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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY

PROJECT ON

SEBI GUIDELINESFOR

VENTURE CAPITAL COMPANY

SUBJECT:FINANCIAL MANAGEMENT

SUBMITTED BY

N.SANTHOSHNI

M.SHOFITHA SHAFIN

M.STUTI OLIVIAK.SUGANYA

C.JENIBA

SUBMITTED TO

MRS.NANDHINIASSITANT PROFESSOR

WOMENS CHRISTIAN COLLEGE

CHENNAI

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CONTENTS

EXECUTIVE SUMMARY .................................................................................. 2

Securities and Exchange Board of India ....................................................... 3

History: ........................................................................................................ 4

Organization structure: ................................................................................ 5

Functions and responsibilities: ..................................................................... 6

Powers: ........................................................................................................... 6

SEBI Committees:............................................................................................ 7

Factors: .......................................................................................................... 11

Roles: ............................................................................................................ 11

Patricof & Co. and MMG:................................................................................. 21

Apax in the 1980s, 1990s and the 21st century: ............................................21

Saunders Karp & Megrue: ............................................................................... 22

History: ..................................................................................................... 25

EXECUTIVE SUMMARY

The project covers various aspects of the Indian VentureCapital Industry, such as what isventure capital , types, and its process, the features of

venture capital, options to finance a venture, a brief history of the venture capital

industry. It also includes the current Indiansce na ri o wit h a br ief pr of il e of th e

m a jo r p l ay e rs i n t h is i n d us t ry .T h e t h eo r et i ca l f o un d at i on s c o ve r t h e

st ag es in th e in ves tme nt cy cl e of Ven tu re cap it al process..However there are

several problems faced by the Venture Capitalists in India which include:

Venture Capital Financing is still not regarded as commercial activity.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY Investors feel that they would like to retain control and also to ensure that

the busine

This project also explains what is SEBI and its organization structure,powers,guidelines forformation of venture capital company etc.

Objectives:

1. Trends in the Indian Venture Capital Industry.

2. To study thegrowth of Venture Capital Industry.

3. To know about the investors in Venture Capital Industry.

4. To identify the major players in the Indian Venture capital Industry.

5. To study the various guidelines of the regulatory body SEBI.

Limitations:

Major limitation of the project has been the unavailability of current data, of the contributors t o

t h e I n d i a n V e n t u r e C a p i t a l I n d u s t r y ( s o u r c e o f d a t a b e i n g t h e

y e a r 2 0 0 7 ) a n d n o comparative analysis has been undertaken of the Venture Capital

Industry in India with thoseof the developed nations like USA, UK due to lack of adequate

data.

Securities and Exchange Board of India

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SEBI Bhavan, Mumbai headquarters

Agency overview

Formed 12 April 1992

Jurisdiction Government of India

Headquarters Mumbai, Maharashtra

Employees 525 (2009)

Agency

executiveUpendra Kumar Sinha, Chairman

The Securities and Exchange Board of India(frequently abbreviated SEBI) is the

regulatorfor the securities market in India.

History:

It was formed officially by the Government of India in 1992 with SEBI Act

1992 being passed by the Indian Parliament. SEBI is headquartered in the business district ofBandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regionaloffices in New Delhi, Kolkata, Chennai and Ahmedabad.

Controller of Capital Issues was the regulatory authority before SEBI came intoexistence; it derived authority from the Capital Issues (Control) Act, 1947.

Initially SEBI was a non statutory body without any statutory power. However in1995, the SEBI was given additional statutory power by the Government of India through anamendment to the securities and Exchange Board of India Act 1992. In April, 1998 the SEBIwas constituted as the regulator of capital market in India under a resolution of the Government

of India.

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Organization structure:

Upendra Kumar Sinha was appointed chairman on 18 February 2011 replacing C. B. Bhave .

The Board comprises

Name Designation

Upendra Kumar Sinha Chairman

M. S. Sahoo Whole-Time Member

Dr K.M. Abraham Whole Time Member

Prashant Saran Whole Time Member

CA. T. V. Mohandas Pai Director, Infosys

Dr. Thomas Mathew Joint Secretary, Ministry of Finance

V. K. Jairath Member Appointed

Anand SinhaDeputy Governor, Reserve Bank of

India

List of former Chairmen:

Name From To

C. B. Bhave 18 February 2008 18 February 2011

M. Damodaran 18 February 2005 18 February 2008

G. N. Bajpai 20 February 2002 18 February 2005

D. R. Mehta 21 February 1995 20 February 2002

S. S. Nadkarni 17 January 1994 31 January 1995

G. V. Ramakrishna 24 August 1990 17 January 1994

Dr. S. A. Dave 12 April 1988 23 August 1990

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http://en.wikipedia.org/wiki/Upendra_Kumar_Sinhahttp://en.wikipedia.org/wiki/Infosyshttp://en.wikipedia.org/wiki/Ministry_of_Financehttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/C._B._Bhavehttp://en.wikipedia.org/wiki/M._Damodaranhttp://en.wikipedia.org/wiki/Infosyshttp://en.wikipedia.org/wiki/Ministry_of_Financehttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/C._B._Bhavehttp://en.wikipedia.org/wiki/M._Damodaranhttp://en.wikipedia.org/wiki/Upendra_Kumar_Sinha


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Functions and responsibilities:

SEBI has to be responsive to the needs of three groups, which constitute the market:

the issuers of securities the investors the market intermediaries.

