Venture capital is a form of private equity and financing provided to startup companies with high growth potential. It involves high risk but also offers opportunities for high returns. Venture capital funding includes seed funding, startup funding, and multiple rounds of funding for early-stage companies. It helps promote innovation and entrepreneurship. Some sources of venture capital in India include PACT, TDICI, and venture capital schemes of IDBI. Portfolio management in mutual funds involves processes like security analysis, portfolio selection, and revision to generate optimal returns. Credit ratings are assigned by agencies and indicate a borrower's creditworthiness. Insurance provides protection from financial losses by sharing risks. Life insurance pays death benefits to beneficiaries. IRDA regulates the

1. Unit – 5
Venture Capital

2. Venture Capital - Example

3. What is Venture Capital?
• A form of private equity
• Investments received by start-up companies
• A type of funding for a new or growing business
• Funding to the high-growth potential start-ups in
exchange for equity in the company
• Finances high-risk projects

4. Features of Venture Capital
investments
• High Risk
• Lack of Liquidity
• Long term horizon
• Equity participation and capital gains
• Venture capital investments are made in
innovative projects
• Suppliers of venture capital participate in the
management of the company

5. Types of Venture Capital
Funding

6. • Seed money: Low level financing for proving and fructifying a
new idea
• Start-up: New firms needing funds for expenses related with
market in grand product development
• First-Round: Manufacturing and early sales funding
• Second-Round: Operational capital given for early stage
companies which are selling products, but not returning a
profit
• Third-Round: Also known as Mezzanine financing, this is the
money for expanding a newly beneficial company
• Fourth-Round: Also called bridge financing, 4th round is
proposed for financing the "going public" process

7. Advantages & Disadvantages
of Venture Capital
Advantages
1. Helps in promotion of industrialization
2. Helps in developing and promoting
innovative technologies
3. Helps the new entrepreneurs
4. Enhances employment opportunities
5. Develops entrepreneurship in the
country
Disadvantages
1. Loss of control
2. Dilution Of Ownership

8. SOURCES OF VENTURE CAPITAL
• Programme for Advancement of Commercial
Technology (PACT)
– It was the first venture capital funding in India, started in
1995 to finance Indian firms in commercializing the
innovative technologies.
– It was started by Indo-US joint ventures known as
Programme for Advancement of Commercial Technology.

9. • 2. Technology Development and Investment Corporation of
India (TDICI)
– TDICI was the first venture capital company of India and it was
promoted by ICICI in 1986.
• 3. Risk Capital and Technology Finance Corporation (RCTFC)
– It is an autonomous body launched by Industrial Finance
Corporation of India (IFCI).
– It promotes and supports the entrepreneurs especially engaged in
technological development.
• 4. Venture capital scheme of IDBI
– This scheme of IDBI is emerging as one of the major sources of
venture-capital funding.
– It is meant specifically to support projects which promote
innovative and experimental technologies in Indian conditions.

10. Origin and Growth of Venture Capital
• In India, it is a new concept
• The BHATT Committee (Committee on Development of Small and Medium
Entrepreneurs) in the year 1972 recommended the creation of venture
capital
• Risk capital foundation: The Industrial Finance Corporation of India (IFCI)
launched the first venture capital fund in the year 1975
• Seed capital scheme: This venture capital fund was launched by IDBI in
1976
• Venture capital schemes: Venture capital funding obtained official
patronage with the announcement by the Central Government of the
“Technology Policy Statement” in 1983.

11. Origin and Growth of Venture Capital
• PACT: The ICICI undertook the administration of Program for Application of
Commercial Technology (PACT) aided by USAID with an initial grant of US$ 10
million.
• Government fund: IDBI, as nodal agency, administers the venture capital fund
created by the Central Government with effect from April1, 1986.
• TDICI: In 1988, an ICICI sponsored company, viz, Technology Development and
Information Company of India Ltd. (TDICI) was founded
• RCTFC: The Risk Capital Foundation (RCF) sponsored by IFCI was converted into
Risk Capital and Technology Finance Corporation Ltd. (RCTFC) in the year 1988
• VECAUS: VECAUS–I, the UTI sponsored “Venture Capital Unit Scheme” was
launched in the year 1989

12. Investment Nurturing Methods

13. Investment Nurturing
• The process by which venture
capital companies continue to involve in the
operations of is called 'investment nurturing

14. • Hands on Nurturing:
– Continuous and constant involvement in the operations of
the investee company by way of representation on the
board of directors is referred to as hands on nurturing.
• Hands-off Nurturing:
– venture capital companies do not take part in the
appointment of nominee directors on the board of the
assisted firms. The venture capitalists do not normally
actively participate in formulating strategies/policy matters,
in spite of the right to do so.
• Hands holding Nurturing:
– The venture capital companies take part in the
management of the ventures only when approached by the
units.

