust, without any collateral security and\or third party guarantees.

What is quantum of credit facility that can be covered under the Scheme? Fund and non-fund based (Letters of Credit, Bank Guarantee etc.) credit facilit ies up to Rs.100 lakh per eligible borrower are covered under the guarantee scheme provided they are extended purely on the project viability without collateral se curity or third party guarantee. Can a credit facility of over Rs. 100 lakh be covered under the Scheme?

Yes, provided that the entire credit facility is extended without any collateral security and it is otherwise eligible for a guarantee cover under the Scheme. The guarant ee cover available will be restricted to credit of Rs. 100 lakh even though credit extended is more than Rs. 100 lakh to an eligible borrower. In other words, maximum of credit risk borne by CGTMSE is restricted to Rs.62.50 lakh being 75% or Rs 65 lakh being 80% as the case may be. Is there any ceiling in respect of interest to be levied on the credit facility advanced to the borrower if the same is to be covered under the Scheme? The lender has to follow the guidelines issued by RBI regarding charging of inte rest on the credit. However, the rate of interest shall not exceed 3% over and above Prime Lending Rate (PLR) of the lender. This is exclusive of the fee payable to the Trust.

Whether the rates of guarantee fee and annual service fee can be varied after th e commencement of guarantee cover? Guarantee fee will not be changed with retrospective effect. Since the guarantee fee is payable only once at the time of seeking guarantee cover, so any change in rate will hav e only prospective effect on the future proposals to be covered under the Scheme. As regards Annual Service Fee, it is payable on the guaranteed credit facilities as on March 31, the prevailing ra te at that time will apply. Whether the guarantee will continue to be available in respect of a particular b orrower unit if there is change in management of that borrower during the period the guarante e is in force? If the new promoters / management meets / satisfy the norms of the eligible borr ower viz. maximum credit availed and outstanding, MSE status etc., and continues to perfor m the existing activities of borrower or undertakes the new activities which otherwise are elig ible under the Scheme for guarantee then the lender can continue such borrower with existing li abilities under the scheme of guarantee. However, if the new promoter / management do not satisfy an y of the norms of the Scheme, the guarantee in respect of the credit facility shall be deemed t o be terminated from the date of said transfer or assignment. Under what circumstances the guarantee cover obtained by the lender in respect o f

particular borrower will lapse? The guarantee cover given by the Trust to the lender in respect of credit facili ty to a particular borrower will lapse if i. It is subsequently brought to the knowledge of the Trust that the lender has obtained collateral / third party guarantee from the borrower while sanctioning the parti cular credit facility which has been covered under the guarantee, ii. It is subsequently gathered that the lender has advanced second / subsequent credit facility to the borrower with collateral / third party guarantee and extended the scope o f collateral / third party guarantee to the existing credit facility for which guarantee cover has be en obtained from the Trust, iii. Annual service charge is not paid to the Trust by the specified period or s uch extended time

limit as may be granted by the Trust, iv. The tenure of guarantee cover has expired Whether guarantee cover is available to the second term loan sanctioned after 2/ 3 years of the first term loan? Whether the cash credit will continue to be covered under t he scheme up to repayment of the 2nd term loan? Guarantee cover is available for the second term loan provided the aggregate cre dit does not exceed Rs. 100 lakh. Where working capital is sanctioned along with the term loa n facility, the tenure of such working capital facility shall be co-terminus with that of term l oan facility and shall run concurrently with the scheduled repayment period of the term loan facility. Subsequent to the repayment of the term loan along with which working capital was sanctioned, the guarantee cover in respect of working capital can be got renewed by paying applicable guarantee fee on the sanctioned working capital facility or the renewal of working capital may also b e clubbed with the second term loan facility so that both are sanctioned together, thus getting gua rantee cover for both the facilities for a period equal to the repayment period of second term lo an, on payment of guarantee fee on the sanctioned (term loan + working capital) account. What is the familiar ground upon which claims from MLIs are rejected by the trus t? . Legal proceedings not initiated, or just a notice under the SARFAERI act issued but charge on primary security is not taken. . Guarantee cover was not in force. i.e. servicing fee was not paid for one particular period. . Account was doubtful of repayment when the cover was taken and it was obvious from the conduct of the account that it will turn NPA subsequently. i.e applied for guarantee cover when the asset became stressed. . Claim application submitted before completion of the lock in period.

The guarantee fee payable would be on the loan amount sanctioned, subject to a maximum of Rs. 100 Lakh. In this case, Rs.100 lakh would be extended guarantee cover even t hough the sanctioned amount exceeds Rs. 100 lakh. Similarly, the annual service fee would be payable on the sanctioned amount subject to a ceiling of Rs. 100 Lakh.

FINANCIAL INSTITUTES UNDER CGTMSE:

S No. MLI Name Operating Offices 1 ALLAHABAD BANK 52 2 ANDHRA BANK 23 3 ANDHRA PRADESH GRAMEENA VIKAS BANK 11 4 ANDHRA PRAGATHI GRAMEENA BANK 6 5 ARYAVART GRAMIN BANK 6 6 ASSAM GRAMIN VIKASH BANK

1 7 AXIS BANK LIMITED 26 8 BAITARANI GRAMYA BANK 1 9 BALLIA KSHETRIYA GRAMIN BANK 1 10 BANK OF BARODA 57 11 BANK OF INDIA 49 12 BANK OF MAHARASHTRA 35 13 BARODA GUJARAT GRAMIN BANK 3 14 BARODA UTTAR PRADESH GRAMIN BANK 1 15 BIHAR KSHETRIYA GRAMIN BANK 1 16 CANARA BANK

36 17 CAUVERY KALPATARU GRAMEENA BANK 1 18 CENTRAL BANK OF INDIA 19 19 CHAITANYA GODAVARI GRAMMENA BANK 1 20 CHATTISGARH GRAMIN BANK 1

21 CHIKMAGALUR-KODAGU GRAMEENA BANK 1 22 CITY UNION BANK 1 23 CORPORATION BANK 20 24 DECCAN GRAMEENA BANK 1 25 DELHI FINANCIAL CORPORATION 2 26 DENA BANK 22 27 DENA GUJARAT GRAMIN BANK 1 28 DEUTSCHE BANK 1 29 DURG RAJNANDGAON GRAMIN BANK 1 30 ETAWAH KSHETRIYA GRAMIN BANK 1

31 GURGAON GRAMIN BANK 1 32 HADOTI KSHETRIYA GRAMIN BANK 1 33 HARYANA GRAMIN BANK 5 34 HDFC BANK LIMITED 1 35 HIMACHAL GRAMIN BANK 1 36 ICICI BANK 28 37 IDBI BANK LTD 1 38 INDIAN BANK 31 39 INDIAN OVERSEAS BANK 45 40 INDUSIND BANK 16

41 ING VYSYA BANK LTD 8 42 JAIPUR THAR GRAMIN BANK 5 43 KARNATAKA BANK LTD. 1 44 KARNATAKA VIKAS GRAMEENA BANK 9 45 KASHI GOMTI SAMYUT GRAMIN BANK 7 46 KERALA FINANCIAL CORPORATION 1

47 KOTAK MAHINDRA BANK 1 48 KRISHNA GRAMEENA BANK 1 49 LANGPI DEHANGI RURAL BANK 1 50 LUCKNOW KSHETRIYA GRAMIN BANK 1 51 MADHYA BHARAT GRAMIN BANK 1 52 MADHYA BIHAR GRAMIN BANK 1 53 MAHARASHTRA GODAVARI GRAMIN BANK 1 54 MALWA GRAMIN BANK 1 55 MGB GRAMIN BANK 1 56 MIZORAM RURAL BANK 1

57 NAINITAL-ALMORA KSHETRIYA GRAMIN BANK 1 58 NARMADA MALWA GRAMIN BANK 1 59 NATIONAL SMALL INDUSTRIES CORPORATION LTD. 9 60 NEELACHAL GRAMYA BANK 1 61 NORTH EASTERN DEVELOPMENT FINANCE CORPORATION LTD. 1 62 NORTH MALABAR GRAMINA BANK 1 63 ORIENTAL BANK OF COMMERCE 29 64 PALLAVAN GRAMA BANK 1 65 PANDYAN GRAMA BANK 1 66

PARVATIYA GRAMIN BANK 1 67 PRAGATHI GRAMIN BANK 1 68 PRATHAMA BANK 1 69 PUNJAB & SIND BANK 23 70 PUNJAB GRAMIN BANK 1

71 PUNJAB NATIONAL BANK 70 72 PURVANCHAL GRAMIN BANK 1 73 RAJASTHAN GRAMIN BANK 1 74 REWA SIDHI GRAMIN BANK 1 75 RUSHIKULYA GRAMYA BANK 1 76 SAPTAGIRI GRAMEENA BANK 1 77 SARVA UP GRAMIN BANK 6 78 SAURASHTRA GRAMIN BANK 4 79 SHREYAS GRAMIN BANK 1 80 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA

66 81 SOUTH MALABAR GRAMIN BANK 1 82 STANDARD CHARTERED BANK 7 83 STATE BANK OF BIKANER & JAIPUR 8 84 STATE BANK OF HYDERABAD 13 85 STATE BANK OF INDIA 206 86 STATE BANK OF INDORE 4 87 STATE BANK OF MYSORE 28 88 STATE BANK OF PATIALA 8 89 STATE BANK OF TRAVANCORE 34 90 SYNDICATE BANK

37 91 TAMILNAD MERCANTILE BANK LTD 1 92 THE BANK OF RAJASTHAN LTD. 1 93 THE DHANALAKSHMI BANK LIMITED 1 94 THE FEDERAL BANK LTD 14 95 THE JAMMU & KASHMIR BANK LTD 1

96 THE NAINITAL BANK LTD. 2 97 THE SOUTH INDIAN BANK LIMITED 1 98 THE TAMILNADU INDUSTRIAL INVESTMENT CORPORATION LIMITED 1 99 TRIPURA GRAMIN BANK 1 100 TRIVENI KSHETRIYA GRAMIN BANK 1 101 UCO BANK 37 102 UNION BANK OF INDIA 57 103 UNITED BANK OF INDIA 29 104 UTTARANCHAL GRAMIN BANK 4 105 UTTARBANGA KSHETRIYA GRAMIN BANK

1 106 VIDHARBHA KSHETRIYA GRAMIN BANK 1 107 VIDISHA BHOPAL KHETRIYA GRAMIN BANK 1 108 VIJAYA BANK 21 109 VISVESHVARAYA GRAMEENA BANK 1

Direct Credit Schemes

1. SSIs 2. Service sector units with project cost upto Rs.25 crore 1. Medium Sector Enterprises (MSE) and 2. Service sector units with project cost above Rs.25 crore and upto Rs.250 crore. Eligibile Borrowers I] New or existing SSI units. ii] SSI unit graduating to medium scale, and iii] Service sector units with an overall project cost not

i] New or existing medium sector enterprises, and ii] Service sector units with an overall project cost above Rs.25 crore and upto Rs.250

exceeding Rs.25 crore. crore with Bank's assistance not exceeding Rs. 50 crore. Constitution The unit should generally be a private limited / public limited company. However, partnership firms, sole proprietorship concerns and Societies and Trusts would also be considered on a case to case basis. The unit should generally be a private limited / public limited company Nature of assistance Term loan and other forms of assistance such as Working Capital Term Loan and bills discounting (on selective basis). Term loan and other forms of assistance such as Working Capital Term Loan, suppliers' & purchasers' bills discounting. Investment products such as debentures, optionally convertible cumulative preference shares, zero coupon bonds, etc. Currency of loan In Rupee or foreign currency In Rupee or foreign currency

Direct Credit Schemes Purpose Assistance for purposes, such as Assistance for purposes, such as

1. Setting up of a new SSI unit/ service sector unit. 2. Expansion / Diversification/ modernisation/ technology upgradation/ quality certification. 3. Any other activity considered relevant to the project. 4. For undertaking various marketing related activities 5. Acquisition of additional machinery / equipment 6. Meeting working capital requirements including gap in MPBF or margin on selective basis. 7. Any other activity as per guidelines (having linkages and benefits accruing to SSI sector from the proposed assistance). 8. All activities covered under erstwhile marketing assistance scheme for SSIs. 1. Setting up of a new MSE unit/ service sector unit. 2. Expansion / Diversification/ modernisation/ technology upgradation/ quality certification. 3. Any other activity considered relevant to the project.