SEBI has three functions rolled into one body: quasi-legislative, quasi-judicialand quasi-executive. It drafts regulations in its legislative capacity, it conducts investigationand enforcement action in its executive function and it passes rulings and orders in its judicialcapacity.

Though this makes it very powerful, there is an appeals process to createaccountability. There is a Securities Appellate Tribunal which is a three-member tribunal and is

presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A secondappeal lies directly to the Supreme Court

SEBI has enjoyed success as a regulator by pushing systemic reformsaggressively and successively (e.g. the quick movement towards making the markets electronicand paperless rolling settlement on T+2 basis). SEBI has been active in setting up theregulations as required under law.

SEBI has also been instrumental in taking quick and effective steps inlight of the global meltdown and the Satyam fiasco. It had increased the extent and quantity ofdisclosures to be made by Indian corporate promoters.

More recently, in light of the global meltdown,it liberalised thetakeover code to facilitate investments by removing regulatory structures. In one such move,SEBI has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at

present.

Powers:

For the discharge of its functions efficiently, SEBI has been invested with the necessary powerswhich are:

1. to opprove bylaws of stock exchanges.2. to require the stock exchange to amend their bylaws.3. inspect the books of accounts and call for periodical returns from recognised stock

exchanges.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY4. inspect the books of accounts of a financial intermediaries.5. compel certain companies to list their shares in one or more stock exchanges.6. levy fees and other charges on the intermediaires for performing its functions.7. grant licence to any person for the purpose of dealing in certain areas.8. delegate powers exercisable by it.9. prosecute and judge directly the violation of certain provisions of the companies Act.

SEBI Committees:

1. Technical Advisory Committee2. Committee for review of structure of market infrastructure institutions3. Members of the Advisory Committee for the SEBI Investor Protection and Education

Fund4. Takeover Regulations Advisory Committee5. Primary Market Advisory Committee (PMAC)6. Secondary Market Advisory Committee (SMAC)7. Mutual Fund Advisory Committee

8. Corporate Bonds & Securitization Advisory Committee9. Takeover Panel10. SEBI Committee on Disclosures and Accounting Standards (SCODA)11. High Powered Advisory Committee on consent orders and compounding of offences12. Derivatives Market Review Committee13. Committee on Infrastructure Funds

VENTURE CAPTIAL COMPANY

Concept of Venture Capital:

The term venture capital comprises of two words that is, Ventureand Capital.Venture is a course of processing, the outcome of which is uncertain but to whichisattended the risk or danger of loss.

Capital means recourses to start an enterprise. Toconnotethe risk and adventure of such a fund, the generic name Venture Capital wascoined.Venturecapital is considered as financing of high and new technology based enterprises.It is said thatVenture capital involves investment in new or relatively untried technology,initiated byrelatively new and professionally or technically qualified entrepreneurs withinadequate funds.

The conventional financiers, unlike Venture capitals, mainlyfinance proven technologies and established markets. However, high technology need not be

pre-requisite for venture capital.Venture capital has also been described as unsecured riskfinancing.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYThe relatively highrisk of venture capital is compensated by

the possibility of high returns usually throughsubstantial capital gains in the medium term.Venture capital in broader sense is notsolely an injection of funds into a new firm, it is also aninput of skills needed to set upthe firm, design its marketing strategy, organize and manage it.Thus it is a long termassociation with successive stages of companys development underhighly risk investment conditions, with distinctive type of financing appropriate to each stageof development.

Investors join the entrepreneurs as co-partners and supportthe project withfinance and business skills to exploit the market opportunities.Venture capital isnot a passive finance. It may be at any stage of business/productioncycle, that is, start up,expansion or to improve a product or process, which are associatedwith both risk and reward.

The Venture capital makes higher capital gainsthroughappreciation in the value of such investments when the new technology succeeds.Thusthe primary return sought by the investor is essentially capital gain rather thansteadyinterest income or dividend yield.The most flexible

Definition:

The support by investors of entrepreneurial talent with finance and business skills toexploit market opportunities and thus obtain capital gains.Venture capital commonly describesnot only the provision of start up finance or seedcorn capital but also development capital forlater stages of business. A long termcommitment of funds is involved in the form of equityinvestments, with the aim of eventual capital gains rather than income and active involvementin the management of customers business.

