A

Dissertation project Report

On
The Impact of Venture Capital
On Indian Capital Market
SUBMITTED TO
NORTH ORISSA UNIVERSITY,ODISHA
IN PARTIIAL FULLFILMENT OF THE REQUIREMENTFOR THE AWARD OF DEGREE
OF MASTER OF BUSINESS ADMINISTRATION IN FINANCIAL MANAGEMENT

(MBA-FM)
UNDER THE GUIDANCE OF:
Mr. Sujit Kumar Sahoo
Lecturer,Department of Professional Studies
D.D (Auto.) College, Keonjhar.
Submitted By:
DHANANJAAYA DAS
ROLL NO:-49419DO11

Department Of Professional Studies

DHARANIDHAR (AUTONOMOUS) COLLEGE

Keonjhar, Odisha.
 D.D. AUTONOMOUS COLLEGE,KEONJHAR
PIN-758001,ODISHA,INDIA

Mr.Sujit Kumar Sahoo.

Lecturer in finance, Department of professional studies
D.D (AUTO) College, keonjhar.
Odisha

CERTIFICATE OF INTERNAL GUIDE

This is certify that DHANANJAYA DAS, a student of semester-

IV,MBA(FM)during session 2019-2021 has worked under my guidance and
supervision for the preparation of the dissertation project report on the topic
“THE IMPACT OF VENTURE CAPITAL ON INDIAN CAPITAL
MARKET” as a part -fulfilment of master degree in MBA(FM).

D.D. (Autonomous)College, Keonjhar Signature of the guide

Date: Department of professional

studies
 DECLARATION

I, DHANANJAYA DAS, Roll No.- 49418D011 do hereby declare

that project report titled “ The Impact of Venture Capital on Indian
Capital Market ” being submitted to D.D (Auto) College ,Keonjhar
affiliated to North Orissa University, is prepared by me and solely of
my own effort and also fully support my guide.
I also declare that this report has not been submitted to any other
University or Academic Institution, Magazine or journals at any time
before.

DHANANAYA DAS
MBA-FM
ROLL NO-49419D011
 ACKNOWLEDGEMENT

Preparing a project is an arduous task, but I was fortunate enough to

get support from large number of people to whom I shall always
remain grateful and who helped me directly or indirectly in
completion of the project onThe impact of Venture Capital on Indian
Capital Market. The project has given me an opportunity to learn
many aspects. I am very grateful to my guide Mr.Sujit Kumar Sahoo,
for giving me this privilege to work under him and for all his support
during the entire duration as well as for his invaluable guidance that
helped me to complete my project.

DHANANJAYA DAS
MBA-FM
ROLL NO-49419D011
TABLE OF CONTENTS
CHAPTER-1
RESEARCH OBJECTIVES AND SCOPE OF RESEARCH PROJECTS
Introduction
Problem definition
Objectives of research
Research Methodology
CHAPTER-2
Literature Review
Nature & History of Venture Capital
Types of Venture Capital
Modes of Finance by Venture Capital
Forms of Venture Capital
Function of Venture Capital
Factors of Venture Capital
Selection of Venture Capitalists
Regional Economic Growth
Venture Capitalist in Rural Areas
Stages of Investment Financing
Venture Capital Process
Venture Capital Companies
Major Players
Venture Capital Industry
CHAPTER-3
DATA ANALYSIS, INTERPRETATION & PRESENTATION
CHAPTER-4
Finding of the study
CHAPTER-5
Conclusion
Suggestion
Bibliography
PREFACE
What is Venture Capital?
Venture capital broadly implies an investment or long term, equity
finance in high risk projects with high rewards possibilities, it is equity
financed based on the principal that a partnership can be formed between
the entrepreneur and the investors and thus represents an attempt to
institutionalize entrepreneur ship particularly associated with innovations.The
venture capitalist essentially provides finance to businesses promoted by
individuals group of individuals who have sound project ideas but lack
financial resources to implement them. Such projects would usually have
a high risk element inherent in them but would also promise
highly attractive returns to the investors in the event of success. Venture
capital is thought of as a creative capital and is expected
to perform economic functions different from other investment vehicles
which primarily serve as expansion capital. This is something that
is ignored by several entrepreneurs in India. The fact remain s that if
v en tu re cap ital has b een th e h arbing e r o f entrepreneurship as
never before in the west, it is because it enjoys a great deal of
flexibility. In the US, for example, this form of financing enjoys
consid erable tax in cen tiv es. Bu t, by and large, the industry
rose to the o c c a s i o n w h e n s o m e i n d u s t r i a l i s t s s u c h a
l o c k W h i t n e y a n d L a u r e n c e Rockefeller set aside funds to
see whether a financing industry could be developed out of giving
entrepreneurs an opportunity to start business. And what a way it developed.
 Origin of Venture Capital

