Financial Management of PSU’s &VC

1. Financial Management of PSU’s
and
Venture Capital
PREPARED
BY
“SUJEET YADAV”

3. Government-owned corporations.
Majority (51% or more) of the paid up share
capital .
Public Sector Undertakings (PSUs) can be
classified :
 Public Sector Enterprises (PSEs)
 Central Public Sector Enterprises (CPSEs)
 Public Sector Banks (PSBs)
PSU’S & VC 30-8-2012 3

4.  In 1951(First 5 year plan):
Number of CPSU’s were only 5 with an investment
of Rs.290mn only.
 In 1992(8th 5 year plan):
Number of CPSU’s were only 246 with an
investment of Rs.1354mn.
 In 2008(11th 5 year plan):
Number of CPSU’s were only 244 with an
investment of Rs.4211mn.
PSU’S & VC 30-8-2012 4

5.  Statutory corporations created through acts of
parliament(HPCL/BPCL).
 Departmental enterprises(Railways).
 Government companies .
PSU’S & VC 30-8-2012 5

6. Strong foundation for the industrial development
of the country
Less concerned with making profits
Key role in nation building activities
Leverage to the Government
Rural development
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7. Maharatna
Navratna
Miniratna
PSU’S & VC 30-8-2012 7

8. Maharatna :
Average annual turnover of Rs 20,000 crore .
Average annual net worth be Rs 10,000 crore.
Eg. Coal India Limited, Indian Oil Corporation Limited
Navratna :
Empowers PSEs to invest up to Rs. 1000 crore
Freedom to enter joint ventures, form alliances and float
subsidiaries abroad.
Eg. Bharat Petroleum Corporation Limited, GAIL (India) Limited
Miniratna :
Miniratna category I-pre-tax profit should have been Rs30 crores.
category II-Profit for the last three years .Have a positive net worth.
Eg. Airports Authority of India , Bharat Sanchar Nigam Limited
PSU’S & VC 30-8-2012 8

9. Role of financial advisor
Capital budgeting decisions
Capital structure decisions
Working capital management
Pricing policy
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10. PSU’S & VC 30-8-2012 10

11. Infrastructure Development
National manufacturing policy
FDI policy
MOU
Investment in CPES
Restructuring of loss making CPSE’s
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12. Disinvestment is a process in which the
public undertaking reduces its portion in
equity by disposing its shareholdings.
Disinvestment as per SEBI(substantial
acquisition of shares) guideline, means the
sale by the central/state government, of its
shares or voting rights and control, in PSU
The disinvestment reduces government
participation in the company.
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13. Transfer of ownership to the government
when the dilution is beyond 51%.
Imperative for the government to sell the part
of its holdings.
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15. To focus on core business of E&P, ONGC has set strategic
objectives of:
Doubling reserves (i.e. accreting 6 billion tonnes of O+OEG).
Improving average recovery from 28 per cent to 40 per cent.
Tie-up 20 MMTPA (Million metric tonne per annum) of equity
Hydrocarbon from abroad by 2018.
Accrete 1 Billion tonnes of resources from unconventional
sources of energy.
The focus of management will be to monetize the assets as
well as to assetise the money.

16. Financials (2010-11)
ONGC group’s turnover during 2010-11 has been Rs.127,905 Crore with net profit
of Rs.22,456 Crore. ONGC paid highest-ever dividend of Rs.7,486 Crore. The Net
Worth of ONGC Group of companies is Rs.114,531 Crore.
During 2010-11, the turnover of ONGC (on standalone basis) has been Rs.69,532
Crore with net profit of Rs.18,924 Crore; the highest-ever despite sharing under-recovery
of Rs.24,892 Crore to the Oil Marketing Companies (OMCs) as per the
instructions of the Government of India. Net worth of ONGC (on standalone basis)
has been Rs.96,709 Crore.
OVL’s(ONGC videsh limited) consolidated gross revenue increased by 21% from
Rs.15,383 Crore during 2009-10 to Rs.18,683 Crore during 2010-11 and
consolidated net profit increased by 29% from Rs.2,090 Crore during 2009-10 to
Rs.2,691 Crore during 2010-11.

17. PSU’S & VC 30-8-2012 17

18. Oil and Natural Gas Corporation
Limited
NTPC Limited
State Bank of India
BSNL
Indian Oil Corporation Limited
Steel Authority of India Limited
NHPC Limited
Nuclear Power Corporation of
India Limited
Power Grid Corporation of India
Limited
Bharat Heavy Electricals Limited
965,505.3
676,049.7
649,860.4
629,365.2
543,187.9
357,000.3
245,812.1
239,808.8
211,109.0
200,182.5
COMPANY NAME NETWORTH (MN)
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19. PSU’S & VC 30-8-2012 19

20. I call my
invention
“the wheel”
but I have
been unable
to get any
venture
capital
Hmm.
His
idea is
good it
will
generat
e lots
of
profit
I will give
you the
capital &
finance for
developmen
t of your
innovation

21. VC - Funds made available for startup & SB
VC - Money provided by professionals
Venture Capitalists generally:
• Finance new and rapidly growing companies
• Purchase equity securities
• Assist in the development of new products or
services
• Add value to the company through active
participation
PSU’S & VC 30-8-2012 21

22. Long time
horizon
Lack of
liquidity
High risk
Equity
participatio
n
Participatio
n in
manageme
nt
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23. 1• Injects long term equity finance
• The VC is a business partner, sharing both the risks
and rewards
2
3• The VC’s provide practical advice and assistance
• The VC may be capable of providing additional
rounds of funding
4•
VCs are experienced in the process of preparing a
company for an IPO of its shares onto the stock
exchanges or overseas like NASDAQ, facilitate a
trade sale.
5
PSU’S & VC 30-8-2012 23

24. Stages of
Financing
Seed
Money
To prove a
concept
(15-25L)
Extreme
risk
Start Up
Provided to
companies
(25-60L)
Very high
risk
First
Round
Manufacturing
funds
(1-3cr)
High risk
Second
Round
Working
capital &
expenses
(2-5cr)
Sufficiently
high
Third
Round
For newel
profitable
company
(2-10cr)
Medium
Forth
Round
Bridge
Financing
for going
public
process
(100cr)
Low
Acquisition or buyout financing (10-100cr)
PSU’S & VC 30-8-2012 24

25. PSU’S & VC 30-8-2012 25
Methods
Equity
Conditional loan
Participating
debentures
Income note

26. Any company or trust to carry on any activity as a venture
capital fund should apply to SEBI
Minimum sum acceptable by VC fund from any investor is Rs
5lkh
VC fund is not permitted to get it’s units listed on any
recognized stock exchange for first three years from the date of
the issuance of units by the venture capital
VC fund should not invest more than 25% of the fund in one
venture

27. The concept of VC was formally introduced in
India in 1987 by IDBI.
The government levied a 5 per cent cess on all
know-how import payments to create the
venture fund.
ICICI started VC activity in the same year
Later on ICICI floated a separate VC company
- TDICI
PSU’S & VC 30-8-2012 27

28. 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
PSU’S & VC 30-8-2012 28

29. 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
PSU’S & VC 30-8-2012 29

30. VC can help in the rehabilitation of sick
units.
VC can assist small ancillary units to
upgrade their technologies
VCFs can play a significant role in
developing countries
Provide financial assistance to people
coming out of universities, technical
institutes, etc
PSU’S & VC 30-8-2012 30

31. The online fashion site My
Wardrobe - won £6m of funding
GroupSpaces, – secured $1.3m
funding
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