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Features of Venture Capital:

High Risk:

By the definition the Venture capital financing is highly risky and chances of failureare highas it provides long term start up capital to high risk-high reward ventures. Venturecapitalassumes 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.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYOperation risk :

- Operations may not be cost effective resulting inincreased cost decreased gross margins.

High Tech:

As opportunities in the low technology area tend to be few of lower order, and hi-tech projects generally offer higher returns than projects in more traditional areas,venturecapital investments are made in high tech. areas using new technologies or

producinginnovative goods by using new technology.

Not just high technology, any high risk ventures where the entrepreneur hasconviction but little capital gets venture finance.Venture capital is available for expansion ofexisting business or diversification to a highrisk area. Thus technology financing had never

been the primary objective but incidentalto venture capital.

Equity Participation & Capital Gains:

Investments are generally in equity and quasi equity participation through direct

purchaseof shares, options, convertible debentures where the debt holder has the option toconvertthe loan instruments into stock of the borrower or a debt with warrants toequityinvestment.

The funds in the form of equity help to raise term loans that arecheaper source of funds. In the early stage of business, because dividends can be delayed,equityinvestment implies that investors bear the risk of venture and would earn areturncommensurate with success in the form of capital gains.

Participation In Management:

Venture capital provides value addition by managerial support, monitoring

and follow upassistance. It monitors physical and financial progress as well as marketdevelopmentinitiative. It helps by identifying key resource person.

They want one seat on thecompanys board of directors and involvement, forbetter or worse, in the major decision affecting the direction of company. This is a uniquephilosophy of hands onmanagement where Venture capitalist acts as complementary to theentrepreneurs.

Basedupon the experience other companies, a venture capitalist advise thepromoters on project planning, monitoring, financial management, including working capitaland public issue.Venture capital investor cannot interfere in day today management of theenterprise butkeeps a close contact with the promoters or entrepreneurs to protect hisinvestment.

Length of Investment:

Venture capitalist help companies grow, but they eventually seek to exit theinvestment inthree to seven years. An early stage investment may take seven to ten years tomature,while most of the later stage investment takes only a few years. The process ofhavingsignificant returns takes several years and calls on the capacity and talent ofventurecapitalist and entrepreneurs to reach fruition.

Illiquid Investment:

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYVenture capital investments are illiquid, that is, not subject to repayment on

demand or following a repayment schedule. Investors seek return ultimately by means ofcapitalgains when the investment is sold at market place.

The investment is realized only onenlistment of security or it is lost if enterprise isliquidated for unsuccessful working. Itmay take several years before the first investment startsto locked for seven to ten years.Venture capitalist understands this illiquidity and factors this in

his investment decisions

Types of venture capital investment:

There are three different types of venture capital investment. Early stagefinancingincludes seed financing, start-up financing and first stage financing. Seed financingrefers to a small amount of venture capital given to an entrepreneur or inventor who wishes tostart a business. It may be used to build a management team, for market research or to developa business plan.

Factors:

Venture Capitalist firms differ in their approaches. There are multiple factors and each firm isdifferent.

Some of the factors that influence VC decisions include:

Business situation: Some VCs tend to invest in new ideas, or fledgling companies.Others prefer investing in established companies that need support to go public or grow.

Others invest solely in certain industries. Others prefer operating locally while otherswill operate nationwide.

Company expectations often vary. Some may want a quicker public sale of thecompany, or expect fast growth. The amount of help a VC provides can vary from onefirm to the next.

Roles:

Within the venture capital industry, the general partners and other investmentprofessionals of the venture capital firm are often referred to as "venture capitalists" or "VCs"...Venture capitalists with finance backgrounds tend to have investment banking or other

corporate finance experience.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYAlthough the titles are not entirely uniform from firm to firm, other positions at venture capitalfirms include:

Venture partners Venture partners are expected to source potential investmentopportunities ("bring in deals") and typically are compensated only for those deals withwhich they are involved.

Principal This is a mid-level investment professional position, and often considered a"partner-track" position. Principals will have been promoted from a senior associate

position or who have commensurate experience in another field such as investmentbanking or management consulting.

Associate This is typically the most junior apprentice position within a venture capitalfirm. After a few successful years, an associate may move up to the "senior associate"

position and potentially principal and beyond. Associates will often have worked for 12 years in another field such as investment banking or management consulting.

Entrepreneur-in-residence (EIR) EIRs are experts in a particular domain andperform due diligence on potential deals. EIRs are engaged by venture capital firmstemporarily (six to 18 months) and are expected to develop and pitch startup ideas totheir host firm (although neither party is bound to work with each other). Some EIR'smove on to executive positions within a portfolio company.

VENTURE CAPITAL COMPANY IN INDIA

Venture Capitalists poured in 700 million dollars of investment inIndia during 2006 as compared to 800 million dollars in the UK and 820 million dollars inChina, ministry of finance chief economic advisor A K Lahiri said at an Assocham organisedseminar on Friday He said the large and medium enterprises in India provide great potential forthe venture capitalists and private equity holders for parking their surpluses.