Venture capital is a post-war phenomenon in the business world

mainly developed as a sideline activity of the rich in USA.The
concept, thus, originated in USA in 1950s when the capitalmagnets
like Rockefeller Group financed the new technologycompanies. The
concept became popular during 1960’s and1970’s when several
private enterprises started financing highlyrisky and highly rewarding
projects. To denote the risk andAdventure and some element of
investment, the generic termVenture Capital” was developed. The
American Research andDevelopment was formed as the first venture
organisationwhich financed over 100 companies and made profit over
35times its investment. Since then venture capital has grown’vastly in
USA, UK, Europe and Japan and has been an importantcontribution in
the economic development of these countries.
 Importance of Venture Capital

The importance of venture capitalists and the impact they have on the
economy has beenemphasized time and again by academic research.
The value addition that venture capitalistsbring to their portfolio
company is a direct result of the specialist skills and expert advice
theyprovide along with equity capital. Black & Gilson (1998), in their
study of the U S venture capital industry, have noted thatfirms which
began with venture capital backing have gone on to play a significant
role inshaping the macro economic landscape as they matured,
especially in emerging sectors likeBiotechnology. Also venture
capitalists are known to take an active role in identifying orbird-
dogging ‘innovative entrepreneurs. By partnering with these
exceptionally talentedentrepreneurs, they achieve what Timmons and
Bygrave (1986) call an ‘acceleration effect’. That is the collaborated
efforts of both parties; take innovations to commercial maturity
andsocial utility at a far greater velocity than a firm would alone. The
benefit of a developing venture capital industry translates into an
increase in employment. Timmons and By grave (1986) highlight the
correlation between high technology firms, financed by venture
capitalists and the enormous growth in employment. Megginson’s
(2001) substantiates the effect on employment by drawing from data
in the NVCA and EVCAshowing how an increase in capital invested
in portfolio companies also increased employment. Megginson and
Weiss’s (1991) study of venture capital certification, reflect thatthe
participation of venture capitalists helps in taking younger company to
an IPO (Initial Public Offering) and at the same time attracts
prestigious auditors, underwriters to participateand elicits greater
interest from institutional investors. Therefore, venture capital
participationhelps in enhancing the economic topography of a country.

EXECUTIVE SUMMARY:
Thisreport, which contains in-depth study of Venture Capital Industry in India,
is made with an intension to get through all the aspects related to the topic and
to become able to make some suggestion at the industry. Future of any
economy depends on the success of the new technologies and industries and
services supporting these technologies. In India, where human, particularly
technical and entrepreneurial are abundant and there is shortfall of capital,
venture capital has a greater significance. It is observed that new companies,
particularly the smaller ones, create more jobs. Venture capital helps
employment generation particularly for educated and skilledworkers.The
financing of domestically developed technologies in general and those
developed by the new generation of entrepreneur has always been a problem in
both developed and developing countries. This is because domestically
developed technologies, either by organized sector or the unorganized sector,
are usually perceived to be uncertain by the conventional financial system. In
India, since independence, a number of financial institutions have emerged to
cater to the needs of the industrial entrepreneurs and these have mainly
remained as debt providing organizations. In India, risk finance has
always been in short supply. The initial equity for any venture has to be raised
by the promoters from their own sources and public financial institutions are
not of much help. To overcome this problem venture capital financing made a
small beginning in India since 1988.Venture capitalists have been catalytic in
bringing forth technological innovation in USA. A similar act can also be
performed in India. As venture capital has good scope in India for three
reasons: First: The abundance of talent is available in the country. The low cost
high quality Indian workforce that has helped the computer user’s world wide
inY2K project is demonstrated asset. Second: A good number of successful
Indian entrepreneurs in Silicon Valley should have a demonstration effect for
venture capitalists to invest in India
 CHAPTER-1
INTRODUCTION, OBJECTIVE AND
RESEARCH METHODOLOGY