4. For undertaking various marketing related activities. 5. Acquisition of additional machinery / equipment. 6. Meeting working capital requirements including gap in MPBF or margin on selective basis. 7. Any other activity as per guidelines (having linkages and benefits accruing to MSE sector from the proposed assistance). 8. All activities covered under erstwhile marketing assistance scheme for SSIs. Minimum loan amount 1. Generally Rs.50 lakh for setting up new unit and Rs.25 lakh for Generally Rs.100 lakh for setting up new unit and

other purposes. 2. In respect of well run existing SSI units, the minimum loan could be Rs. 10 lakh. Rs.50 lakh for other purposes.

Rate of interest As applicable from time to time. As applicable from time to time. Desirable Norms and parameters Debt Equity Ratio Generally not exceeding 2:1 for the company as a whole. Generally not exceeding 2:1 for the company as a whole. Minimum Promoter's contribution (wherever applicable) New projects - 33%, lower contribution [upto 25%] could be accepted in respect of existing well performing companies / firms. Others 25% (minimum) New projects - 33%, lower contribution [upto 25%] could be accepted in respect of existing well performing companies. Others - 25% (minimum) Period of loan / limit Minimum 6 months to maximum 8-10 years for term loan (including moratorium of not exceeding 18 months). Minimum 6 months to maximum 8-10 years for term loan (including moratorium of not exceeding up to 18 months). Upfront fee [non refundable]

1% of the term loan sanctioned at the time of issue of LoI. Upto 1% of the term loan sanctioned at the time of issue of LoI.

APPLYING FOR CGTMSE MADE EASY:

Additionally, entrepreneurs interested in obtaining collateral free small business loans or working capital credit lines from CGTMSE can apply directly through their account on biz2credit.in. The portal connects business owners with loan options from lenders, including public, private and micro and rural financial institutions. This is in line with our focus to guarantee collateral free working capital small business loans to the micro, small and medium enterprise (MSMEs) in the manufacturing and services sector by leveraging technology through our lending partners, said OS Vinod, CEO of CGTMSE. Biz2Credit and CGTMSE have collaborated to create a system that improves the financial application process for collateral-free small business loans and working capital lines of credit. The average processing time for receiving a loan is around two weeks. integrated document sharing and messaging features to help the entrepreneur quickly and easily reach the funding stage. Founded in 2007, Biz2credit connects small business owners with service providers and lenders, empowering them to effectively compete with big business, innovate their services and products and grow their enterprise. Biz2Credit does this by matching entrepreneurs with loan options based on the strength of their business, venture financing priorities and the creditworthiness of the individual. Built for transactions, Biz2Credit gives small business owners 1GB free storage space to manage and share documents, access to a global small business exchange to market their services and free advice on how to start or grow their enterprise. PERFORMANCE AND REVIEW OF CGTMSE: During the first nine months of financial year 2009-10, CGTMSE has shown commendable growth in its performance in terms of number and amount of guarantee covers issued under its Credit Guarantee Scheme on all India basis. Against the set target of covering 1,00,000 proposals under its Credit Guarantee Scheme (CGS) during FY 2010, CGTMSE has already reached the target registering a growth of 86% and 103% in terms of number of guarantee approvals and amount respectively over the previous financial year.

CGTMSE issued the 1,00,000th Credit Guarantee Approval Certificate to Punjab National Bank in respect of their collateral-free loan of Rs.60 lakh sanctioned to M/s. Chemical Corporation of India, Bulandshahr, Uttar Pradesh.

CGTMSE to reach the target of 1,00,000 proposals in FY 2010. During FY 2010, as at December 31, 2009, Punjab National Bank emerged as the MLI with the highest coverage of 19,651 guarantee approvals for Rs.673.68 crore with Uttar Pradesh accounting for the highest coverage for States. Cumulatively, as at December 31, 2009, Punjab National Bank has covered 37,017 proposals for Rs.1000.79 crore under Credit Guarantee Scheme. Shri O.S. Vinod, CEO, CGTMSE indicated that cumulatively, as at December 31, 2009, 2,49,164 proposals for Rs.9,192.27 crore had been approved by CGTMSE on all India basis since inception and the Trust was hopeful of rapidly scaling up the coverage further during FY 2010. Around 84% of these guarantees were to small borrowers with average loan size of below Rs.5 lakh. CGTMSE as on date has 99 Member Lending Institutions comprising of all PSU Banks, major Private Sector Banks, Regional Rural Banks, NEDFi and SIDBI. The operations of the Trust are conducted online through internet based B2B portal, resulting in transparency and efficiency of operations. He further added that this sector comprising more than 26 million enterprises as per the 4th census of MSMEs, is the second largest employment generator in the country, producing more than 40% of industrial output and nearly one-third of country s exports. The corpus of CGTMSE is being contributed by the Government and SIDBI in the ratio of 4:1 respectively and has contributed Rs.1906.55 crore to the corpus of the Trust up to March 31, 2010. As announced in the Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end of 11th Plan.

WORKING SCHEME OF CGTMSE: Any geographical patterns? Tamil Nadu and Kerala. Tamil Nadu is the highest in terms of numbers and Kerala is number two. If you look at Kerala s example, today you cannot call it one of the most economically developed states, but the coverage of our guarantee scheme has been quite good. That shows that if you have a very knowledgeable banker and a well-informed public, the marriage can be good.

Why only less than a lakh entrepreneurs? What is the limiting factor? We face a unique situation. Unless a loan is given, we can t cover it. So, we actually need to encourage the bankers to lend to the sector. We also need to see that they lend to the sector without any collateral. These are two very important things. Bankers take a very cautious approach because of the small size of each deal and the high churn rate, the heightened default probability. They are also right in a way. If you do not reliable financial statements and credit records, banks take a very cautious stand. Without all these, it is very difficult to assess the reliability. CGTMSE has been set up to reduce the risk in lending to the micro sector. Like you said, banks need to be encouraged to lend. Is CGTMSE doing anything to encourage that? If the proposal is otherwise good, banks in the normal case should lend with or without collateral. If the proposal is not so good also, banks may lend for various reasons. What we are trying to tell the banks is -- you don t appraise the collateral but the project. If the project is good, and then the second issue of collateral comes in and we will step in. So, banks have to move from collateral-based lending to project-based lending, which was not happening. Now, it is happening, but in a very small way. Secondly, in banks, in lending, there are issues in terms of accountability. Whether there is collateral or no collateral, if any loan goes bad, there are accountability issues. So, many managers are very right in saying, why get into all these hassles? Don t lend and you won t get into any problems. That is another way of playing safe. But in the last couple of years, we are seeing a shift in the bank s perception. If you see our own experience, out of one lakh cases that we

did, more than 75% were done in the last 2-3 years. This year, in the first quarter itself, we have done about 12,000 cases. I think there is gradual shift taking place. But like I said, in this country, whatever you do, it is lik e a drop in the ocean. One can never get the feel that you have done enough. Just a hypothetical question, you said you have done about a lakh cases so far. If you were to fully utilize your capabilities how many cases can you guarantee? Right now, we have about Rs 1,900-2,000 crore available with us. If we were to leverage this, say by five times, we can easily guarantee loans of about Rs 10,000 crore. And this is a very conservative estimate. There are guarantee organizations abroad, which have been leveraging much more like for example in Germany, where the leveraging is 25-26 times. There the banking systems are far more sophisticated. Our committed corpus is Rs 2,500 crore (2000 crore from the government and 500 crore from SIDBI). If you take five times leveraging, we can do about Rs 12,500 crore of guarantees as on date. Let me come back to the guarantee part specifically, is it an overall guarantee for the entrepreneur or is it the guarantee for the project? I, as an entrepreneur, could have multiple projects under guarantee? The scheme says upto Rs 50 lakh per borrower. There could be multiple projects covered. Suppose, you take a loan for Rs 10 lakh; subsequently, you want to expand, you can take another Rs 10 lakh and so on till 50 lakh without collaterals.. Typically when a bank comes to you after appraising a project do you do a repeat appraisal? Here in India, we have chosen a model where we trust completely on the banker s ability to assess the project. We don t question them. How much time does it take for you to process an application? It takes 24 hours or less. They do the due diligence and they get to you? There is no due diligence. If something goes wrong, they have to file the claim with us. While filing the claim, there are five or six columns they have to tick. One is whether the guarantee is valid. Whether they have classified the specific loan as an NPA (non performing asset) in their books, Third is if they have classified it as an NPA, have they issued a recall notice, fourth is whether they have filed in the appropriate forum, and fifth whether there is

a certification from an AGM level officer. If these things are there, we simply issue a cheque. There is nothing more we need to know. Once that has been done, there is no value addition from our side. We pay 75 % of the guaranteed amount immediately. The remaining 25% we pay after the total process is over. After the decree is obtained. Ultimately we share the default 3:1. Is that why the banks are holding back because they have to bear 25%? You cannot have a situation where you have a 100% guarantee scheme. If you see internationally also, guarantees have been ranging between 5080%. There is a case where they have done 100%, once I think, but they found the default rate rising dramatically. We need to be somewhere where it interests the banks to get covered, but at the same time it cant be 100% in their favor. 75% to 80% is the global practice. What is the biggest challenge going ahead? One is that we need to scale up in a big way. That is the biggest challenge. Second is that more than actually covering the number of loans, personally I feel, that CGTMSE should be in a position to encourage the banks to lend at a lower rate. If that happens then I think the guarantee mechanism can work well because it removes a lot of apprehensions of the banker should come down for the SMEs. When that happens the take off stage would be ready.

Operational Highlights of CGTMSE

Period Active MLIs Number of Proposals Approved Credit Amount Approved (Rs. in Lakh) FY 2000-01 9 951 606 FY 2001-02 16 2296 2952 FY 2002-03 22 4955 5867 FY 2003-04 29 6603 11760 FY 2004-05 32 9516 32677 FY 2005-06

36 16284 46191 FY 2006-07 40 27457 70453 FY 2007-08* 47 30825 105584 FY 2008-09* 57 53708 219940 FY 2009-10* 85 151387 687511

Operational Highlights of CGTMSE Operational Highlights of CGTMSE 10. As on March 31, 2010, 3,00,105 proposals from micro and small enterprises have been approved for guarantee cover for aggregate credit of Rs.11550.61 crore, extended by 85 MLIs in 35 States/UTs. A year-wise growth position is indicated in the table below:

Period Active MLIs Number of Proposals

Approved Credit Amount Approved (Rs. in Lakh) FY 2000-01 9 951 606 FY 2001-02 16 2296 2952 FY 2002-03 22 4955 5867

FY 2003-04 29 6603 11760 FY 2004-05 32 9516 32677 FY 2005-06 36 16284 46191 FY 2006-07 40 27457 70453 FY 2007-08* 47 30825 105584 FY 2008-09* 57 53708 219940 FY 2009-10* 85 151387 687511

NUMBER OF REGISTERED & UNREGISTERED SSI UNITS - ALL INDIA Year No. of units (In lakhs Nos.) Regd. Un-Regd. Total 1990-91 13.78 5.70 19.48 1991-92 14.98 5.84 20.82 (6.88) 1992-93 16.48 5.98 22.46 (7.98) 1993-94 17.76 6.12 23.88 (6.14) 1994-95 19.44 6.27 25.71 (7.66) 1995-96 20.84

6.40 27.24 (5.95) 1996-97 22.07 6.50 28.57 (4.88) 1997-98 23.52 6.62 30.14 (5.5) 1998-99 24.47 (P) 6.74 (P) 31.21 (P) (3.55) 1999-2000 25.39 (Pj) 6.86 (Pj) 32.25 (Pj) (3.33)

http://www.dcmsme.gov.in/sido/boardmeeting/46/Image17.gif Production The small-scale industries sector plays a vital role in the growth of the country. It contributes almost 40% of the gross industrial value added in the Indian economy. It has been estimated that a million Rs. of investment in fixed assets in the small scale sector produces 4.62 million worth of goods or services with an approximate value addition of ten percentage points.