Venture capital (VC) arms of companies such as Intel, Cisco, Reliance ADAG, Google andYahoo are increasing their investments in early stage technology and consumer service start-ups in India.

Early Days:

In the absence of an organised Venture Capital industry until almost 1995,individual investors and development financial institutions played the role of venture capitalists

in India. Entrepreneurs have largely depended upon private placements, public offerings andlending by the financial institutions.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYIn 1973 a committee on Development of Small and Medium Enterprises

highlighted the need to foster venture capital as a source of funding new entrepreneurs andtechnology. Thereafter some public sector funds were set up but the activity of venture capitaldid not gather momentum as the thrust was on high-technology projects funded on a purelyfinancial rather than a holistic basis.

Regulatory Guidelines & Framework:

Later, a study was undertaken by the World Bank to examine thepossibility of developing Venture Capital in the private sector, based on which the Governmentof India took a policy initiative and announced guidelines for Venture Capital Funds(VCFs) inIndia in 1988.However, these guidelines restricted setting up of VCFs by the banks or thefinancial institutions only. Thereafter, the Government of India issued guidelines in September1995 for overseas investment in Venture Capital in India.

For tax-exemption purposes, guidelines were also issued by the Central

Board of Direct Taxes (CBDT) and the investments and flow of foreign currency into and outof India have been governed by the Reserve Bank of Indias (RBI) requirements.

Further, as a part of its mandate to regulate and to develop the Indiancapital markets, the Securities and Exchange Board of India (SEBI) framed the SEBI (VentureCapital Funds) Regulations, 1996. These guidelines were further amended in April 2000 withthe objective of fuelling the growth of Venture Capital activities in India.

Industry Size, Activity and Participants:

Pursuant to the regulatory framework mentioned above, some domesticVCFs were registered with SEBI. Some overseas investment has also come through theMauritius route. However, the venture capital industry, understood globally as independentlymanaged, dedicated pools of capital that focus on equity or equity-linked investments in

privately held, high-growth companies, is relatively in a nascent stage in India.

Figures from the Indian Venture Capital Association (IVCA) show that, till1998, around Rs. 30 billion had been committed by domestic VCFs and offshore funds whichare members of IVC]. Figures available from private sources indicate that overall fundscommitted are around US$ 1.3 billion. Investable funds are less than 50% of the committedfunds and actual investments are lower still.

Policy Support:

Given the proper environment and policy support, there is undoubtedly

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYtremendous potential for venture capital activity in India. The Finance Minister of India, in his1999 budget speech, announced that for boosting high-tech sectors and supporting firstgeneration entrepreneurs, there is an acute need for higher investment in venture capitalactivities. The SEBI committee on Venture Capital was set up in July, 1999 to identify theimpediments and suggest suitable measures to facilitate the growth of venture capital activity inIndia. Also keeping in view the need for a global perspective it was decided to associate Indianentrepreneurs from Silicon Valley in the committee.

Objectives and Vision for Venture Capital in India:

Venture capitalists finance innovation and ideas which have potential for highgrowth but with inherent uncertainties. This makes it a high-risk, high return investment. Apartfrom finance, venture capitalists provide networking, management and marketing support aswell. In the broadest sense, therefore, venture capital connotes financial as well as humancapital.

In the global venture capital industry, investors and investee firms worktogether closely in an enabling environment that allows entrepreneurs to focus on valuecreating ideas and allows venture capitalists to drive the industry through ownership of thelevers of control, in return for the provision of capital, skills, information and complementaryresources. This very blend of risk financing and hand holding of entrepreneurs by venturecapitalists creates an environment particularly suitable for knowledge and technology basedenterprises.

Scientific, technology and knowledge based ideas properly supported byventure capital can be propelled into a powerful engine of economic growth and wealthcreation in a sustainable manner. In various developed and developing economies venturecapital has played a significant developmental role.

India, along with Israel, Taiwan and the United States, is recognized for itsglobally competitive high technology and human capital. India has the second largest Englishspeaking scientific and technical manpower in the world.

The Indian software sector crossed the Rs 100 billion mark turnover during1998. The sector grew 58% on a year to year basis and exports accounted for Rs 65.3 billionwhile the domestic market accounted for Rs 35.1 billion. Exports grew by 67% in rupee termsand 55% in US dollar terms. The strength of software professionals grew by 14% in 1997 andhas crossed 1,60000. The global software sector is expected to grow at 12% to 15% per annumfor the next 5 to 7 years.

Recently, there has also been greater visibility of Indian companies in theUS. Given such vast potential not only in IT and software but also in the field of serviceindustries, biotechnology, telecommunications, media and entertainment, medical and health

services and other technology based manufacturing and product development, venture capitalindustry can play a catalytic role to put India on the world map as a success story.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYWhere are VCs Investing In India?