Introduction Of Venture Capital

Venture Capital has emerged as a new financial method offinancing
during the 20th century. Venture capital is the capital provided by
firms of professionals who invest alongsidemanagement in young,
rapidly growing or changing companiesthat have the potential for high
growth. Venture capital is aform of equity financing especially
designed for funding high risk and high reward projects.There is a
common perception that venture capital is a means offinancing high
technology projects. However, venture capital isinvestment of long
term finance made in:
1. Ventures promoted by technically or professionally qualified but
unproven entrepreneurs
2. Ventures seeking to harness commercially unproven technology,
3. High risk ventures.
The term ‘venture capital’ represents financial investment in ahighly
risky project with the objective of earning a high rate ofreturn. While
the concept of venture capital is very old the recentliberalisation
policy of the government appears to have given afillip to the venture
capital movement in India. In the real sense, venture capital financing
is one of the most recent entrants inthe Indian capital market. There is
a significant scope for venturecapital companies in our country
because of increasing emergence
Of technocrat entrepreneurs who lack capital to be risked.These
venture capital companies provide the necessary riskcapital to the
entrepreneurs so as to meet the promoters ‘contribution as required by
the financial institutions. Inaddition to providing capital, these VCFs
(venture capital firms) take an active interest in guiding the assisted
firms. A young, high tech company that is in the early stage
offinancing and is not yet ready to make a public offer of
securitiesmay seek venture capital. Such a high risk capital is provided
byventure capital funds in the form of long-term equity financewith
the hope of earning a high rate of return primarily in theform of
capital gain. In fact, the venture capitalist acts as aPartner with the
entrepreneur. Thus, a venture capitalist (VC) may provide the seed
capital forunproven ideas, products, and technology oriented or start
upfirms. The venture capitalists may also invest in a firm that
isUnable to raise finance through the conventional means.

OBJECTIVE OF VENTURE CAPITAL

1-Fuel ambitions and dreams

2-Breathes life into promising business ventures
3-Charts the course of incisive business ideas.
4-Provides foresight with a free sense of direction
5-Helps in building enterprise visions
6-Smoothly glides over rough passages
7-Partners enterprises on to script thrilling success
8-Complements acumen and enterprise with a steady flow of
resources
9-Inspires enterprises to script thrilling success
10-Venture capital finances are plotted on a firm life cycle curve.
 RESEARCH METHODOLOGY

The data or information has been collected from one source:

➢ Secondary sources

SECONDRY DATA

Secondary data are those which are already gathered and available
There may be internal sources within plant. Externally these sources
include books, periodicals, published reports etc. For collection of
data, I have consulted the following secondary data:
➢ Books on the subject
➢ Annual Reports.
➢ Published reports relevant to the subject.
➢ Commercial data.
➢ Files and records of the plant.
➢ Brochures provided by the Finance Department.

LIMITATIONS OF THE STUDY:

The time limit given for the study is too short.