Year Target Achievement 1991-92 3.0 3.1 1992-93 5.0 5.6 1993-94 7.0 7.1 1994-95 9.1 10.1 1995-96 9.1 11.4 1996-97 9.1 11.3 1997-98 *

8.43 1998-99 * 7.7 1999-00 * 8.16 2000-01 (P) * 8.90

Export SSI Sector plays a major role in India's present export performance. 45%50% of the Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. It would surprise many to know that non-traditional products account for more than 95% of the SSI exports.

http://www.dcmsme.gov.in/sido/boardmeeting/46/Image16.gif http://www.dcmsme.gov.in/images/up1.gif The exports from SSI sector have been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garments, leather and gems and jewellery units from this sector. The product groups where the SSI sector dominates in exports, are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products. The SSI sector is reorienting its export strategy towards the new trade regime being ushered in by the WTO. Year Exports (Rs. Crores) (at current prices) 1994-95 29,068 (14.86) 1995-96 36,470 (25.50) 1996-97 39,249 (7.61) 1997-98 43946 (11.97) 1998-99 48979 (10.2) 1999-00 (P) 53975 (10.2)

P-Provisional

PERFORMANCE OF MICRO & SMALL ENTERPRISES Year Number of Enterprises (Lakh Nos.) Empl. (Lakh Person) Production (Rs. Crs.) Growth Share In Registered Unregistered Total at Current prices Rate (%) GDP (%) 20022003 15.91 93.58 109.49 263.49 314850 8.68 5.92 20032004 16.97 96.98 113.95

275.30 364547 9.64 5.79 20042005 17.53 101.06 118.59 287.55 429796 10.88 5.84 20052006 18.71 104.71 123.42 299.85 497842 12.32 5.83 20062007 20.98 107.46 128.44 312.52 587196 12.65 5.94

20072008 (Projected) 24.68 108.99 133.67 322.28 695126 13.00 NA

SSIs IN INDIA 1. Estimated No. of Units 3.57 Million 1. Employment 19.96 Million 1. Share in Industrial Value Added 39% 1. Share in Total Exports Direct Overall

45%

34%

1. Total Number of Items Produced Over 8000

1. Number of Reserved Items 675

(Figures for 20022003)

EMPLOYMENT PROVIDING TRENDS IN GROWTH OF EMPLOYMENT IN SSI & INDUSTRIAL SECTOR (in %) Period GDP Growth per annum Increase in jobs per annum Organised Sector including Government SSI sector 19801990 5.7% 1.59% 6.7% 19911997 5.7% 0.86% 3.5%

CREDIT APPROVED: Period Active MLIs Number of Proposals Approved Credit Amount Approved (Rs. in Lakh) FY 2000-01 9 951 606 FY 2001-02 16 2296 2952 FY 2002-03 22 4955 5867 FY 2003-04 29 6603 11760 FY 2004-05 32 9516 32677 FY 2005-06 36 16284

46191 FY 2006-07 40 27457 70453 FY 2007-08* 47 30825 105584 FY 2008-09* 57 53708 219940 FY 2009-10* 85 151387 687511

VENTURE CAPITAL CASE STUDY 4 ICICI VENTURES

C:\Users\ujjwal\Desktop\vc pro\Welcome to ICICI Venture - India's Largest Privat e Equity Fund20_files\pix1.gif C:\Users\ujjwal\Desktop\vc pro\Welcome to ICICI Venture - India's Largest Privat e Equity Fund20_files\pix1.gif C:\Users\ujjwal\Desktop\vc pro\Welcome to ICICI Venture - India's Largest Privat e Equity Fund20_files\pix1.gif http://www.iciciventure.com/images/blank.gif

ICICI VENTURE - a private equity firm ICICI Venture is one of the largest and most successful private equity firms in India with funds under management to the tune of USD 2 billion. ICICI Venture, over the years has built an enviable portfolio of companies acros s sectors including pharmaceuticals, Information Technology, media, manufacturing, logisti cs, textiles, real estate etc thereby building sustainable value. It has several .firsts. to its credit in the Indian Private Equity industry. Amo ngst them are India s first leveraged buyout (Infomedia), the first real estate investment (Cybe r Gateway), the first mezzanine financing for a acquisition (Arch Pharmalabs) and the first =royalty-based structured deal in Pharma Research & Development (Dr Reddy s). ICICI Venture is a subsidiary of ICICI Bank, the largest private sector financia l services group in India. Firms Funded: Banking & Financial Services Centurion Bank of Punjab Karvy Stock Broking Ltd

Consumer Services PVR Deccan Aviation Tops Securities

Energy Reliance Petroleum Kalpataru Power

Engineering Services Nagarjuna Construction VA Tech India Action Construction Equipment

Internet Naukri.Com

IT/ITES Geometric Software Infowavz Rel Q Bill Junction/Techprocess

Life Sciences Arch Pharmalabs Malladi Drugs Bharat Biotech I-Ven Pharma (Dr Reddy's Labs) RFCL Metropolis Arch Pharmalabs Perlecan Avesthagen Biocon Medicorp Intas Pharma Swiss Biosciences

Manufacturing Samtel Color Tebma Shipyards Ltd. ACE Refractories Electrotherm (India) Limited

Investment Strategy Deal Sourcing

ICICI Venture's investment process starts with the sourcing of deals. Being the premier private equity player in India, ICICI Venture's reputation and brand equity has been attracting investment proposals and deals from entrepreneurs, management teams, promoters a nd intermediaries. Deals are also directly sourced from industry contacts of the ma nagement team. Besides, ICICI Venture also leverages its network with investment banks, f und investors, and also draws upon its access to the ICICI Bank Limited network with its large corporate clientele. Deal Evaluation ICICI Venture engages in a rigorous and disciplined decision-making process prio r to making an investment. When considering a potential transaction, ICICI Venture conducts a timely and thorough due diligence investigation. The skills of the ICICI Venture invest ment professionals are important to the due diligence process, as they are able to de termine the optimal structure and financing methods for a particular transaction, as well as negotiate favorable acquisition terms. ICICI Venture has an in-house risk, legal & complia nce team

which provides transactionary support to the investment teams & greatly enhance the response time. The investment proposal would move through various stages of preliminary analysi s, initial meeting, internal valuation discussion, valuation negotiation, term sheet negoti ation, management committee meeting, & due diligence appraisal meeting before it is pro posed in the Investor Committee meeting.

Investment Decision The Investment proves or rejects the necessary, ask fications. The final decision Committee reviews a deal recommended for investment and either ap investment proposal. The Investment Committee may, if considered for further analysis, additional due diligence or any other clari is based on a majority vote in the Investment Committee.

Post-Investment Process ICICI Venture endeavours to ensure that the Portfolio Companies are governed eff ectively and that there is active involvement and timely intervention by the team once th e investment is made. The team creates value in the Portfolio Companies by taking strategic, operational and financial initiatives aimed at strengthening their competitive position vis-vis competitors and industry benchmarks. The Investment team works with management teams to identify opportunities for en hancing value through cost reduction and internal rationalization. They also work togeth er to implement growth strategies based on market definitions, customer segmentation, price management, focused marketing and sales plans, strategic capital investments and /or the introduction of proven technologies. The Investment teams also help in further s trengthening the management teams. ICICI Venture works actively with management teams to iden tify and execute acquisitions.

Strategy ICICI Venture seeks to achieve a timely and appropriate exit to return cash and profits for its Investors. Such exit strategies may include:

. . . . . .

Selling off the stake to strategic investors Initial Public Offering in India or overseas Sale to any other private equity fund or venture capital fund Secondary sale on stock markets Merger with an existing listed company Management / Company buy-backs.

The holding period of each investment is generally between 3 to 5 years. This ho wever depends upon the stage of investment and the performance of the sector and the c ompany.

http://www.iciciventure.com/images/testimonial_kishore.jpg http://www.iciciventure.com/images/testimonial_manuparpia.jpg

PANTALOON INDIA

ICICI Venture Funds Management and Kotak SEAF India Fund have together invested over Rs 120 crore ($26.6 million) in Home Solutions Retail, a wholly-owned subsidiary of Pantaloon Retail. ICICI Venture will pick up about 15 per cent stake in Home Solutions, while Kotak SEAF will take a 6 per cent stake in the company. Pantaloon promoters have also invested in Home Solutions through warrants. ICICI Venture has invested through India Advantage Fund Series II, a $810 million fund. Kotak SEAF is a Rs 400 crore private equity fund formed by a JV between Kotak Mahindra and SEAF Management LLC, US, in 2004.

Geometric Software Geometric is a leader in providing the most cost-effective, end-to-end product lifecycle management (PLM) services to the global mechanical design, manufacturing and industrial markets. Geometric was incorporated as a division of Godrej & Boyce before focused effort was put on the potential of PLM. Over time, Geometric has worked with all major PLM products companies and has strong domain expertise in engineering space. Currently, Geometric is focusing on three business segments - providing software development support to PLM software companies and providing system integration services around these products, developing own IP which is complementary to its clients in PLM space and providing engineering services to large manufacturing firms. Geometric recently acquired the engineering services division of Modern Engineer ing for an equity value of USD 25 mn. The key benefits of this acquisition would be that th e merged entity would be able to offer superior integrated PLM and engineering services c apability to a wider range of clients through its enhanced global presence.

http://www.iciciventure.com/images/testimonial_capt_gopinath.jpg http://www.iciciventure.com/images/testimonial_sanjeev.jpg Air Deccan

Air Deccan was established in 2003 with the objective of setting up a budget airline, the first of its kind in India. Price sensitivity and the aspirations of the typical Indian consumer were cited to be the main reasons for a budget airline. The airline industry began to face significant changes in its operating environment from 2005. Large rises in fuel prices and competition from other budget airlines like Spice Jet, Indigo and Go Air adversely affected Air Deccan s profitability. With ICICI Ventures assistance, some of the aircraft that had been purchased were re-contracted on a lease basis, thereby improving cash flows. In 2006, Air Deccan offloaded 25 percent of its equity in an IPO. The IPO took place during a very difficult time for Indian equity markets. Fortunate ly, with ICICI s support in the form of stepped up funding as well as marketing to other investor s, the issue was completed at the offer price. At its peak, the market capitalisation of Air Deccan reached USD 1.1 billion. By late 2007, the ongoing pressure of competition and lower tha n expected growth forced Air Deccan into significant losses. In 2008, the company was merge d into Kingfisher Airlines, a premium domestic airline. Kingfisher was attracted by Air Deccan s large fleet that enabled Kingfisher to rapidly scale up its operations. Although the initial understanding was that Air Deccan would be the budget brand of Kingfisher, it wa s later rebranded with the Kingfisher name.

NAUKRI.COM

Sanjeev Bikhchandani is among the early movers in the dot com space who realized the business potential of the internet in India. He created a highly successful Internet venture naukri.com, India s leading careers search website. His other online ventures include matrimonial website Jeevansathi.com and a real estate portal 99acres.com.