IT and IT-enabled services Software Products (Mainly Enterprise-focused) Wireless/Telecom/Semiconductor Banking PSU Disinvestments Media/Entertainment Bio Technology/Bio Informatics Pharmaceuticals Electronic Manufacturing Retail

Issues and Challenges:

Indian VC yet to be established as a sustainable asset class among institutionalinvestors. Moreover a limited amount of true risk-capital impacts entrepreneurial activity.

Exit challenges exist mainly due to shallow capital markets and dull M&A environment forsmall companies. Most importantly, India is yet to create a brand-name for IP-led companies,like Israel has successfully done.

GUIDELINES AND REQUIREMENTS OF SEBI FOR REGISTER

THE VENTURE CAPTIAL COMPANY

HOW TO GET REGISTERED AS A VENTURE CAPITAL FUND :Applicant should follow the procedure given below so as to expedite the

registration process. However, SEBI will also guide the applicant step by step after gettingapplication for registration as a venture capital fund. Normally, all replies are sent within 21working days from the date of getting each communication from the applicant during the

process of registration. Thus, the total time period for registration depends on how fast therequirements are complied with by the applicant.

Main requirements under SEBI (Venture Capital Funds) Regulations,

1996:

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY The following are the eligibility criteria for grant of a certificate of registration as

per regulation 4 of SEBI (Venture Capital Funds) Regulations 1996 . For the purpose of grant of acertificate of registration, the applicant has to fulfil the following, namely:-

(a) if the application is made by a company, -

(i) memorandum of association has as its main objective, the carrying on of theactivity of a venture capital fund;

(ii) it is prohibited by its memorandum and articles of association from making aninvitation to the public to subscribe to its securities;

(iii) its director or principal officer or employee is not involved in any litigationconnected with the securities market which may have an adverse bearing on the

business of the applicant;

(iv) its director, principal officer or employee has not at any time been convicted

of any offence involving moral turpitude or any economic offence.

(v) it is a fit and proper person.

(b) if the application is made by a trust, -

(i) the instrument of trust is in the form of a deed and has been duly registered underthe provisions of the Indian Registration Act, 1908 (16 of 1908);

(ii) the main object of the trust is to carry on the activity of a venture capital fund;

(iii) the directors of its trustee company, if any, or any trustee is not involved in any

litigation connected with the securities market which may have an adverse bearingon the business of the applicant;

(iv) the directors of its trustee company, if any, or a trustee has not at any time, been

convicted of any offence involving moral turpitude or of any economic offence;

(v) the applicant is a fit and proper person.

(c) if the application is made by a body corporate,-

(i ) it is set up or established under the laws of the Central or State Legislature.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY(ii) the applicant is permitted to carry on the activities of a venture capital fund.(iii) the applicant is a fit and proper person.(iv) the directors or the trustees, as the case may be, of such body corporate have not

been convicted of any offence involving moral turpitude or of any economicoffence.

(v) the directors or the trustees, as the case may be, of such body corporate, if any, is

not involved in any litigation connected with the securities market which may havean adverse bearing on the business of the applicant.

(d) the applicant has not been refused a certificate by the Board or its certificate has notbeen suspended under regulation 30 or cancelled under regulation 31.

Application for Registration:An applicant should apply for registration in form A prescribed under First Schedule of SEBI(Venture Capital Funds) Regulations 1996 along with requisite fees. All documents should beenclosed as specified in the form.

While applying, please ensure that the main object clause of the memorandum of the applicantcompany/ trust deed, etc., as the case may be, permits you to carry on venture capital fundactivities. While applying, please also submit the following additional information:

1. A complete list of your associate companies registered with SEBI , and also indicate thecapacity in which they are registered along with the SEBI Registration number;

2. State whether the applicant is registered with SEBI in any capacity.

3. A complete list of your group companies registered with SEBI, and also indicate thecapacity in which they are registered with SEBI along with their SEBI Registration number.

4. Whether the applicant or the intermediary, as the case may be or its whole time directoror managing partner has been convicted by a Court for any offence involving moralturpitude, economic offence, securities laws or fraud

5. Whether any winding up orders have been passed against the applicant or the intermediary

6. Whether any orders under the Insolvency Act have been passed against the applicant orany of its directors, or person in management and has not been discharged.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY7. Whether any order restraining prohibiting or debarring the applicant or its whole time

director from dealing in securities in the capital market has been passed by SEBI or anyother regulatory authority and a period of three years from the date of the expiry of the

period specified in the order has not elapsed;

8. Whether any order canceling the certificate of registration of the applicant on the groundof its indulging in insider trading, fraudulent and unfair trade practices or market manipulationhas been passed by SEBI and a period of three years from the date of the order has not elapsed ;

9. Whether any order, withdrawing or refusing to grant any license/ approval to the applicantor its whole time director which has a bearing on the capital market, has been passed by SEBIor any other regulatory authority and a period of three years from the date of the order has notelapsed.