The collection of data is only through the secondary collection, so we
cannot get the adequate data about the study.
 CHAPTER-2
Literature Review
Features of Venture Capital
It is high risk venture. The success rate in developed economics like
the USA is around 60%. Where as in a developing country like ours,
the success rate is expected to be around 20%-30%
It finances high tech projects
Th e g estatio n period is long . Th e b enefit o r p ro fit fro m
the v en tu re capital investment will start accruing only after an
average period of 4to 5 years
Venture capitalist also makes available to be
a s s i s t e d u n i t s t h e managerial and marketing assistance.
When the assisted company has reached a certain stage of
profitability, the venture capitalist sells his shares in the stock
market at a hefty p remiu m. He thu s makes good p ro fit as
well as gets h is lock ed up funds released for redeployment in some
other ventures
Provision to h av e condition al loans which unlik e the
conv en tio n al loans don’t carry interest charge. Instead, it carries a
royalty linked to sales generated by the company after
commercialization. The rate of royalty is fixed depending on the
profitability of the business and the fun d’s req uirement o f a
reason able ret urn . Th e con dition al lo an is essentially a
quasi-equity instrument which does not place a servicing b u r d e n
on the company in the initial periods and seeks a
r e t u r n commensurate with the success of the ventures.
It is an equity or quasi-equity form of investment
It is a long term investment and the returns are in the forms of
capital gains
It is an active form of investment with a higher degree of
involvement in the management of a venture.
 History and Background
In the Indian context, supply of capital for establishing risk and start-
up capital is centuriesold, usually made available through family
members, relatives and friends (Pandey, 1998).But, modern venture
capital in India was started in the late 1980s with the World Bank
takingkeen interest in the economic liberalisation of the country.
Through regulatory changes, statecontrolled banks were allowed to
start venture capital arms. The World Bank, responsible forthe
transferring of technology research and development from the state to
private hands alsohelped in the setting up of four public sector
financial institutions (FIs) by lending $45mn.The FIs selected were
those of Andhra Pradesh and Gujarat state governments, CanaraBank
a leading nationalized bank and ICICI (Industrial Credit and
Investment Corporation ofIndia) a development financial institute. A
portion of the finance was also channelizedtowards training of
personnel to support the industry (Dossani& Kenny (2002).According
to Dossani& Kenney (2002), management lacking in experience and
regulationsthat mandated sartorial investments, beleaguered the first
phase (period from1986-1995) ofventure capital in India.
Governmental interference enhanced the risk of an already
riskybusiness. Regulatory hurdles like high taxes and lack of finances
from pension or insurancecompanies proved a challenge for
mobilising funds. (Pandey, 1998) Conditions in India until recently
were not encouraging for the growth of entrepreneurship and risk
capital. Bank loans11were still the primary source of finance in spite
of some companies facing problems inavailing of credit (Smolarski et
al, 2005).With the Securities and Exchange Board of India (SEBI),
gaining statutory powers in 1992, aseries of reforms were set in
motion. SEBI reduced the minimum percentage of sharesrequired to
be listed to 20%, mandated quarterly reporting and allowed companies
to buybackShares (Wright et al, 2002 b). While there were a few
reforms brought about in 1992, thegeneral legal and regulatory
framework was not conducive for the growth of venture
capital.Government of India, SEBI and CBDT (Central Board of
Direct Taxes), all three bodies, wereresponsible for the regulation of
Venture funds. Different regulations were applicable toForeign and
domestic venture capital firms. The foreign funds had lesser
regulatory pressure. The overseas firms, which were registered in
Mauritius under the Double Taxation AvoidanceTreaty and operating
in India, were subject to minimal tax. The Indian firms had to apply
toCBDT to avail of any tax benefit. The reporting of foreign firms was
to the Government ofIndia while domestic firms had to register with
SEBI. (Wright et al, 2002b)Certain guidelines laid down by SEBI also