His flagship company, Info Edge (India) Ltd. is among the leading Indian Internet companies. Info Edge reported revenue of $18 million in 2006, which is almost same as the revenue of NASDAQ-listed Indian internet portal, rediff.com. The company has received venture funding from ICICI Venture Capital, a subsidiary of ICICI Bank and the largest private equity & venture capital management company in India, Kleiner Perkins Caufield & Byers, a U.S. based early stage venture capital firm. Now, Sanjeev is all set to bring the Ini tial Public Offering (IPO) of Info Edge. The IPO will float about 25% post-issue equity in p ublic by raising $28.25 million (Rs. 130 crore). This puts a valuation of about $140 mill ion (Rs. 650 crore) for the compan

VENTURE CAPITAL CASE STUDY 5 Aavishkaar India Micro Venture Capital Fund

Shri Kamdhenu Electronics Private Ltd.

OVERVIEW OF BUSINESS

Shree Kamdhenu Electronics Private Limited (SKEPL), a company based in the town of VallabhVidyanagar, Gujarat, India, develops products and systems that help bridg e the technology gap inthe dairy industry and make milk-production more transparent fo r the farmers involved. SKEPL wascreated in 1996 to act as a facilitator between milk producer s (mostly farmers) and dairies, and in its initial years was very successful. But as the South Gujarat dairy market app roached saturation,the company could not sustain its growth. SKEPL s expansion plan, launc hed in April 2003 with the help of a capital investment of nearly Rs. 18 lakhs (approx. $40,000 USD) from A avishkaar India Micro Venture Capital Fund (AIMVCF), was centered around the development of its two newengineering ventures, which would become the company s signature products.

They were theAutomatic Milk Collection System (AMCS) and the Milk Analyser, whic h together comprise the Akashganga (.Milky Way.) process, an alternative system of milk col lection that has huge potentialbenefits for the daily farmers of India.

SKEPL s headquarters are located just outside of Anand, the seat of the Anand dist rict of easternGujarat and a town that is known as the .Milk Capital. of India.

With the National Dairy Development Board and Anand Agricultural University at i ts center, Anand district relies heavily on milk production to drive the rural economy. Ind ividual dairy farmers sell their milk to village-level cooperatives called Dairy Collection So

cieties(DCS). In some villages, these organizations are run by the local pancharyat (village coun cil), while in others they elect officers to organize the co-op. Each DCS sells its milk to the district-wide Dairy Union, and from there it goes to one of the big Dairy Federations. In most parts of the country, the Collection Societies and Unions have exclusive agreements to sell to only one Da iry Federation. For almost a half-century, the farmers of Anand have been selling their milk to Amul, one of the largest milk distributors in India. The problem with this system was that when the farmers brought their milk to coo perative societies twice a day, they would often have to wait in line for as long as an h our while local officials took a

C:\Users\GUNJEE~1\AppData\Local\Temp\msohtmlclip1\01\clip_image001.png sample of the milk and used old-time methods of testing fat content. For the far mers, it meant wasting two hours of each day, and they only got paid for their trouble about tw o weeks after handing in each batch of milk. Sometimes the milk would spoil while the farmers waited in line. The process was arduous and filled with tension and disputes, which were not oft en resolved by the DCS records, which were generally kept on paper registers. In April 2003, SKEPL engineered two products, the Automatic Milk Collection Syst em (AMCS) and the Milk Analyser, which make up what is collectively known as the Akashgang a (.Milky Way.) process. Using this computerized system, milk is collected and analyzed at the Collection Society quickly and accurately. The AMCS integrates the measurement of milk para meters using instruments that are networked with a PC through a complex interface.

The system immediately provides data on parameters like fat, weight, and value o f the milk in question. The electronic system keeps the milk collectors honest by bringing tra nsparency to the system. Before, farmers could not be sure that they were being paid the full and proper amount for their product, and it was not uncommon for milk to be adulterated by the far mers or for the cooperative authorities to cheat the farmers by altering test results. The Milk Analyzer exa mines six milk parameters simultaneously, giving an accurate picture of the quality of the milk on a printed receipt. The main value addition of SKEPL s technology has been to streamline the milk-coll ection system. With computer-generated prices, the farmers are ensured sufficient compe nsation. In addition, many farmers are now paid on the spot, rather than days or weeks later , which reduces the overall burden of the whole system. The whole process now takes about 15 min utes, and has allowed for any member of a farming family (including women and children, literate or illite rate) to bring milk to the cooperative and get home quickly, without argument or dispute. The men, w ho previously were the only ones to sell their milk, can send their families to sell the milk and supplement their incomes with full-time day jobs. Over one thousand of SKEPL s computerized systems have be en sold

and are now in use in villages across India.

OPERATION AND FINANCIAL INFORMATION SKEPL has shown significant sales growth over the past raph below. As a result of increased sales and cost control has shown ble. From a financial structure perspective, SKEPL was debt ridden the Aavishkaar investment; the equity investment has provided a solid e business further. year as depicted in the g that SKEPL is now profita and overstretched before financial base to grow th

Introduction of new products is in the pipeline. Some larger corporations such a s Reliance have shown some interest in partnering with SKEPL. The main goal over the next year i s to introduce new products into the market and expand outreach to other parts of India. Howeve r, operationally, SKEPL has been struggling with limited manpower, so a focus on bu ilding internal capacity isessential.

SKEPL has beneficiaries throughout the dairy sector. In particular, SKEPL s produc ts are created with the intention to assist dairy farmers in rural and semi-urban India, dairy cooperative societies who buy milk from individual farmers and state level federations who process and distribute milk. At the end of the chain are dairy consumers throughout India. Through 100 in person interviews with rural dairy fa rmers a profile was generated on the type of people SKEPL s productsaim to help.

AAVISHKAAR S ROLE

SKEPL was the second project funded by Aavishkaar in April 2003 with a total inv estment of 18 lakhs in equity. Through this investment, Aavishkaar received a 26.62% stake in the company. Aavishkaar has been working closely with SKEPL in improving financial discipline and cost control. The team has been integral in developing the creation of an MIS system that has helped the SKEPL management team improve their internal processes and systems. Also, Aa vishkaar has provided access to a network for business development. Aavishkaar also conti nually provides advice and networking support to SKEPL on an as needed basis, as well a s working with SKEPL on negotiations with potential investors.

Based on various interviews the following outcomes were identified:

Learn:

Good business strategies Networking, business development and negotiating partnerships Building stronger management skills

Behaviours/Actions:

Increased publicity Decreased risk profile with 26% Aavishkaar ownership Usefulness of product has improved credibility among dairy cooperatives Breakeven with profit potential within the next year Ultimate benefits: Created a more efficient dairy sector Time savings results in other income generating options Greater asset accumulation as dairy farmers own their animals

CONCLUSION

Applying Aavishkaar s logic model to the outcomes drawn from interviews, surveys a nd focus groups suggests that investing in SKEPL has had a positive social impact on the dairy farmers, and their communities.

VENTURE CAPITAL CASE STUDY 6 SEQUOIA CAPITAL

SEQUOIA CAPITAL Sequoia Capital India currently manages funds capitalized at close to US $1.8 bi llion and invests across venture, growth and late stage opportunities. It takes a long term view o n investments and plays the role of an active, value added partner to entrepreneurs, business fami lies and management teams. Over the last 9 years, Sequoia Capital India has invested in m ore than 50 Indian companies including Applabs, Comviva (formerly Bharti Telesoft), Cafe Cof fee Day, Edelweiss, Idea Cellular, Just Dial and Shaadi.com. Globally, Sequoia Capital has an unparalleled track record of partnering with en trepreneurs to create global market leaders. Sequoia Capital has been an early investor in comp anies such as Google, Cisco, Yahoo, YouTube, Oracle and Apple Computers. Sequoia Capital maint ains dedicated teams in the US, China, India and Israel. No of Companies invested:60 Total investments:$800mn

WHAT THEY FOCUS ON .The investments are not done through open market; they are done nships, through people and entrepreneurs we know. In every case, we know rs for many years before we made the investment. You will not find us making ity investments. We make early stage investments, early in the sense sector and early in the company..says Mohit Bhatnagar,Sequoia Capital They basically look for four things when they invest. . The first is growth. It is very important for a VC that the company has exhibi ted a strong growth or has the potential for strong growth in the triple digits in the early stages of its life. To them, that is the best indicator that we have been able to take the lea d in the market. . The second is a fantastic team . third is a large market . fourth is a well-differentiated product SHAILENDRA SINGH Shailendra is a Principal with Sequoia Capital India. Prior to joining Sequoia Capital India in 2006, Shailendra worked at Bain & Company, where he advised senior management through relatio the entrepreneu standard commod of being in the

of Fortune 500 companies on pricing, customer segmentation, organizational design, technology outsourcing and international growth. Prior to Bain, Shailendra was c o-founder and CEO of a venture-backed offshore outsourcing company called Jalva Media. Shailendra received an MBA with Distinction from Harvard Business School and a B .Tech in Chemical Engineering from IIT Mumbai

JUST DIAL.COM ABOUT THE COMPANY:

Just Dial is a clear leader in the local search space, with over 90% market shar e, reaching out to 400 million mobile customers across 240 cities and 40 million internet users. Th e company has introduced many innovations to benefit customers, the most recent being a single number that is available across 240 cities. The increase in customer calls from 60,000 to 200,0 00 per day is testimony to the spectacular growth Just Dial has achieved in the last three yea rs. The popularity of Just Dial has made it a preferred medium for advertisers. The company today h as emerged as one of the most efficient and measurable advertising platforms with over 100,000 SME advertisers VALUATION:521 crore TURNOVER:100 crore

ROUND OF INVESTMENTS: . Sequoia Capital picked up a stake in Mumbai-based local search firm Just Dial Pvt Ltd for Rs 40 crore (~$8 mn). The Silicon Valley headquartered venture capital firm pick ed up a little less than 10% stake from an early investor in a secondary deal. .Just Dial is a preferred medium for local search. The confidence reposed in us by Sequoia Capital India is a testimony to the fact that we are headed in the right direction. The success of our model in India gives us the optimism to look at expanding our footprint, not only in India but also across the globe,. said VSS Mani, Founder and Managing Director, Just Dial. Sandeep Singhal, Managing Director, Sequoia Capital India said, "Just Dial is to day the leader in the Indian local search market through constant innovation and very hi gh quality customer service. We are very happy to partner with Just Dial and are confident that the company will continue to grow and set new benchmarks in this space.. . Sandeep Singhal, Managing Director, Sequoia Capital India, joined the board of Just Dial. . The investment were made from Sequoia s $300 million venture capital fund, which the

company raised in 2007. Sequoia manages over $1.8 billion in capital for India investments. . Just Dial earlier raised funding from Asia focused private equity fund SAIF Pa rtners and US-based hedge fund Tiger Global Management. It raised Rs 50 crore from SAIF in 2006, followed by a Rs 77 crore investment by Tiger in 2007. . SAIF and Tiger, which hold over 20% stake each in the firm, have also picked u p additional stakes in the secondary deal. . Just Dial achieved revenues of Rs 91 crore in FY09, and expected to reach Rs 1 30 the following year. FUNDS DISBURSAL Sequoia Capital s global experience and local expertise added value and help fuell ed Just Dial s aggressive growth plans . Following the investments;The company forayed into print, but is now pulling o ut as it didn t work out. .We did that as we were looking at widening our revenue base, and there were some of our customers who were targeting print ads,. said Mani. Enhancing l ocal information through online and technology enabled services. . Focus on Innovation and high quality consumer services . It invested in development of in-house-built-open-source platform and is const antly upgrading since then . Emphasis were laid on enhancing search accuracy based on user feedback, and incorporating new search logicand enhancing B2B and B2C framework of the company . It also forayed overseas with local search in the US with New Call Telecom Ltd