15. Mutual Funds

17. What is Mutual Funds?
• Mutual Funds is a type of financial vehicle
which Pool the money
• MF is a financial instrument that allows
people to pool their money to build a huge
amount, and then this money is invested by
group of people (refereed as FUND
MANAGERS)

19. Portfolio Management Process in
Mutual Funds
• What is Portfolio Management?
– The advisory services provided by corporate
financial intermediaries.
– It enables investors to promote and protect their
investments that help them to generate higher
returns.

20. Phases of Portfolio Management in
Mutual Funds
• Security Analysis
• Fundamental factors affecting the company such as EPS
• Past movement in the prices of shares
• Portfolio Analysis
• An attempt to spread the risk all over
• Portfolio Selection
• Generate a portfolio that provides the highest returns at a given level of risk
• Portfolio Revision
• Constantly monitor the portfolio
• Portfolio Evaluation
• Assessing the performance of the portfolio

21. Credit Rating System

22. What is Credit Rating?
• A quantified measurement of the creditworthiness of a
borrower in general terms or with respect to a
particular debt or financial responsibility.
• the ability and willingness to fulfill the financial
responsibility in completeness and within the
established due dates

23. Types of Credit Ratings
• Investment Grade
– Financial instruments that have ratings ranging from AAA+
to BBB- under the terminology
– BBB- as the lowest investment grade
• Speculative Grade
– The company is less likely to be able to pay back its
creditors than a company with an investment-grade rating
– Companies rated BB, B, CC, and C are
considered speculative

24. NATURE OF CREDIT RATING
• Rating is based on information
• Many factors affect rating
• Rating by more than one agency
• Publication of ratings
• Right of appeal against assigned rating
• Rating not applicable to equity shares
• Time taken in rating process

25. Growth Factors of Credit Rating
1. Provides quality and dependable information
2. It provides information at low cost
3. It provide basis for investment
4. Healthy discipline on corporate borrowers
5. Formation of public policy

26. Advantages & Disadvantages of Credit
Rating
Advantages of Credit Rating
1. Recognition of risk and
returns
2. Freedom of investment
decisions
3. Easy understanding of
investment proposals
4. Advantages of continuous
monitoring
5. Reduced cost of public issues
6. Rating facilitates growth
Disadvantages Of Credit Rating
1. Non-disclosure of
significant information
2. Static study
3. Rating is no certificate of
soundness
4. Rating may be biased
5. Rating under unfavorable
conditions
6. Difference in rating grades

27. Credit Rating Process

28. Domestic And International Credit
Rating Agencies
• Credit Analysis and Research Ltd. (CARE)

29. Domestic Credit Agencies
• Credit Analysis and Research Limited(CARE)
• Credit Rating and Information Services of India
Ltd (CRISIL)
• ICRA Limited (Investment Information And Credit
Rating Agency)
• Brickwork Ratings India Pvt. Limited (Brickwork)

30. International Credit Rating Agencies
• Fitch
• Moody’s
• Standard & Poor’s

32. What is Insurance?
• Insurance is a means of protection from
financial loss.
• It is a form of risk management primarily used
to avoid the risk of a contingent, uncertain
loss.
• It is a “Little Price - For a Priceless Security.”