10. (a) Details of registration of your company/associate/group companies (to be givenseparately), which are registered/ required to be registered with Reserve Bank of India (RBI)as a Banking company or Non Banking Finance Company or in any other capacity andaddress(es) of concerned branch office(s) of RBI.

(b) Details of disciplinary action taken by RBI against you or any of your group/associatecompanies. Please also inform us in case there is any default in repayment of deposits by youor any of your group / associate companies.

Applicant can submit no objection certificate from RBI for getting registered with SEBI, to

expedite the registration process.

Other Documents to be submitted to SEBI :

1) Memorandum and Articles of Association of applicant company, executed copy oftrust deed if the fund is being set up as a trust and main objective of constitution in caseof body corporate.

2) Executed copy of Investment Management Agreement, if applicable.

3) Disclose in detail the investment strategy as required under regulation 12(a) of theSEBI (Venture Capital Funds) Regulations, 1996. Also state the target size of the fundalong with the profile of the investors of the fund.

4) An undertaking to the effect that the fund will not enter into any venture capitalactivity if it fails to raise a commitment of at least Rs. five crore as required underRegulation 11(3) of SEBI (Venture Capital Funds) Regulations, 1996.

5) Copies of letters of commitment from investors in support of the target amountproposed to be raised by the fund.

6) Undertaking that the venture capital fund will not make investment in any area listedunder Third Schedule to SEBI (Venture Capital Funds) Regulations, 1996.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANY7) Venture Capital Fund shall disclose the duration/ life cycle of the fund.

Grant of Certificate of Registration:

Once all above requirements have been complied with and requisite fees as perSecond Schedule to Regulations has been paid, SEBI will grant certification of registration as a

venture capital fund.

EXAMPLES OF VENTURE CAPITAL COMPANY-FOREIGN

COMPANY

Apax Partners LLP-Venture Capital Company

TypePrivate Ownership,

Limited liability partnership

Industry Private equity

Founded 1969

Headquarters London, United Kingdom

Products Investments, private equity funds

Total assets $20 billion

Employees 100+

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Website www.apax.com

History of private equity

and venture capital

Early history

(Origins of modern private equity)

The 1980s

(LBO boom)

The 1990s

(LBO bust and the VC bubble)

The 2000s

(Dot-com bubble to the credit crunch)v d e

Apax Partners LLP is a global private equity and venturecapital firm, headquartered in London. The company also operates out of eight other offices in

New York, Hong Kong, Mumbai, Tel-Aviv, Madrid, Stockholm, Milan and Munich. The firm,including its various predecessors, have raised approximately $35 billion (USD) dating back to1969. Apax Partners is one of the oldest and largest private equity firms operating on aninternational basis, ranked the seventh largest private equity firm globally.

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYApax invests exclusively in certain business sectors including:

telecommunications, information technology, retail and consumer products, media, healthcareand financial and business services. As of the end of 2007, Apax had invested in approximately340 companies in all stages of development.

Apax raises capital for its investment funds throughinstitutional investors including corporate and public pension funds, university and collegeendowments, foundations and fund of funds. One of the firm's co-founders, Alan Patricof, wasan early investor in Apple Computer and America Online (AOL).

Apax Partners Worldwide, as it exists in 2008 is the product of the combination of three firms:

Patricof & Co., founded in 1969 in New York by pioneering venture capitalist Alan

Patricof; Multinational Management Group (MMG), founded in 1972 by Sir Ronald Cohen

and Maurice Tchnio; Saunders Karp & Megrue, founded in 1988 by Thomas A. Saunders III and Allan W.

Karp and joined by John Megrue in 1992.

Patricof & Co. and MMG:

In 1969, Alan Patricof founded Patricof & Co. a firm dedicated to makinginvestments in "development capital" later known as "venture capital," primarily in small early-stage companies. Patricof, one of the early venture capitalists, was involved in the developmentof numerous major companies including America Online, Office Depot, Cadence DesignSystems, Apple Computer and FORE Systems. In 1975, Patricof launched 53rd StreetVentures, a $10 million vehicle.

Meanwhile, in 1972, Sir Ronald Cohen and Maurice Tchnio, along withtwo other partners, founded Multinational Management Group (MMG) with offices in London,Paris, and Chicago. MMG initially was established as an advisory firm, working with smallemerging companies, rather than an investment firm. However, MMG initially struggled togain traction amid the negative economic conditions, particularly in the UK in the mid-1970s.

By 1977, two of the original four founding partners had left MMG, leavingCohen and Tchnio in need of a partner to help rejuvenate their firm. In that year, Cohenapproached Alan Patricof to join them and run the new firm's investments in the U.S. The newfirm would be known as Alan Patricof Associates (APA) and ultimately come to be known asApax Partners (based on a play on Patricof's name: Alan Patricof Associates Cross (x) Border).Following the merger, MMG abandoned its advising business, and the new APA shifted itsfocus exclusively to investing in start-up companies.