QUICKHEAL About the company: Quick Heal Technologies is India s leading provider of computer security software products.. Quick Heal Technologies has been growing at a CAGR of almost 100% for the last t hree years, making it the fastest growing software product company in the computer security space in India. The Company registered revenues of more than INR 100 crore in FY 09-10, all from its indigenously developed product portfolio. Quick Heal has a suite of award-winning computer security products that are inst alled in corporate, small businesses and consumer s homes protecting their computers from v iruses and other security threats. The Quick Heal Total Security product, addresses a wide range of distinct security needs that protect the PC from online and offline threats, in addition to providing privacy protection and PC optimization. The company also added a unique feature to Quick Heal Total Security called the PC2Mobile Scan, which enables users to scan, detect and dele te malware, spyware and viruses from mobile phones. REVENUES:INR 100 Cr ROUND OF INVESTMENTS . Sequoia Capital increased its investments in the software technology product s ector. They invested Rs 60 crore (approximately $12.8 million) in Quick Heal Technologi es. . This deal followed closely on a slew of investments by Sequoia in technology p roduct companies such as Druva Software, Ideacts Innovations and July Systems. "The local markets are big now especially in the mobile phone space where there are a lot of investment opportunities, this is the start of a new big trend," said Sumir Chad ha, managing director, Sequoia Capital India. Quick Heal has had a 100% year-on-year growth in the last three years," said San jay Katkar, CTO, Quick Heal, who expects to sharpen the company's focus on the SME sector an d large corporations. With this investment Sumir Chadha, Managing Director, Sequoia Capital will join the board of the company. FUNDS DISBURSAL

This investment helped Quick Heal Technologies in . growing its product portfolio . expanding its global distribution footprint . funding future acquisitions . Developement of various applications such as .Track my Laptop.;antivirus for a ndroid mobiles;Quickheal Admin console 4.6 . Focus on SME s and Customer satisfaction

CAF COFFEE DAY . V.G. Siddhartha, chairman of the Bangalore-based Amalgamated Bean Coffee Tradi ng Co. (ABC) and the man behind India's largest caf chain, Caf Coffee Day (CCD), has set his team a stiff target: wants to expand the chain to 950 cafs. . From where it stands today, with 595 cafs across 100 cities in India, three in Vienna, and two in Karachi, this means opening more than one caf a day -- and not just in Ind ia. Siddhartha has strong global ambitions: He wants 50 of these cafs to be located o utside India. . While this might appear to be a tall order, CCD's investors feel otherwise. Th ey see enough potential in the coffee retail market for CCD to ramp up even faster. . According to Naresh Malhotra, formerly CCD's chief executive officer and now a director at the venture capital firm Sequoia Capital: "This space has enough potential fo r Coffee Day to open a caf every 200 yards in the country, within five minutes' walking di stance of one another." Sequoia invested $20 million in ABC, one of India's largest integr ated coffee conglomerates, two years ago. . Industry analysts estimate that fewer than 1,000 cafs make up India's organized space, but they put the potential at around 5,000. The largest player after Coffee Day, Barista, has about 200 cafs. Java Green (around 75 cafs) and Mocha (around 25 cafs) are further behind. Venu Madhav, head of operations at Caf Coffee Day, has started qu ietly thinking about a farther-out caf target number for his team: 2,000. . Coming from a family of coffee plantation owners and as chairman of ABC, which owns more than 10,000 acres of coffee plantations in the southern Indian state of Kar nataka, Siddhartha's aim was to sell coffee. The space he was operating in, as an export er of green coffee beans, offered low margins and these fluctuated depending on the vicissitudes of pricing in the world coffee market. A caf, in contrast, operates at the highest end of the value chain. Its margins can be 35% to 40% higher than those of bean exports, notes Bijoor. . "At that time, coffee drinking in India was limited to South Indian traditiona lists, the intellectuals and the five-star coffee shop visitors," Siddhartha says. "I saw t hat in the neighboring international markets of Southeast Asia there was a popular culture of consumers visiting a caf for experiential purpose in addition to consuming a glas s of beer. These cafs were also promoting cyber-culture and offering Internet access. These trends inspired us. We realized that there was a potential for building a coffee brand for the India market, and we launched the first cyber caf model based on the internat

ional lessons, but replaced beer with coffee. This is when Coffee Day was born." Funds Disbursal/Expansion and Experimentation . ABC is privately held, and as such does not disclose its financial results. Co mpetitors estimate the company's revenues last year to be around Rs 600 crore ($140 millio n), of which half, they say, came from a caf business that they believe turned profitabl e a few years ago. The rest of ABC's revenues come from its other business groups, all o f which operate under the Coffee Day brand. These include Coffee Day Exports, Coffee Day Xpress (fast food and beverage outlets that are much smaller than the cafs and ar e franchised), Coffee Day Take Away (coffee vending machines), Coffee Day Fresh 'n Ground (ground coffee retail outlets) and Coffee Day FMCG (packaged filter coffe e powder). ABC has 775 Xpress outlets, 7,000 vending machines in diverse locations such as railway stations, hospitals, gas stations and office campuses, and 400 Fresh 'n Ground outlets. Operating across this spectrum has allowed Siddhartha to expand his bra nd presence rapidly. . Siddhartha is experimenting now with new formats, such as lounge cafs serving p lated meals in addition to the sandwiches, pastries and croissants offered in the cafs. The idea is to see whether this format can attract and retain customers who typically go elsewhere

during mealtimes. Unlike the cafs, which cater primarily to the 15 to 30 age grou p, this format targets consumers who are more than 30 years of age. In two airports in I ndia -- in Mumbai and Bangalore -- these lounge cafs serve liquor to cater to those location s' specific audiences. Whether this plays well with consumers or just confuses the brand remains to be seen. . Meanwhile, Siddhartha is believed to have raised some $100 million for his exp ansion plans during the past few months. While much of this apparently is through debt, around $25 million has come from the Darby Asia Mezzanine Fund, a unit of Franklin Temp leton Investments. According to Richard H. Frank, CEO of Darby Overseas Investments, "Coffee Day has successfully consolidated its market leader status and is positi oned to take further advantage of the ongoing macroeconomic, demographic and lifestyle changes. We are attracted to ABC because of its leadership position within India 's rapidly expanding consumer lifestyle segment and its strong execution capabilities." . In its early years, however, Coffee Day had neither clear positioning nor sign ificant presence. In fact, it lost ground to Barista Coffee, which was founded in 2000 b y Amit Judge of the investment company Turner Morrison. Barista positioned itself as an upmarket, premium coffee caf and targeted executives who saw it as a less expensi ve alternative to coffee shops in five-star hotels. In 2002, Barista had some 85 ca fs around the country, while Coffee Day had just 35. . But after a faltering start, Siddhartha pulled things together. What turned th e tables in Coffee Day's favor was its subsequent strong positioning as a "third place" away from the home and college or workplace for the young and the young at heart. Siddhartha m ade people ages 15 to 30 Coffee Day's prime target. "With the advent of cable televi sion and growing consumerism, the urban youth in India were exposed to the lifestyles of youth across the world," he says. "They were seeking an experience which was world cla ss in nature and yet easily accessible -- an urban youth 'hangout venue' that allowed them 'their culture'. We fulfilled this latent demand." . Having zeroed in on the target, elements such as pricing, ambience, food, musi c and promotions fell into place. Says CCD's president of marketing, Bidisha Nagaraj: "We have a single-minded commitment to the young in India and everything we do is centere d on that. We see our cafs almost like a brick and mortar social community network whe re people can express themselves in a friendly, clean, non-inhibitive and non-intim idating environment that offers an excellent range of products at affordable prices

WHY SEQUOIA INVESTED . Malhotra, of Sequoia, notes that while Coffee Day can't afford to be complacen t, it is well ahead in the game. He points out that with each outlet needing an investment of around Rs 40 lakh ($100,000), this is a business that needs to be funded aggressively. Also, the low per-unit revenue makes it a difficult market to crack. "Coffee Day has a tre mendous advantage because it has its own plantations, procurement agents, curing works, etc.," Malhotra says. "The scale of its caf operations brings its own advantages." Outsi de of ABC, Siddhartha has launched a small business that supplies furniture for his ca fs and a residential hospitality college that trains young people who can be absorbed int o the business. . Malhotra believes that given its large number of outlets, instead of sourcing food from outside, Coffee Day should maximize value by putting up its own kitchens. This, he says, will ensure quality control and make it easier to introduce changes and create e xcitement around the menu. Sequoia's most immediate concern, however, is that Siddhartha n eeds to bring a chief executive officer on board for the caf business. Ever since Malh otra left in July 2007 after a six-year stint with CCD, Siddhartha has played that role himse lf. "Siddhartha has other interests that take up his time, and we have been insistin g that he get a CEO soon," Malhotra says.

. Apart from his interests in coffee, Siddhartha is founder and managing partner at Global Technology Ventures and founding chairman of Way2Wealth, an investment consultan cy. He is also on the board of MindTree, Ittiam Systems and Liqwid Krystal. In addit ion, he has other plans: He wants to leverage ABC's picturesque coffee plantations into a new business opportunity. "We have identified the burgeoning luxury tourism market a s a suitable growth opportunity," he says. "With this we will be catering to an olde r target audience." As for getting a CEO for Coffee Day, Siddhartha admits that he will " have someone to fill this position" but this will not happen immediately. . A key focus for Siddhartha at the caf business is to make greater use of techno logy, both at the back and front ends. At the back end, Madhav is working on strengthening the supply chain and logistics. At the front end, Nagaraj is focusing on making the cafs wi-fi enabled, digitizing the in-house magazine Caf Beat, building loyalty programs, an d using technology such as Bluetooth to stream music across the cafs. Nagaraj, who has wo rked for technology majors Google, Intel and Compaq, says: "Once we have our consumer s hooked on to Bluetooth in our cafs, we can create a whole lot of excitement and e nergy around it, and make communities and build further on that."