33. Definitions of Insurance
• “A contract under which one party (that is
insurer) accepts significant insurance risk from
another party (the policyholder) by agreeing
to compensate the policyholder if a specified,
uncertain future event (insured event)
adversely affects the policyholder”. -
International Financial Reporting Standards
for Insurance (IFRS - 4) in March 2004

34. Terminology used in Definition of
Insurance
• Insurer or insurance company
– The agency involved in Insurance business is known as insurer
• Insured/ Assured
– The person who gets his property/life insured is known as insured
• Policy
– The agreement or contract which is put in writing is known as a
Policy
• Premium
– The consideration in return of which the insurer undertakes to make
goods the loss or give a certain amount in case of life insurance is
known as premium

35. Functions
of
Insurance
Primary
Functions
Certainty of compensation of loss
Insurance provides protection
Risk sharing
Secondary
Functions
Prevention of losses
Providing funds for investment
Insurance increases efficiency
Solution to social problems
Encouragement of savings

37. • Principle of Utmost Good Faith
– It states that both the parties to contract must enter into a contract in good faith.
• Principle of Indemnity
– Principle of indemnity means insurance contracts are done to provide protection and compensate against
uncertain losses, damages or injuries.
• Principle of Insurable Interest
– This principle states that insurance policy holder must have insurable interest in the subject matter of
insurance.
• Principle of Subrogation
– Principle of subrogation states that after paying compensation, the ownership right of property will
transfer from insured to insurer.
• Principle of Loss Minimization
– This principle states that insured should always take all necessary steps to avoid losses and damages to
insured property.
• Principle of Contribution
– Principle of contribution states that insured cannot make profit by insuring the property with more than
one insurance company.
• Principle of Causa Proxima
– Causa proxima means the ‘direct cause’ or ‘nearest cause’. The principles of Causa proxima are applicable
when there are series of causes for losses or damages to insured property.

38. Types of Insurance
Types of
Insurance
Life
Insurance
or Persona
l Insurance
Property
Insurance
Marine
Insurance
Fire
Insurance.
Liability
Insurance
Social
Insurance

39. What is Life Insurance?
• A contract between an insurer and a
policyholder in which the insurer guarantees
payment of a death benefit to named
beneficiaries upon the death of the insured.

41. Insurance Regulatory and
Development Authority (IRDA)
• is a Statutory, autonomous and apex body
to regulate the insurance sector in India.
• It was created upon the recommendations by
the Malhotra Committee report of 1994.
• The members and the Chairman of IRDA are
appointed by the Government of India.

42. The main objective of setting up
IRDA was to promote market
efficiency and ensure consumer
protection

44. Functions of IRDA
• Ensure orderly growth of Insurance industry
• Protection of interest of policy holders.
• Issue consumer protection guidelines to insurance
companies.
• Grant, modify, and suspend license for insurance
companies.
• Lay down procedure for accounting policies to be adopted
by the Insurance companies.

45. Pension Fund
• Pension fund also known as a
superannuation fund
• Pension fund is any plan, fund, or scheme
which provides retirement income

46. What is Pension Plan?
• Pension plan or retirement plan are a type of
investment plan, which helps to build up a
part of savings over a long-term period

47. Pension Fund Objectives
• To give income during retirement
• To provide a steady source of income at the time of
retirement
• Every person who worked receives his retirement
benefits
• Ensuring livelihood during old age
• Reducing old age poverty

48. Features of Pension Fund
1. Guaranteed Pension/Income
2. Tax-Efficiency
3. Liquidity
4. Vesting Age
5. Accumulation Duration
6. Payment Period
7. Surrender value

49. Types of Pension Plans in India

50. • Deferred Annuity
– Build up an amount through regular premium or single
premium payment over a policy term
• Immediate Annuity
– The pension is provided immediately.
– The policyholder has to pay a lump-sum amount and
pension will be provided instantly, based on the lump-
sum amount paid by the policyholder
• Annuity Certain
– The annuity is paid to the annuitant for a specific
number of years

51. • Guaranteed Period Annuity
– The annuity is provided to the policyholder for certain
periods like 5years, 10years, 15 years or 20 years
• Life Annuity
– The pension amount will be paid to the annuitant until death
• National Pension Scheme(NPS)
– Introduced by the government of India in order to secure the
financial future of the individual after retirement
• Pension Funds
– This pension plan offers a comparatively better return upon
maturity

52. The Chilean Pension System

53. The Chilean Pension System
• It was introduced in on November 4, 1980
• Chile was the first country in the world to privatize its pensions
system
• A privately managed pension system in Chile, has attracted world-
wide attention
• It was following PAYGO (Pay As You GO) system
(financing expenditures with funds that are currently available
rather than borrowed)
• It means people are required to save a part of their salaries for their
own pensions and their contributions are invested in private funds

54. Pension Investment Policy & Types
of Pension Plans in India & Pension
Financing are same

55. YES BANK