Apax in the 1980s, 1990s and the 21st century:

Throughout the 1980s, the firm grew steadily raising capital under aseries of separate funds. As the 1980s progressed, the firm introduced its first later stageventure fund in 1984, its first growth capital fund in 1987 and its first dedicated European

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYleveraged buyout fund MMG Patricof European Buy-In Fund in 1989. In response to thechanging conditions, in the venture capital industry in the 1980s Apax (and other early venturecapital firms including Warburg Pincus and J.H. Whitney & Company) began to transitionaway from venture capital toward leveraged buyouts and growth capital investments, whichwere in vogue in that decade. This trend was more prevalent in Europe than the U.S. wherePatricof preferred to continue focusing on venture investments.

In 1991, Apax Partners became the official name for all of its Europeanoperations however the U.S. business still operated under the Patricof & Co. name. By the mid-1990s Apax had become one of the larger private equity firms globally.

In 2000, Patricof & Co. adopted the Apax Partners branding and formalized itsaffiliation with its European business. The U.S. business would operate as Apax Partners, Inc.

The following year, Patricof stepped back from day-to-day management of Apax Partners, Inc.,the US arm of the firm to return to his original focus on making venture capital investments insmall early-stage companies. In 2006, Patricof left Apax to form Greycroft Partners whichfocuses on small early-stage venture capital investments.

Despite the closer relations between the U.S. and European teams, the firm stilloperated separate fund entities for each geography. The European side of the business began to

pull away in terms of capital commitments, raising more than $5 billion for its 2004 vintageEuropean fund but just $1 billion for its 2006 U.S. vintage fund.

As of June 2011 Israel consumer action groups are calling for a consumer ban

of TNUVA an APAX held firm in Israel.

Saunders Karp & Megrue:

In 2005, Apax announced it would acquire middle market leveragedbuyout firm Saunders Karp & Megrue to augment its buyout business in the United StatesSaunders Karp, formerly based in Stamford, Connecticut, was founded in 1989 by Thomas A.Saunders III and Allan W. Karp. John Megrue, who today heads Apax's operations in the U.S.,had worked as a principal at Patricof & Co. before joining Saunders Karp in 1992. SaundersKarp had received capital commitments from institutional investors including AT&T, the

General Electric Pension Trust, Goldman Sachs Private Equity Group, HarbourVest Partners,JP Morgan Fleming Asset Management, New York State Common Retirement Fund andVerizon, among others.

2005

Apax purchased a majority stake in Travelex (the world's largest foreign exchangecompany) for 1.06bn. In Q3 2005 Apax also announced plans to purchase GrupoPanrico, one of Spain's largest food companies and its largest bakery company.

As part of the Violet Acquisitions consortium (along with Barclays Capital and RobertTchenguiz) Apax is involved in the December 2005 purchase of Somerfield, the UK's

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PROJECT ON SEBI GUIDELINES FOR VENTURE CAPITAL COMPANYfifth largest supermarket chain (with around 700 stores). Somerfield was later sold toThe Co-operative Group in March 2009.

2006

Apax purchased the Tommy Hilfiger Corporation for $1.6 billion, or $16.80 a share, all

in cash. In May 2006, this deal was approved by the shareholders of Tommy Hilfiger. In June 2006, Apax acquired HIT Entertainment in a take-private transaction in June

2006. Apax acquired a majority stake in Pictage, Inc. the leading provider of online solutions

for professional wedding and portrait photographers. Pictage, Inc. was co-founded byGary Fong.

On August 21, 2006, it was announced that Apax Partners and Bain Capital had joinedthe enlarged private equity consortium headed by KKR that has agreed to acquire an80.1% stake in the Semiconductor Division of Royal Philips Electronics. The newcompany is called NXP Semiconductors.

On October 31, 2006, it was announced that Apax Partners had acquired FTMSC

(France Telecom Mobile Satellite Communications) which would later be rebrandedunder the Vizada name in June 2007. This was shortly followed by an announcement onSeptember 6, 2007 explaining that Apax Partners had acquired Telenor SatelliteServices which was to be merged into the Vizada brand.

On November 20, 2006, Apax Partners Worldwide LLP won a tender to buy control ofTnuva. The bid values the privately held food and dairy group at $1.025 billion.

2007

In May 2007, Apax signed definitive agreements with funds advised by Apax Partnersand OMERS Capital Partners under which such funds acquired the higher education,

careers and library reference assets of Thomson Learning, and a consortium of fundsadvised by OMERS, and Apax acquired Nelson Canada, for a combined total value ofapproximately $7.75 billion in cash. The higher education, careers and library referenceassets include such well-known brands and businesses as: Wadsworth, South-Western,Delmar Learning, Eddie Diamond, Gale, Heinle, Brooks/Cole, Course Technology and

Nelson Canada. Nelson Canada is a leading provider of books and online resources forthe educational market in Canada. The group will be majority-owned by OMERS. Thename was changed to Cengage Learning, on 24 July 2007.