proved restrictive. Investees could invest aminimum of Rs. 0.5 mn, a
restriction, which deterred small inventors and, 80% of funds wereto
be invested in early stage investment or listed securities in the case of
financially sickcompanies. There were also sectoral restrictions for
investments. (Wright et al, 2002a)Realising the importance of venture
capital investments for the development of industry andbusiness in
India, SEBI formed a committee. The Chandrasekhar Committee on
VentureCapital in 2000 (Chandrasekhar, 2000) put forth certain
recommendations with intent to bring about changes in the regulatory
and institutional environment, creating conditions favourable
For a faster development of the venture capital industry.
The major recommendations were: (Wright atal,2002; Chandrasekhar,
2000)
Need for a nodal regulator
A tax pass through in order to avoid double taxation of gains,
Tax exemption for all foreign VC’s regardless of their being
registered in Mauritius
Flexibility in investments ceilings and sectoral restrictions
Relaxation in listing requirements for IPOs
Registration of foreign venture capital firms with SEBI to allow for
smoothinvestment and divestment requiring no additional regulatory
approval.
Domestic pool of resources to include Banks, Mutual funds,
Insurance and PensionFunds
Since then, amendments to the Venture Capital Funds Regulations of
1996 have been made,relaxing restrictions on domestic VC firms.
SEBI has been made the nodal regulator. TheForeign Venture Capital
Investor Regulations of 2000 (FVCI) has been able to bridge
thedifference between foreign and domestic firms, allowing both to
invest up to 75% (earlier setat 80% for domestic) of the investable
funds in unlisted equity shares or equity linkedinstruments. Restriction
of domestic firms investing in financial services has since been lifted.
The amount, foreign and domestic firms can now investment, in one
investee has beenincreased by five percent to 25%. And Mutual funds
are now allowed to invest in venture funds within a stipulated ceiling.
(Pruthi et al, 2003; Singhvi, 2001)In 2003, SEBI revisited the
regulations pertaining to the venture capital environment in orderto
address issues raised by the industry. The Lahiri Committee (2003)
was constituted for thispurpose. The committee along with putting
forth new recommendations also stressed on thosewhich were
recommended by the earlier Chandrasekhar Committee and which had
not beenincorporated. The suggestions put forth were on operations,
legal and foreign exchangematters. Amendments in 2004 to the FVCI
Regulations of 2000 further loosen controls. Some of the amendments
were (Lahiri Committee, 2003; Amendments to FVCI Regulations,
2004)
The lifting of the one-year ‘post IPO listing ‘lock-in which could be
earlier availed bybanks and mutual funds but not venture capital
funds. As this did not allow for venturecapital firms to take advantage
of an exit opportunity post the one-year of an IPO listing, it had
proved a major deterrent.
The Real Estate Sector, which was not earlier opened for investing,
was opened.
 Types of Venture Capital:
Generally, there are three types of organized or institutionalventure
capital funds -
i. Venture capital funds set up by angel investors, that is, highnetwork
individual investors.
ii. Venture capital subsidiaries of corporations - these areestablished
by major corporations; commercial bankholding companies and other
financial institutions.
iii. Private capital firms/funds-The primary institutional sourceof
venture capital is a venture capital firm venture capitalists take high
risks by investing in an early stage company withlittle or no history
and they expect a higher return for theirhigh-risk equity investments in
the venture.
Modes of Finance by Venture Capitalists
Venture capitalists provide funds for long-term in any of the
Following modes
1. Equity- Most of the venture capital funds provide financialsupport
to entrepreneurs in the form of equity by financing49% of the total
equity. This is to ensure that theownership and overall control remains
with theEntrepreneur. Since there is a great uncertainty about
thegeneration of cash inflows in the initial years, equityfinancing is
the safest mode of financing. A debtinstrument on the other hand
requires periodical servicingof debt.
2.Conditional loan–
From a venture capitalist~ point ofview, equity is an unsecured
instrument and hence a lesspreferable option than a secured debt
