Contemporary Issues in Venture Capital Financing in India

Author : Dr. C. Viswanatha Reddy
Pages : X+374=384

Young entrepreneurial firms with risky product introduction strategies are facing trouble in mobilizing funds from equity investors and banks because of two reasons. The first one is the conflicts of interest between entrepreneurs and investors. Debt financing from banks may not be available either, because the entrepreneur has incentives to handle excess risk from the bank’s perspective. He or she benefits, if the firm is successful, whereas the bank stands to lose if the firm fails. The second reason is asymmetric information. Equity investors fear that entrepreneurs would only issue equity when the firm is overvalued. Capital gains taxation also affects the demand for venture capital. Venture capitalists specialize at solving these problems, thereby connecting idea-rich entrepreneurs with cash-rich investors; ensuring funding for innovative firms has positive impact on the economy, as it makes sense for governments to promote an active venture capital and private equity market to bring the nation on par and above the developed nations. 

In recent years, the government controlled financial institutions have initiated positive and progressive measures to provide financial support including MSMEs at reasonable and affordable costs and without any usual hurdles. Government-funded schemes exist at both the national and the state levels. The venture capital and private equity movement did not take deep roots in India so far, because of lack of further support, high tax rate on capital gains, poor fiscal incentives, lack of public private partnership, no proper review of existing laws, low focus on start up finance, lack of proper implementation of the recommendations of the various committees, etc. Hence, there is a need to debate on the issues for the development of a sound venture capital and private equity industry in India.

The Government of India in an attempt to bring the nation on the same lines with the developed nations, has been promoting venture capital financing to new, innovative concepts & ideas, liberalizing taxation norms, providing tax incentives to venture firms, offering incentives to the creation of local pools of capital and holding training sessions for the emerging VC investors.

In this context, the edited volume entitled “Contemporary Issues in Venture Capital Financing in India” is timely and relevant. The issues highlighted and conclusions drawn by the authors coincide with and reflect the problems in venture capital financing in the world in general and India in particular. The conclusions and recommendations made by the authors are, no doubt, more practicable and hence will go a long way for strengthening the venture capital financing activities in India.

I congratulate the editor of the book, Dr. C. Viswanatha Reddy, Professor, Department of Business Administration, Sree Vidyanikethan Institute of Management, A.Rangampet – 517 102 and the authors of the papers for their effort, initiation, perceptive outlook and pragmatic approach in studying the contemporary issues in venture capital financing.  I hope this edited volume will be a reference book to the researchers and the students in the field of finance, a guide to the policy makers.
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I wish the editor of the book and authors of the papers all the best in their academic pursuits in the years to come.
 
Prof. B. Mohan
Former Registrar, Sri Venkateswara University.
Director, Sree Vidyanikethan Inst. of Management
A.Rangampet – 517 102, A.P.

Contents

1.    An Overview of Venture Capital and 
       Private Equity Financing in India
        Dr. T. Narayana Reddy, Dr. C. Viswanatha Reddy
2.    Venture Capital Financing: Key Elements
        Prof. P.R. Sivasankar,  Mr. K. Rajaiah
3.    Comparative Analysis of Sectoral
       Financing by VCFs and FVCIs in India
        Dr. E. Lokanadha Reddy, Dr. C. Viswanatha Reddy
4.    Monitoring The Performance of Venture
       Capital Funded Companies
        Dr. E. Lokanadha Reddy, Dr. A. Amruth Prasad Reddy
        Dr. V.N. Jothi
5.    Private Equity Investemnts in India: A Review
        Dr. V Vijay Durga Prasad
6.    Venture Capital Financing in India & Its Prospects
        Dr. D.H. Malini Srinivasa Rao
7.    Venture Capital/Private Equity (Vc/Pe) 
       Funding in India’s Education Sector: A Perspective
        Gangineni Dhananjhay,  Archana G
8.    Across the Sector Venture Capital Investments in India
        Dr. P. Niranjan Reddy,  Dr. J. Prakash Reddy
9.    Role of Venture Capital for Growth of 
       MSMEs–A Study of SIDBI Venture Capital Limited
        Dr. Sujatha Susanna Kumari D,  Mr. Basavaraj
10.    Development of MSMEs Through
        Public Private Partnership
            Dr. G. Vijaya Bharathi, Ms. S. Masthani
            Mr. P. Harinatha Reddy
11.    Venture Capital Investments in India During 2007-12
            Dr. V. N. Jothi
12.    Venture Capital for MSMEs in India: A Review
            S. Dilli,  Dr. K. Jayachandra Reddy
13.  Venture Capital Financing in India: Problems and Prospects
            Dr. M. Lokanadha Reddy,  Mr. Harinath. K
            Mr.  Lakshminarayana. S
14.    A Study on Role of Venture Capital in Indian Economy
            Gajanethi Swathi Kumari
15.    Changing Scenario of Insurance Sector
         with the Entry in Private Equity–The Way Forward
            Dr. Suresh Chandra. C.H.,  Mr. B. Naresh
16.    Performance Analysis on Venture
         Capital in Select Undertakings
            Mr. D. Prem Kumar,  Mr. B. Naresh    
17.    Venture Capital Investments in India
            Dr. K. Ekambaram,  Sk. Rameez Raja
18.    Venture Capital - A Theoretical 
        Perspective, Growth and Challenges in India
            Dr. P. Subbaiah,  Mr. V.Harikrishna
            Mr. P.V.L.Narasimha Rao
19.    Venture Capital Financing in India -  Challenges Ahead
            Dr. D. Rajashekar,  D. Prem Kumar
20.    Private Equity – Opportunities and Challenges
            M. Saritha
21.    A Study on Venture Capital Challenges
        in India: Conceptual Approach
            Mr. A. Sreeenivasulu,  Mr. M. Suresh
22.    Evolution of Global Private Equity
        Market Implications and Prospects for India
            Dr. G. Venkatachalam,  Mrs. K. Kalyani
            Prof. P. Mohan Reddy
23.    A Study on Venture Capital Financing Sources in India
            Mrs. N. Chandrika,  Prof. G. V. Chalam
24.    A Study on Venture Capital Financing for MSMEs in India
            W. R. Sony,  S. Gautami,  K. Tirumalaiah
25.    Contemporary Issues in Venture Capital
        Finance for Women Entreprenuer
            Mrs. Sandra Kirthy
26.    Regulatory Aspects of Venture Capital Financing in India
            V. Lava Kumar,  V. Komala
27.    New Venture Valuation by Venture
        Capitalists: An Integrative Approach
            V. Radhika
28.    Regulatory Frame Work of Venture 
         Capital Financing in India
            U. Chandramouli
29.    Growth and Prospects of Venture  
        Capital Finance in India
            Dr. Ravi Kumar,  Dr. Ch. Rama Krishna
30.    Venture Capital Funding for Social Enterprises
            Dr. S. Srinivasa Rao,  S. Durga