Apax abandoned PCM Uitgevers.

2008

In August 2008, Apax Partners completed acquisition of TriZetto Group.

2009

In August 2009, Apax Partners completed acquisition of Bankrate.

2010

In April 2010, Apax Partners announced acquisition of Tivit.

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EXAMPLES OF VENTURE CAPITAL COMPANY-INDIAN

COMPANY

Reliance Asset Management Ltd-Venture Capital Company

Type public

Industry Venture capital

Founded 2006

Founder(s) Anil Ambani

Headquarters Mumbai, Maharastra, India

Key peopleAnil Ambani(Chairman)

Harshal Shah, CEO

Products Venture capital, Growth capital

ParentReliance Anil Dhirubhai Ambani

Group

Website RelianceVenture.com

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Reliance Venture (Reliance Venture Asset Management Ltd) is acorporate venture capital company based in Mumbai, Maharashtra. It has been promoted by theReliance ADA Group. It has advised and invested in deals to the tune of over $4 billion invarious companies.

It has invested in companies such as India's largest online travel portal,Yatra.com, Suvidhaa Infoserve, Stoke Inc, Pelago Inc, Sequans Communications, E-BandCommunications, Seedfund and two MIT-startups, Dhama Innovations and Scalable DisplayTechnologies. It was recently ranked 30th in the Red Herring Top 100 Global Venture CapitalFirms in 2009.

History:

Reliance Venture Asset Management was founded by ex-IBMer, HarshalJ. Shah, in 2006, as Reliance Technology Ventures Ltd. Harshal Shah was hand-picked by AnilAmbani, the Chairman of the Reliance Anil Dhirubhai Ambani Group, to start the corporateventure arm of the Group.

On March 3, 2010, company changed its name from

Reliance Technology Ventures Ltd to Reliance Venture Asset Management

Ltd.

Recently, Reliance Venture sold its stake in Seattle-

based, Pelago, Inc., to Groupon for pre-IPO shares in Groupon. Media

reports state that this deal will provide Reliance Veture a 9X on its

investment in 3 years. Pelago was co-invested into by Jeff Bezos, CEO and

Foudner of Amazon.com, and Kleiner Perkins Caufield & Byers.

Reliance Venture is also the first Indian venture capital firm to takea portfolio company for an IPO on the New York Stock Exchange, though its listing of France-

based Sequans Communications (NYSE ticker: SQNS).

It reportedly made a 5X profit on its investment in 3 years. Earlier, italso sold its stake in MIT start-up, Dhama Innovations, to a group of private equity investorsgenerating a triple-digit IRR.

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GROWTH OF VENTURE CAPITAL COMPANY IN INDIA

Setting the stage - Venture Capital in India:

Phase I- Formation of TDICI in the 80s and regional funds as GVFL & APIDC in

the early 90s.

Phase II - Entry of Foreign Venture Capital funds (VCF) between 1995-1999

Phase III - (2000 onwards). Emergence of successful India-centric VC firms

Phase IV (current) Global VCs and PE firms actively investing in India

150 Funds active in the last 3 years (Government,Overseas, Corporate, Domestic)

The Opportunity:

High Growth in Technology and Knowledge basedIndustries (KBI)

KBI growing fast and mostly global, less affected by domestic issues.

Several emerging centers of innovation biotech,wireless, IT, semiconductor,

pharmaceutical.

Ability to build market leading companies in India that serve both global and domestic

markets.

India moving beyond supplier of low-cost services to higher-value products.

Quality of entrepreneurship on ascending curve.

2006 PE/VC Trends:

US$7.5bn invested in 2006 across 299 deals.

IT & ITES retained its status as the favorite industry among PE investors, followed by

manufacturing and real estate.

Largest PE deal was $900M LBO of Flextronics by Kohlberg Kravis Roberts (KKR).

M&A and IPO activity continued to remain strong.

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CONCLUSION

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This project explains the concept of venture capital company and how it

grows in Indian economy. There are some pictorial representations issued by the government

about the growth of venture capital in India.By working in this project we get more knowledge

about SEBI AND ITS GUIDELINES FOR VENTURE CAPITAL COMPANY.Bywe conclude our project.

BIBLIOGRAPHY

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www.google.com

www.indiainfoline.com

www.economictimes.com

www.namesthenri.com

www.altaassets.com

www.domain-b.com
http://www.economictimes.com/http://www.namesthenri.com/http://www.altaassets.com/http://www.domain-b.com/http://www.economictimes.com/http://www.namesthenri.com/http://www.namesthenri.com/http://www.altaassets.com/http://www.altaassets.com/http://www.domain-b.com/