instrument. Aconditional loan usually involves either no interest at all
or aCoupon payment at nominal rate. In addition, a royalty atagreed
rates is payable to the lender on the sales turnover. As the units picks
up in sales levels, the interest rate areincreased and royalty amounts
are decreased.
3.Convertible loans–
The convertible loan is subordinate toall other loans, which may be
converted into equity if interest payments are not made within agreed
time limit with inadequate financial resources to commercialise
newtechnology is promoted by an existing company.
 4. Second Round Financing:
It refers to the stage when producthas already been launched in the
market but has not earnedenough profits to attract new investors.
Additional fundsare needed at this stage to meet the growing needs of
business. Venture Capital Institutions (VCIs) provide largerfunds at
this stage than at other early stage financing in the
Form of debt. The time scale of investment is usually threeto seven
years.
B. Later Stage Financing:
Those established businesses which require additional
financialsupport but cannot raise capital through public issue
approachventure capital funds for financing expansion, buyouts
andturnarounds or for development capital.
I. Development Capital:
It refers to the financing of an enterprisewhich has overcome the
highly risky stage and has recordedprofits but cannot go public, thus
needs financial support. Funds are needed for the purchase of new
equipment/Plant, expansion of marketing and distributing facilities,
launching of product into new regions and so on. The timescale of
investment is usually one to three years and falls inmedium risk
category.
II. Expansion Finance:
Venture capitalists perceive low risk inventures requiring finance for
expansion purposes either bygrowth implying bigger factory, large
warehouse, newfactories, new products or new markets or through
purchaseof existing businesses. The time frame of investment is
usually from one to three years. It represents the last roundof
financing before a planned exit.
III. Buy Outs:
It refers to the transfer of management control bycreating a separate
business by separating it from theirexisting owners. It may be of two
types.
i. Management Buyouts (MBOs):
In ManagementBuyouts (MBOs) venture capital institutions
providefunds to enable the current operating management/investors to
acquire an existing product line/business. They represent an important
part of the activity ofVCIs.
ii. Management Buyins (MBIs):
Management Buy-ins isfunds provided to enable an outside group
ofmanager(s) to buy an existing company. It involvesthree parties: a
management team, a target companyand an investor (i.e. Venture
capital institution). MBIsare more risky than MBOs and hence are less
popularbecause it is difficult for new management to assess theactual
potential of the target company. Usually, MBIsare able to target the
weaker or under-performingcompanies.
IV. Replacement Capital-VCIs another aspect of financing is
toprovide funds for the purchase of existing shares ofowners. This
may be due to a variety of reasons includingpersonal need of finance,
conflict in the family, or need forassociation of a well known name.
The time scale of investment is one to three years and involves low
risk.
Forms of Venture Capital
Based on the four stages of development of a business, the venture
capital financing m aybe clas sified as seed finance , star t -up
finance , beg inner’sF inance and e stablish ment finance .
D uring the fir st s tage of s tarting a business i.e., at the formulation
of an idea stage, the risk associated is very high. Here an idea needs to be
translated into a business proposition. So the finance required at this
stage is the seed finance from the venture capital fund. The second
stage being the implementation phase, start-up finance from venture capital
is required for the purpose of implementing the appropriate p roduction
processe s. In t he th ird stage com me rcial production is to be
started and beginner’s finance is required to develop the marketing and
other infrastructures. In the fourth and the last stage, when the
business is fully established, it requires finance for its growth and
expansion so as to reap the econo mics of the scale . He re,
estab lish ment finance is sough t fro m the venture capital fund.
The degree of risk associated with a business gradually d i m i n i s h e s
in every subsequent stage of business
development.
 Functions of Venture Capital