VENTURE CAPITAL ANNEXURE LIST OF REGISTERED VC FIRMS IN INDIA (SEBI)

S.No Name of the Venture Capital Fund Date of Registration Address 1 Aavishkaar India Micro Venture Capital Fund 22.05.2002 8A, Saahil, 14 Altamount Road Mumbai 400026 Tel: 022-56998955 2 Aboyne India Trust 10.11.2009 Aboyne India Trust, C/o. Eredene Infrastructure Private Limited Office No.3, Sarkar Heritage, Kane Road, Band Stand, Bandra, Mumbai - 400 050. 3 ACA Private Equity Trust 04.11.2008 Ascent Capital Advisors India Private Limited, Concorde Block, 16th Floor, U.B. City, 24 Vittal Mallaya Road, Banglore 560 001 Tel: 80-30551222 Fax: 80-30551200 4 Adharshila Venture Capital Fund 16.01.2007 Azimganj House, 7, Camac Street, 2nd Floor,

Kolkata 700 017 Tel: 033 2282 9330 - 34 Fax: 033 2282 9335 5 Aditya Birla Private Equity Trust 24.12.2008 C/o Aditya Birla Trustee Company Private Limited 1-A, Aditya Birla Centre, S.K Ahire Marg, Worli, Mumbai 400 030 Tel No: 022-6652 5728 Fax No: 022-6652 5229 6 Akruti City Venture Capital Fund 10.07.2008 Akruti Trade Centre, 6th Floor, Road No 7, Marol MIDC, Andheri (East), Mumbai 400093 Tel No : 022 67037400 Fax No : 022 66772301 7 Ambit Pragma Fund 10.07.2008 Ambit House, 449, Senapati Bapat Marg, Lower Parel, Mumbai 400013 Tel No : 022 30038400 Fax No : 022 30038410

8 Anand Rathi Realty Fund 23.06.2005 11th Floor, Times Tower Kamala City, Lower Parel, Mumbai - 400 013 9 APIDC 20.11.1998 20B, ASCI COLLEGE PARK, ROAD NO. 3, BANJARA HILLS, HYDERABAD-500 034, A.P. Tel.No.040 2355 0481 10 Aditya Birla Real Estate Fund 26.02.2010 C/o. Birla Sun Life Asset Mgt. Company Ltd., One India Bulls Centre, Tower 1, 17th Floor, Jupital Mill Compound, 841, Senapati Bapat Marg, Mumbai - 400013. Tel: 4356 8000; Fax: 4356 8110 11 Ariston IET Fund 18.10.2010 601, Swati, North Avenue, Santacruz (W), Mumbai 400 054. 12 ASK Real Estate Special Opportunities Fund 02.09.2010 Band Box House, 1st Floor, 254-D, Dr Annie Besant Road, Worli Mumbai 400025

13 Ativir Venture Capital Trust 13.11.2007 21 Hemant Basu Sarani Suit No 417, Centre Point Kolkata 700 001 Tel: 033-22319052 Fax: 033-22137131 14 Aureos India Fund 01.02.2006 303, Vaibhav Chambers, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 Tel: +91 22 30685500 15 Avendus Ace Fund Trust 26.10.2009 Avendus Ace Fund Trust C/o. Avendus Investment Holdings Private Limited IL & FS Centre, B Quadrant Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. 16 Avigo India Private Equity Trust 14.03.2006 404- 407, Mercantile House, 15 K G Marg, New Delhi-110001

17 Axis Infrastructure Fund -1 28.04.2008 C/o Axis Private Equity Limited 14th Floor, 146, Maker Chambers VI, Nariman Point, Mumbai - 400 021 18 Axis Venture Capital Trust 03.10.2006 112, Highway Commerce Centre, I.B. Patel Road, Off W.E. Highway, Goregaon (E), Mumbai 400063 Tel :022 26866210 Fax : 022 - 26866211 19 Blume Ventures Fund 1 07.01.2011 c/o IL&FS Trust Company Ltd., The IL&FS Financial Centre, Plot C-22, G Block, Bandra Kurla Complex, Bandra East, Mumbai- 400 051 20 BTS India Private Equity Fund 31.03.2006 704/705, Balarama Bandra (E) Mumbai 400051 Tel: 022-66978292 Fax: 022-66978299 21 Business Excellence Trust 08.10.2008 c/o Motilal Oswal Private Equity

Advisors Pvt Ltd., 3rd Floor, Hoechst House, Nariman Point, Mumbai - 400 021 22 Business Excellence Trust II 31.05.2010 c/o Motilal Oswal Private Equity Advisors Pvt Ltd., 3rd Floor, Hoechst House, Nariman Point, Mumbai - 400 021 23 BYTS Growth Fund 25.07.2008 5-B, Ramachandra Avenue, Seethalmal Colony, 1st Main Road, Alwarpet, Chennai 600018 Tel No : 044 2432 9863 Fax No : 044 2432 9863 24 Canbank Venture Capital Fund 04.03.1998 6th Floor, Naveen Complex No. 14, M G Road Bangalore 560001 Tel: 080-25586506/25586507 Fax: 080-25583909.

25 Cheeko Tel Pvt Ltd 22.09.2009 Cheekotel Private Limited C/o Interactivity Incubation Centre, Plot 8, Phase I, Noida Special Economic Zone, Noida 201 305 26 CIG Realty Fund 02.12.2005 C/o D.M. Harish & Co., Advocates 305-309, Neelkanth 98, Marine Drive Mumbai 400002 Tel: 022-22817272 Fax No : 022-22819258 27 Cinema Capital Venture Fund 22.05.2008 102-103, 1st floor, A/4, Lok Nirman Towers, Dr. Ambedkar Road, Khar (W), Mumbai- 400 052 Phone: +91 22 4246 1717 Fax: +91 22 4246 1700 28 DHFL Venture Capital Fund 01.10.2005 DHFL Ventures Trustee Company Pvt. Ltd. 4th Floor, Dheeraj Arma, Anant Kanekar Marg, Bandra (East) Mumbai 400051 Tel: +91 22 6774 8000/90/91 Fax: +91 22 6774 8008 29 Dhunn Carr Management and Research India Private Limited

11.01.2001 22 Kartar Bhavan Minoo Desai Marg Coloba Mumbai 400005. 30 Edelweiss Investment Trust 31.10.2005 14th Floor, Express Towers Nariman Point Mumbai 400021 Tel: 022-22864400 Fax: 022-22882119 31 Emerging India Fund 18.05.2010 C/o ICICI Investment Management Company Limited, ICICI Bank Towers, Bandra Kurla Complex, Bandra (E), Mumbai - 400051

32 Enam India Infrastructure Fund 06.09.2010 C/o Enam Holdings Private Limited 11th Floor, Express Towers, Nariman Point, Mumbai 400021 33 Eureka Venture Fund 14.02.2005 307, Regent Chambers, Nariman Point Mumbai- 400021 Tel: 22025230/66308888 34 Faering Capital India Evolving Fund 23.11.2010 Faering Capital Trust Company Private Ltd., 112, Free Press House Nariman Point Mumbai 400021 Tel: +91 22 22025902 Fax: +91 22 66321384 35 Felicitas Venture Capital Trust 17.10.2008 W New Tel Fax 36 FIRE Capital Fund 19.07.2004 901-904, 9th floor, JMD Regent Square, M G Road, Gurgaon122 001, Haryana, India 37 22, Greater Kailash 1, Delhi 110048 No : 011 41431462 No : 011 29230676

Footprint Venture India Fund 22.06.2007 Plot 16, 7th Main 1st Block, Koramangala, Bangalore - 560034 Phone: 080 41101910 Fax : 080 41101913 38 Forum Synergies India Trust 30.09.2008 Suit No VI, A 1, Epsilon, Yemlur Main Road, Banglore 560037 Tel : 080 40006400 Fax : 080 41179500 39 Gaja Capital India Fund- I 30.10.2007 G - 133, Sarita Vihar, New Delhi - 110 044 40 Green India Venture Fund 27.06.2008 C/o IFCI Venture Capital Funds Ltd. IFCI Tower, 61, Nehru Place, New Delhi 110019 Tel No : 011 26453343/46 Fax No : 011 26453348 41 Growth Plus Real Estate Fund 12.06.2007 6th Floor, Mahindra Towers 2A, Bhikaji Cama Place New Delhi - 110066

42 Gujarat Bio techology Fund 08.04.2005 Ist Floor, Premchand House Annexe Behind Popular House Ashram Road Ahmedabad 380009 Phone: (079)26580704/26581285 43 Gujarat Information Tech Fund 26.06.2000 GVFL Trustee Company Limited 1st Floor, Premchand Annexe B/h Popular House Ashram Road Ahmedabad -380009 Tel: 079 6580704/6581285/6588741 44 Gujarat Infrastructure Development Fund 01.02.2006 211, Shail Complex,2nd Floor, Opp. Madusudan House, Shilpchar Rasta, C.G.Road, Navrangpura Ahmedabad 380009 45 Gujarat VCF - 1990 03.11.1999 GVFL Trustee Company Limited 1st Floor, Premchand Annexe B/h Popular House Ashram Road Ahmedabad -380009 Tel: 079 6580704/6581285/6588741 46 GVFL Venture Capital Fund

07.06.2007 1st Floor, Premchand House Annex Behind Popular House Ashram Road Ahmedabad - 380009 Phone: 07926580704/26581285/ 26588741 Fax : 079-26585226 47 Halcyon Opportunities Special Situations Rupee Fund 07.01.2010 HRM Capital Management Pvt. Ltd.,Ground Floor, Hoechst House,Nariman Point, Mumbai - 400 021. Tel: 0222284600 48 HDFC Property Fund 21.12.2004 HDFC Property Fund Ramon House, 6th Floor, 169 Backbay Reclamation, Churchgate, Mumbai-400020. Ph:022-66316000

49 High Street Venture Capital Trust 24.11.2008 High Street Capital Level 14, Concorde Towers, UB City, Vijay Mallya Road, Bangalore- 560 001 Phone: 080-4030 0374 50 Hive Fund 22.01.2001 C/o Hyderabad Informaiton Technology Venture Enterprises Ltd (HITVEL) 1ST Floor, Parisrama Bhavanam, Fateh Maidan Road, Hyderabad-500004 Phone: 040-23235253, Dir: 23299832 51 i3E Trust 28.10.2009 C/o. IDBI Trusteeship Services Ltd., Asian Building, Ground Floor, 17, R.Kamani Marg, Ballard Estate , Mumbai - 400 001. 52 ICICI Econet Fund 04.12.2000 C/o ICICI Venture Funds Management Company Limited, Gr. Floor, Appasaheb Marathe Marg, Prabhadevi, Mumbai- 400 025 Phone: 022 2665 5050 Fax: 022 26655 5055 53 ICICI Emerging Sector Trust

29.08.2002 C/o ICICI Venture Funds Management Company Limited, Gr. Floor, Appasaheb Marathe Marg, Prabhadevi, Mumbai- 400 025 Phone: 022 2665 5050 Fax: 022 26655 5055 54 IDFC - India Infrastructure Fund - 3 28.05.2008 201, Naman Chambers, C-32, G Block, Bandra Kurla Complex, Bandra (East) Mumbai: 400-051 55 IDFC Infrastructure Fund 10.12.2002 201, Naman Chambers, C-32, G Block, Bandra Kurla Complex, Bandra (East) Mumbai: 400-051

56 IDFC Infrastructure Fund - 2 15.06.2005 201, Naman Chambers, C-32, G Block, Bandra Kurla Complex, Bandra (East) Mumbai: 400-051 57 IL&FS ORIX Trust 21.07.2009 C/o IL&FS Investment Managers LTd The IL&FS financial Centre, C22, G Block Bandra Kurla Complex Bandra (East) Mumbai 400051 58 IL&FS Private Equity Trust 27.07.2004 IL&FS Financial Centre Plot no C-22, G-Block Bandra Kurla Complex Bandra (East) Mumbai- 400051 Tel: 022-26524165/26533333 Fax No: 022-26533297 59 IL&FS Special Opportunities Fund 21.12.2009 IL & FS Special Opportunities Fund The IL& FS Financial Centre Plot No.C-22, 'G' Block, Bandra Kurla Complex, Bandra (E) Mumbai - 400 051. 60 iLabs Venture Capital Fund 11.01.2001 97, Road No. 3

Banjara Hills Hyderabad - 500 034 Tel : (040) 3352900 / 2 Fax : (040) 3351522 61 India Advantage Fund 1 20.01.2002 ICICI Venture Funds Management Company Limited, 10th Floor, Prestige Obelisk, Kasturba Road, Banglore 560001 62 India Advantage Fund -III 06.06.2005 ICICI Venture Funds Management Company Limited, 10th Floor, Prestige Obelisk, Kasturba Road, Banglore 560001

63 India Advantage Fund IV 11.08.2005 ICICI Venture Funds Management Company Limited, 10th Floor, Prestige Obelisk, Kasturba Road, Banglore 560001 64 India Advantage Fund RE S2 06.09.2010 C/o ICICI Venture Fund Management Company Ltd, ICICI Venture House Appasaheb Marathe Marg, Prabhadevi, Mumbai 400025 65 India Advantage Fund S3 I (earlier known as India Advantage Fund VIII) 19.03.2008 ICICI Venture Funds Management Company Limited, 10th Floor, Prestige Obelisk, Kasturba Road, Banglore 560001 66 India Advantage Fund V 21.10.2005 ICICI Venture Funds Management Company Limited, 10th Floor, Prestige Obelisk, Kasturba Road, Banglore 560001 67 India Alternatives Pvt Equity Fund 19.04.2010 Office No 301-302,

