COLLECTIVE

INVESTMENT
SCHEMES

WHAT IS VENTURE CAPITAL...???

Money provided by investors to startup firms and

small businesses with perceived long-term growth
potential.

Features Of Venture Capital

Long-time horizon
Lack of liquidity
High risk
High-tech
Equity participation and capital gains
Participation in management

Advantages Of Venture Capital

They can provide large sum of equity finance
Able to bring wealth and expertise to your
company

Easier to secure future funding from other sources

The business is not obligated to repay the money

Disadvantages Of Venture Capital

Lengthy and complex process (needs detailed business
plan, financial projections and etc.)

In the deal negotiation stage, you will have to pay for

legal and accounting fees

Investors become part owners of your business - founder

loss of autonomy or control

STAGES & RISK OF FINANCING

Financial Stage

Seed Money

Start Up

First Stage

Period (Funds
locked in years)

7-10

5-9

3-7

Risk Perception

Extreme

Very High

High

Activity to be
financed
For supporting a
concept or idea or
R&D for product
development
Initializing
operations or
developing
prototypes
Start commercials
production and
marketing

Financial Stage

Second Stage

Period (Funds
locked in years)

3-5

Risk Perception

Sufficiently high

Third Stage

1-3

Medium

Fourth Stage

1-3

Low

Activity to be
financed

Expand market and

growing working
capital need

Market expansion,
acquisition &
product
development for
profit making
company

Facilitating public
issue

VC Investment Process
Deal origination
Screening
Due diligence (Evaluation)
Deal structuring
Post investment activity
Exit plan

Venture Capital Funding In India

Venture Capital Funds In India

VCFs in India can be categorized into following five
groups:

1)

Those promoted by the Central Government controlled

development finance institutions. For example:
- ICICI Venture Funds Ltd.
- IFCI Venture Capital Funds Ltd (IVCF)
- SIDBI Venture Capital Ltd (SVCL)

2) Those promoted by State Government

controlled development finance institutions.
For example:
- Punjab InfoTech Venture Fund
- Gujarat Venture Finance Ltd (GVFL)
- Kerala Venture Capital Fund Pvt Ltd.
3) Those promoted by public banks.
For example:
- Canbank Venture Capital Fund
- SBI Capital Market Ltd

4)Those promoted by private sector companies.

For example:
- IL&FS Trust Company Ltd
- Infinity Venture India Fund
5)Those established as an overseas venture capital
fund.
For example:
- Walden International Investment Group
- HSBC Private Equity management
Mauritius Ltd

Reasons For Growth Of Venture

Capital

High Technology
Human Resource Capital
Scientific & Technical Research
Government Initiative
SEBI Initiative

Venture Capital Industry Wise

Segmentation

Exchange Traded
Fund

MUTUAL FUND

Simplicity
Transparency
Risk control
Diversification
Open-End Fund

STOCK

Stock:
On Exchange
Trading flexibility
Trading strategies

Exchange Traded Fund

EXCHANGE
TRADED
(ETF)
FUND
ETFs are mutual funds that trade like a stock

A Brief History Of ETF

ETFs

were launched post the 1987 crash to overcome the lack of

liquidity and intense program trading in the market

The first ETF traded on a U.S. exchange was StateStreets SPDR (SPY),
which was introduced in 1993. SPY tracks the S&P 500 Index and is
currently the most heavily-traded security in the world.

Due to popularity of indexing in the 1990s, ETFs soon became popular

amongst individual investors and financial advisors as a transparent
and liquid method of indexing which was also better than index mutual
funds

As the availability of ETFs grew for different asset classes, investment

styles and geographic sectors, it made possible for investors to construct

Key Benefits Of ETF

Easy to
Implement
any Inv.
Strategy

Cost
Advantage

Broad
Market
Access

Diversified
Exposure To Market

Hedging

Buy And Hold

Investing

Active Trading

Core/Satellite
Investing

Alternative To
Futures*

The challenging market conditions in 2008-09 caused a significant shift in investors risk
appetite and in their desire for liquidity. ETFs met their need for greater transparency
regarding cost, holdings, price, liquidity, product structure, and risk and return.

Factors Driving ETF Growth

1

Large variety of indices of Equity, Fixed income, Commodity and other

covered by ETFs

Facilitation of investor education & trading by large broking houses

Special market campaigns by many on-line brokers in an effort to win new

accounts and cross-sell other products

Major fund platforms embracing ETFs

Regulatory changes in the US, Europe and many emerging markets that allow
funds to make larger allocations to ETFs

Development and growth of investment styles that employ products like ETFs
that deliver low cost beta

Indian ETF Market

14000

35
AUM Other ETF

AUM Gold ETF

#ETF

12000

30

10000

25

8000

20

AUM (INR Crore)

6000

Number of ETFs
15

4000

10

2000

37711 38077 38442 38807 39172 39538 39903 40268 40633 40999 41182
* Average Quarterly AUM Source
www.amfiindia.com

ETFs In INDIA

Gold ETF

Liquid ETF

Index ETF
Nifty
Junior Nifty
Bank Nifty
PSU Banks

International Index ETF

Hang Seng
S&P CNX 500

Structure of an ETF
PRIMARY MARKET

SECONDARY MARKET

Redemption

ETF Issuer

Market Making

Exchange

Seller

ETF
Units

Creation

Buy & Sell

Cash

Authorized
Participants & Large
Investors

ETF
Units

Arbitrage

Cash

Buyer

NIFTY ETF
S&P CNX Nifty Index
Why NIFTY?

7000

Blue chip stocks

6000

Well diversified

5000

Highly liquid

4000

Represents Indian business

economy

Why NIFTY ETF?

Direct investment in
benchmark index

Lower Cost

More Transparency

More Flexibility

Small ticket size

Dec-12; 5870.95

3000
2000
Jan-94; 1083.74
1000
0

Nifty ETF is the simple and safe way

to access equity markets

NIFTY ETF: A COMPARISON

STOCKS

NIFTY MUTUAL
FUND

NIFTY
ETF

EXPOSURE

Narrow

Broad

Broad

VOLATILITY

High

Low

Low

EXPENSE

Low

High

Low

High

Low

Low

Market Rates

NAV at EOD

Market Rates

Yes

No

Yes

No

May Be

Yes

Yes

No

Yes

CAPITAL
REQ
PRICE
ARBITRAGE
MARKET
RETURNS
INTRADAY
TRADING

24

Gold ETF

GOLD ETF
Unit of Dematerialized Gold
Lists and trades on a stock exchange
Every ETF unit is backed by physical gold
Efficient

What makes it
attractive?

SIMPL
E

No wastage, impurities & extra charges

SAFE

Transparent
Transparent real time prices
Convenient
Can be purchased in small lots, typically 1 gram
Tax Efficient
Tax efficient way to hold gold

TRUST
ED

Your gold is safely stored in highly secure vaults

Lots of 1000 gm equivalents can be converted into physical

gold

You can sell yours ETFs on the exchange like a share

No costs other than brokerage are payable in buying or

selling on exchange

No wealth tax unlike physical purchase, also LTCG benefit

available after one year

You can track your investment value in real time

fe
Sa

s
Ea

Your ETFs are backed by high quality physical gold

Fa
s

Pu
re

GOLD ETF: KEY BENEFITS

THANK YOU