36 Turner Road, Bandra (west), Mumbai - 400 050 68 India Automotive Component Manufacturers Private Equity Fund-1 27.06.2008 C/o IFCI Venture Capital Funds Ltd. IFCI Tower, 61, Nehru Place, New Delhi 110019 Tel No : 011 26453343/46 Fax No : 011 26453348 69 India Development and Construction Fund 18.05.2010 4-4A, 4th Floor, Global Foyer, Sectore 34, Gurgaon, Haryana - 122009 70 India Education Fund 24.12.2010 Educomp Towers 514, Udyog Vihar Phase III Gurgaon 122001

71 India Enterprise Development Fund 27.06.2008 C/o IFCI Venture Capital Funds Ltd. IFCI Tower, 61, Nehru Place, New Delhi 110019 Tel No : 011 26453343/46 Fax No : 011 26453348 72 India Infoline Venture capital Fund 25.09.2008 Building No 75, Nirlon Complex Off Western Express Highway, Goregaon (East), Mumbai 400 063 73 Indian Infrastructure Advantage Fund 30.09.2010 ICICI Venture Fund Management Company Ltd, ICICI Venture House Appasaheb Marathe Marg, Prabhadevi, Mumbai 400025 Phone: 022 2665 5050 Fax: 022 26655 5055 74 India Infrastructure Fund 07.03.2008 C/o IDFC Project Equity Company Limited Naman Chambers, C-32, G-Block, Bandra Kurla Complex, Bandra (East), Mumbai-400 051, Maharashtra, India Telephone nos- +91 22 42222108/ Board line +91 22 42222000 75 India Innovation Fund

21.04.2009 IKP Investment Management Company Private Limited, Level IV, ICICI Bank Tower, 1-11-256, Begumpet, Hyderabad- 500 016 Phone: +9140 2348 0022 Fax: +9140 2348 0007 76 India Japan Fund 17.07.2007 302 Vibgyor Towers, Third Floor, G Block, BKC, Bandra (E), Mumbai - 400051. 77 India Plus Trust 07.09.2010 B-19, Greater Kailash Enclave Part 1 1st Floor, New Delhi- 110048. 78 India Property Fund 31.05.2005 304, Enterprise Centre Vile Parle (East) Mumbai 400099 Tel: 022-- 26172555 Fax : 022 56772575

79 India Relaty Fund I 26.07.2010 Asian Building, Ground Floor, 17 R. Kamani Marg, Ballard Estate, Mumbai 400001. 80 India Realty Venture capital Fund 07.11.2005 30,1 Camy House, Cowasji Hormusji Street, Marine Lines, Mumbai - 400002 81 India Rizing Fund 06.09.2007 511, Tusliani Chambers Nariman Point, Mumbai 400 021 82 India Value Fund (previously known as India Human Capital Fund) 29.06.2000 Suite F9C, Grand Hyatt Plaza, Santacruz (East), Mumbai 400055 83 India Value Fund III 15.12.2006 Suite F9C, Grand Hyatt Plaza, Santacruz (East), Mumbai 400055 84 India Value Fund III - A 23.08.2007 Suite F9C, Grand Hyatt Plaza,

Santacruz (East), Mumbai 400055 85 India Value Fund IV 16.11.2009 India Value Fund IV, IVF Trustee Company Pvt Ltd. Ground Floor, Rocklines House, 9/2, Museum Road, Bangalore-560001. 86 India Infrastructure Development Fund 29.03.2010 C/o. UTI Asset Mgt. Company Ltd. UTI Tower, 1st Floor, Gn Block, Bandra Kurla Complex Bandra (E), Mumbai 400051. Tel: 022 66786553 87 Indian Enterprise Fund 14.08.2003 2i Capital (India) Private Ltd., 613, Oxford Towers, 139 Airport Road, Bangalore- 560 008 Phone: 080-41151990-3 Fax: 080-41151994 88 INDIAREIT FUND 17.10.2005 INDIAREIT Consultancy Services Private Ltd. Nicholas Piramal Towers 3rd Floor Ganapatrao Kadam Marg, Lower Parel Mumbai - 400013 Tel: 022-56637911 Fax : 022-56636466

89 IndiaVenture Trust 02.07.2008 Piramal Towers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013 Tel no: 61513605 90 Industrial Venture Capital Limited 15.01.1998 Vairams, 112 Thyagaraya Road, First floor T.Nagar Chennai - 600 017 Telephone.No. 28153623 Fax.No. 28155673 91 Infinity Venture India Fund 17.12.1999 001, Turf Estate Shakti Mills Lane OFF Dr. E Moses Road Mahalakshmi Mumbai 400011 Tel: 24902201-04 Fax: 24902205 www.infinityventure.com 92 Information Technology Fund 31.03.1999 001, Turf Estate Shakti Mills Lane OFF Dr. E Moses Road Mahalakshmi Mumbai 400011 Tel: 24902201-04 Fax: 24902205 www.infinityventure.com 93 INFRAINDIA Trust

29.03.2006 IDBI Trusteechip Services Ltd, 10th floor, Nariman Bhavan 227 Vinay K Shah Marg, Nariman Point, Mumbai- 400 021 94 Intelligroup Venture Fund 15.04.2008 31, 3rd Floor, Free Press House Free Press Journal Marg, 315, Nariman Point, Mumbai - 400021 95 iPro Capital Private Equity Trust 10.03.2010 9/1, R.N. Mukherjee Road (2nd Floor), Kolkata - 700 001. 96 JM Financial India Fund 12.10.2006 141 Maker Chamber III Nariman Point, Mumbai 400021 Tel: 022- 56303030 Fax: 022- 22881586

97 JM Financial Property Fund 12.01.2007 141, Maker Chambers III, Nariman Point, Mumbai 400 021 Tel: 022 6630 3030 Fax: 022 2288 1586/ 2202 8224 98 Kaizen Trust 18.09.2009 2, Frontline Grandeur, 14, Walton Road, Bangalore - 560 001 99 Kaizen Venture Capital Pvt. Ltd. (Previously known as Nilanchal Capitals Pvt Ltd) 06.03.2006 Vivro House, 11- Shashi Colony, Opp. Suvidha Shopping Centre, Paldi, Ahmedabad- 380 007 Phone: 079 26650670 100 Karnataka Information technology Venture Capital Fund 24.07.1998 Karnataka InformationTechnology Venture Capital Fund 403, 4th Floor, HVS Court, 21 Cunningham Road, Banglalore 560 052 101 Karnataka Information Technology Venture Capital Fund-2 18.02.2008 Karnataka

InformationTechnology Venture Capital Fund - 2 403, 4th Floor, HVS Court, 21 Cunningham Road, Banglalore 560 052 102 Kerala Venture Capital Fund 18.07.2000 604, Pioneer Towers Marine Drive Kochi - 682 031 Ph: (0484) 236 1279 Fax: (0484) 237 3077 103 Kotak India Growth Fund II 03.04.2008 5th Floor , INGS Point , Plot no. 8, Near University Campus, CST Road , Kalina, Mumbai 400 098 Tel: + 91 22 6626 0500 104 Kotak India Venture Fund I 24.07.2007 5th Floor , INGS Point , Plot no. 8, Near University Campus, CST Road , Kalina, Mumbai 400 098 Tel: + 91 22 6626 0500

105 Kotak Mahindra realty fund 23.06.2005 5th Floor , INGS Point , Plot no. 8, Near University Campus, CST Road , Kalina, Mumbai 400 098 Tel: + 91 22 6626 0500 106 Kotak SEAF India Fund 01.03.2005 5th Floor , INGS Point , Plot no. 8, Near University Campus, CST Road , Kalina, Mumbai 400 098 Tel: + 91 22 6626 0500 107 Kshitij Venture Fund 31.05.2005 Knowledge House, Shyam Nagar Jogeshwari Vikhroli Link Road, Jogeshwari (East) Mumbai 400050. Tel: 022-56442234 Fax: 022-56442222 108 Landmark Real Estate Fund - I 04.07.2006 11th floor, Narain Manzil Building 23, Barakhamba Road, New Delhi- 110 001 Phone: (91-11) 4362 1200 Fax: (91-11) 4150 1333 109 Leapstart Trust 01.12.2009

LeapStart Trust 24, School Lane Opp. World Trade Centre, New Delhi - 110 001. 110 LICHFL Fund 29.10.2010 Level 3, Office No. 304, Vibgyor Tower, Plot No C 62, G Block, Bandra Kurla Complex, Mumbai- 400 051 111 Marigold Mezzanine Investment Fund 07.04.1997 201, 2nd Floor, Sainara, North Avenue Linking Road Santacruz ( West), Mumbai4000054 Tel: 22-6058509/6058511 112 Mcap Growth Fund 08.10.2010 1A, Upper Ground Floor, Building No.10B, DLF Cyber City, DLF Phase II, Gurgaon

113 Milestone Private Equity Fund 21.02.2008 602, Hallmark Business Plaza, Sant Dnyaneshwar Marg, Opp. Guru Nanak Hospital, Bandra (E), Mumbai- 400 051 Phone: + 9122 4235 7000 Fax: +9122 4235 7077 114 Milestone Real Estate Fund (Formerly known as Indian Real Opportunity Venture Capital Fund) 20.09.2005 602, sant Guru (E), 115 Morpheus Media Fund 22.04.2009 Morpheus Capital Advisors Pvt. Ltd. # 5365, Grand Hyatt, Santacruz (E), Mumbai - 55 116 Multiples Private Equity Fund 10.09.2009 142, C Wing, Mittal Court, Nariman Point, Mumbai - 400021 Tel No: +91 22 30268421 Fax No: +91 22 30268420 117 Nagarjuna Venture Capital Fund 10.05.2007 309, Delhi Chamber, 3453, Delhi Gate, New Delhi - 110002 Phone: 011-23283005, Hallmark Business Plaza, dnyaneshwar marg, opp. nanak hosptial, bandra mumbai - 51

23274795 Fax : 011-23272389 118 National Venture Fund for Software and IT industry 06.09.1999 SIDBI venture Capital ltd. Ground Floor, SME Development Centre, C-11, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 51 119 Network Enterprise Fund 06.07.2009 IFMR Trusteeship Pvt. Ltd. Kalpataru Estates, No. 3c/1621, JVL Road Andheri East Mumbai - 400093 Tel: 022-67423140 Fax: 022-67423141 120 Nine Rivers Capital Trust - 1 09.04.2009 Nine Rivers Capital holdings Ltd. 511-512, Meadows, Sahar Plaza, Andheri Kurla Road, Andheri (E), Mumbai - 59 121 NV India Trust 01.10.2009 N V India Trust 21/22 Free Press House, 215, Free Press Journal Marg, Nariman Point, Mumbai - 400 021.

122 Oman India Joint Investment Fund 29.12.2010 12th Floor, New Businesses Department, State Bank Bhavan, Madam Cama Road, Mumbai 400 021 Tel No: +91 22 22851081 Fax no: +91 22 22855822 123 Opulent Venture Capital Trust 23.09.2002 216 A J C Bose Road Kolkota 700017 Tel: 033-2470107/ 2813271 Fax: 033-2470280 124 Peninsula Realty Fund 04.07.2006 Peninsula Investment Management Company Ltd. 1, Peninsula Spenta, Mathuradas Mills, Senapati Bapat Marg, Lower Parel, Mumbai - 13 125 Phi CapitalTrust 12.06.2010 Chaitanya Buildings, III Floor, No. 12, Khadar Nawaz Khan Road, Nungambakkam, Chennai 600 006 126 PI Opportunities Fund I 01.12.2009 PI Opportunities Fund-1, No.134, Doddakannelli,

Next to Wipro Corporate Office, Sarjapur Road, Bangalore - 560 035. 127 PI Opportunities Fund II 06.11.2009 PI Opportunities Fund-II, No.134, Doddakannelli, Next to Wipro Corporate Office, Sarjapur Road, Bangalore - 560 035. 128 Punjab Infotech Venture Fund 24.05.1999 c/o Punjab State Industrial Development Corporation Ltd., Udyog Bhavan, Sector 17, Chandigarh 160017 Tel: 0172 2703963 129 Quest India Fund 31.03.2006 No.76, Venkatakrishna Road Raja Annamalaipuram Chennai - 600028 Tel: 044-- 24617358/59 Fax: 044 -- 24617360

130 Rajasthan Venture Capital Fund 21.06.2002 Rajasthan Trustee Compay Pvt Ltd C/o RIICO Ltd Room No 307: Udyog Bhawan Tilak Marg Jaipur- 302005 Tel: 0141-404804 131 RE Capital India Fund 29.03.2006 161/C, 16th Floor, Mittal Court Nariman Point Mumbai 400021 Tel: 022 22880986/88 Fax: 022- 22816477 132 Realty Excellence Trust 08.10.2008 c/o Motilal Oswal Private Equity Advisors Pvt Ltd., 3rd Floor, Hoechst House, Nariman Point, Mumbai - 400 021 133 Realty India Trust 26.09.2006 LANDPRO Trustee Company Pvt. Ltd. 141, Avenue 8, Road No 2, Banjara Hills, Hyderabad 5000034 Tel : 040 23540695 Fax : 040 - 23540699 134 Red Fort India Realty Fund 11.01.2008

Red Fort Capital Advisors Pvt Ltd Suite 670, The Grand, Nelson Mandela Road, Vasant Kunj Phase II, New Delhi 110070 135 Reliance Alternative Investments Funds (Formerly known as Reliance Venture Capital Fund) 01.02.2006 Reliance Centre, 19, Walchand Hirachand Marg, Ballard Estate, Mumbai - 1 136 Reliance India Power Fund 16.06.2005 Reliance Capital Trustee Company Ltd, Kamala Mills Compound, Trade World, B Wing, 7th Floor, S.B. Marg, Lower Parel (W) Mumbai -13 137 RVCF Trust - II 25.07.2008 414, RIICO Wing, 3rd Floor, Udyog Bhawan, Tilak Marg, Jaipur 302005 Tel No: 022 5113225 Fax No: 022 2227959

138 Sashi Reddi Investment Capital Fund 17.03.2009 Plot No. 372/D, Road No. 81, Film Nagar, Jubilee Hills, Hyderabad 500 033 139 SBI Macquarie Infrastructure Trust 22.11.2010 12th Floor, New Businesses Department, State Bank Bhavan, Madam Cama Road, Mumbai 400 021 Tel No: +91 22 22851081 Fax no: +91 22 22855822 140 SEAF India Investment Trust 09.06.2009 1st Floor, West Wing, Plot No. 83 & 4, Road No. 2 , Banjara Hills, Hyderabad- 500 034 141 Secura India Real Estate Fund 13.02.2009 Secura Investment Management (India) Private Limited C6. 5/193. First Floor. Nirmal Arcade Eranhipalam, By-pass Road, Calicut-673006 Kerala Ph:0495-2367959 142 SGR Achievers Fund 31.01.2011

Friendship Centre, 13 Rebsch Street, Near YMCA Swimming Pool, Mumbai Central, Mumbai 400011. 143 SICOM Venture Capital Fund 24.05.1999 c/o SICOM Ltd., Kubera Chambers, Dr. R.P. Road, Opp. Sancheti Hospital, Shivaji Nagar, Pune - 411 005 144 SIDBI SME Venture Fund 02.09.2004 SIDBI Trustee Company Ltd 105 -107, 10th Floor, Jolly Maker Chamber II, Nariman Point Mumbai 400021 Tel: 22043065 to 69 Fax: 22043078

145 Small is Beautiful 18.03.2002 KSK Energy Ventures Limited 8-2-293/82/A/431/A Road # 22, Jubilee Hills, Hyderabad 500033 Tel: 040-23559922 to 29 Fax: 040-23559930 146 Solitaire Capital India 20.06.2005 112-113, Charmwood Plaza, Eros Garden, Suraj Kund Road, Faridabad- 121 009 Phone: 91-129-4118193 Fax : 91-129-4118194 147 Sourabh Venture Trust 14.07.2004 4, Fairlie Place, HMP House 1st Floor Room No 126, Kolkota 700001 Tel: 033-22318975 Fax : 033-22312023 148 South Asian Regional Apex Fund 27.09.1999 IL&FS Venture Corporation Limited, The IL&FS Financial Centre, 7th Floor, Plot No. C22, G-Block, Bandra Kurla Complex, Bandra East, Mumbai 400 051 Tel : 6533333 Fax : 6523015 149 Special Opportunities Fund 16.02.2010

602. Hallmark Business Plaza Sant Dnyaneshwar Marg, Opposite Guru Nanak Hospital Bandra (E), Mumbai 400 051. 150 Spice Capital Fund 05.11.2004 No. 87, 5th Floor, Almas Centre, MG Road, Bangalore - 560001, 151 Spring Healthcare India Trust 31.08.2009 Spring Health Care Advisors, 8th Floor Free Press House, Nariman Point, Mumbai 400021 Tel: 66178814 152 SREI Venture Capital Limited 06.08.2002 Vishwakarma , 86 C, Topsia Road ( South), Kolkota 700046 Phone: 033-22850112-15/012427 153 SREI Venture Capital Trust 18.07.2005 Viswakarma , 86 C Topsia Road (South) Kolkata 700046 Phone: 033 39873126

154 Subhkam Growth Fund 09.11.2009 Subhkam Growth Fund 1z5, Onlooker Building, 2nd Floor, 14, Sir PM Road, Fort, Mumbai - 400 001. 155 Systematix Venture Capital Turst 07.12.2010 2nd Floor, J.K. Somani Building, Bombay Sanchar Marg, British Hotel Lane, Fort, Mumbai 400001. 156 Tamil Nadu Infotech Fund 31.03.1999 C/o IL&FS Venture Corporation Limited The IL&FS Financial Centre 7th Floor, Plot No. C-22, GBlock Bandra Kurla Complex, Bandra East Mumbai 400 051 Tel : 6533333 Fax : 6523015 157 Tara India Fund III Trust 26.02.2008 C/o IL&FS Investment Managers Limited The IL&FS Financial Centre Plot No C 22, =G Block, Bandra Kural Complex, Bandra(E), Mumbai 400051 158 TaraIndia Fund III Domestic Trust 09.06.2008

C/o IL&FS Investment Managers Limited The IL&FS Financial Centre Plot No C 22, =G Block, Bandra Kural Complex, Bandra(E), Mumbai 400051 159 Tata Capital Growth Fund-1 29.07.2009 Tata Capital Growth Fund - 1 one Forbes Dr. V.B. Gandhi Marg Mumbai - 400001 160 Tata Capital Healthcare Fund I 28.10.2009 Tata Capital Healthcare Fund-1 C/o. Tata Capital Limited one Forbes Dr. V.B. Gandhi Marg Mumbai - 400001 161 Tata Capital Innovations Fund 27.10.2009 Tata Capital Innovations Fund C/o. Tata Capital Limited one Forbes Dr. V.B. Gandhi Marg Mumbai - 400001

162 Tata Capital Special Situation FundTrust 03.11.2009 Tata Capital Special Situation Fund - Trust C/o. Tata Capital Limited one Forbes Dr. V.B. Gandhi Marg Mumbai - 400001 163 TCG India Fund 9.12.2010 TCG Real Estate, 5th Floor, Metropolitan, Bandra Kurla Complex,Bandra (E), Mumbai 400051 164 Teepee Venture Capital Trust 3.12.2010 3rd Floor, 3A, Navodaya Colony, Road No. 14, Banjara Hills, Hyderabad 500 034 165 Terrafirma Realty Fund 29.03.2007 5A, 5th Floor, Maker Bhawan II, New Marine Lines, Mumbai- 400020 Phone: 022-66102864 Fax : 022-66102864 166 The India Seed Investment Trust 12.10.2006 1, Turf Estate, Shakti Mill Lane, Off. Dr E Moses Rd, Mahalakshmi, Mumbai 400011 Tel : 022 24902201 - 04 Fax : 022 - 24902205

167 The Technology Venture Fund 22.01.2003 20B, ASCI COLLEGE PARK, ROAD NO. 3, BANJARA HILLS, HYDERABAD-500 034, A.P. Tel.No.040 2355 0481 168 The Ventureast Funds 29.05.2009 20B, ASCI COLLEGE PARK, ROAD NO. 3, BANJARA HILLS, HYDERABAD-500 034, A.P. Tel.No.040 2355 0481 169 TVS Shriram Growth Fund 20.06.2008 TVS Capital Funds Limited, 249A, Ambujammal Street, Off TTK Road, Alwarpet, Chennai- 600 018 Phone: 044-42954800 170 Urban Infrastructure VCF 21.03.2006 11B, Mittal Tower, B- Wing, Nariman Point Mumbai 400012 Phone 6669 6049/92

171 Urjankur Nidhi Trust 31.03.2006 IL&FS Trust Company Ltd IL&FS Financial Centre Plot No. C-22, G- Block Bandra Kurla Complex Bandra (East) Mumbai- 400051 Tel: 022-26533333 Fax: 022-26533056 172 UTI - India Technology Venture unit scheme 04.01.2000 UTI Ventures / Ascent Capital Advisors 16th Floor, Concorde Block, U B City, Vittal Mallya Road, Bangalore - 560001. 173 UVF Private Equity Trust 08.04.2005 Concorde Block, 16th Floor, U.B. City, 24 Vittal Mallaya Road, Banglore 560 001 Phone: +9180 3055 1222 174 Ventureeast Telnet India Fund 25.03.2003 Third Floor, TPL House No 3, Cenotaph Road Chennai- 600018 Tel: 044-24329863/64 Fax: 044-24329865 175 Vistaar Religare Media Fund 25.07.2008

2, Shubhdha Commercial Building, Sir Pochkanwala Rd, Worli, Mumbai 400030 Tel No: 022 66163535 Fax No: 022 66163536 176 vKarma Capital 25.07.2008 1-E, Jhandewalan Extension, Naaz Cinema Complex, New Delhi - 110055 Tel: 011 43023000 177 Volrado Venture Partners 17.11.2005 17/19, Khatau Building, 2nd Floor, 44, Bank Street, Fort, Mumbai - 400023 Ph. No. : 91 22 6637 6491 / 92 Fax No. : 91 22 2263 4430 Email Id.: info@volrado.com

178 Wallford India Infrastructure & Realty Fund 06.11.2007 Upvan Building, 1st Floor, Behind Indian Oil Nagar, D.N. Nagar, Andheri West, Mumbai 400 053 Phone: 022-26303451 Fax : 022-26303493 179 West Bengal VCF 04.12.2000 C/o West Bengal Electronics Industry Development Limited Webel Bhavan, Block EP &GP Sector V, Bidhannagar, Salt Lake Calcutta 700091 Tel: 033-23575399 180 Zephyr Peacock India II Trust 04.12.2009 Zephyr Peacock India II Trust, 201, Embassy Classic, 11, Vittal Mallya Road, Bangalore - 560 001

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. Entrepreneur Magazine . Forbes Magazine . Indian Angel Network . Indian Venture Capital Association . www.cgtmse.in . www.morebusiness.com . www.wikipedia.org . www.vccircle.com . www.dealcurry.com . www.iciciventures.com . www.helionvc.com