Venture Capital provides finance as well as skills to new enterprises &

new ventures of existing ones based on high technology innovations.
It provides seed capital funds to finance innovations even in the pre-
start stage.
Venture Capitalist fills the gap in the owner’s fund in relation to the
quantum of equity required to support the successful lunching of a
new business or the optimum scale of operations of an existing
business. It acts as a trigger in lunching new business & a catalyst in
stimulating exist in firm to achieve optimum performance.
Venture Capitalist’s duty extends even as far as to see that the firm
has proper & adequate commercial banking & receivable financing.
Venture capitalist assists the entrepreneurs in locat ing,
interviewing and employing outstanding corporate achievers to
professionalise the firm.
 Factors of Venture Capital
The venture capitalists usually take into account the followingfactors
while making investments:
Strong Management Team. Venture capital firms ascertainthe strength
of the management team in terms of adequacyof level of skills
commitment and motivation that createsa balance between members
in area such as marketing, finance and operations, research and
development, generalmanagement, personal management and legal
and taxissues. Track record of promoters is also taken into account.
A Viable Idea. Before taking investment decision, venturecapital firms
consider the viability of project or the idea. Because a viable idea
establishes the market for the productor service. Why the customers
will purchase the product, who the ultimate users are, who the
competition is withand the projected growth of the industry?
Business Plan. The business plan should concisely describethe nature
of the business, the qualifications of themembers of the
managementteam, how well; the businesshas performed, and business
projections and forecasts. Thepromoters experience in the proposed or
related businessesis an important consideration. The business plan
should also meet the investment objective of the venture capitalist.
Project Cost and Returns A. VCI would like to undertakeinvestment in
a venture only if future cash inflows are likelyto be more than the
present cash outflows. Whilecalculating the Internal Rate of Return
(IRR) the riskassociated with the business proposal, the length of
timehis money will be tied up are taken into consideration. Project
cost, scheme of financing, sources of finance, cashinflows for next
five years are closely studied.
Future Market Prospects. The marketing policies adopted, marketing
strategies in relation to the competitors, marketresearch undertaken,
market size, share and future marketprospects are some of the
considerations that affect thedecision.
Existing Technology. Existing technology used and anytechnical
collaboration agreements entered into by thepromoters also to a large
extent affect the investment decisions.
Selection of Venture Capitalists:
Venture capital industry has shown tremendous growth duringthe last
ten years. Thus, it becomes necessary for the entrepreneursto be
careful while selecting the venture capitalists. Following factors must
be taken into consideration:
1. Approach adopted by VCs- Selection of VCs to a large
extentdepends upon the approach adopted by VCs.
a. Hands on approach of VCs aims at providing value addedservices
in an advisory role or active involvement inmarketing, recruitment and
funding technical collaborators.VCs show keen interest in the
management affairs and actively interact with the entrepreneurs on
various issues.
b. Hands off approach refer to passive participation by theventure
capitalists in management affairs. VCs just receive. Periodic financial
statements. VCs enjoy the right to appointa director but this right is
seldom exercised by them. In between the above two approaches lies
an approach where VC’ s approach ispassive except in major
decisions like change intop management, large expansion or major
acquisition.
(2) Flexibility in deals- The entrepreneurs would like to strike
adeal with such venture capitalists who are flexible and generousin
their approach. They provide them a package which best meetthe
needs of the entrepreneurs. VC’s having rigid attitude maynot be
preferred.
(3) Exit policy- The entrepreneurs should ask clearly the
venturecapitalists as to their exit policies whether it is buy back
orquotation or trade sale. To avoid conflicts, clarifications shouldbe
sought in the beginning; the policy should not be against theinterests
of the business. Depending upon the exit policy of the VCs, selection
would be made by the entrepreneurs.
(4) Fund viability and liquidity- The entrepreneurs must
makesure that the VCs has adequate liquid resources and can
providelater stage financing if the need arises, also, the VC has
committedbackers and is not just interested in making quick
financialgains.
(5) Track record of the VC & its team- The scrutiny of the
pastperformance, time since operational, list of successful
projectsfinanced earlier etc. should be made by the entrepreneur.
Theteam of VCs, their experience, commitment, guidance duringbad
times are the .other consideration affecting the selection ofVcs.
Regional Economic Growth:
Venture capital is of interest because of its perceived contribution to
rapid economic growth and development in certain regional
economies as well as its role in the growth of the US economy in the
1990s. Numerous authorities have pointed to the key role played by
venture capital in business start-ups and growth and the resulting
positive impacts on state and regional economic growth and
development (Barkley et al., 2001). Both the regional science
literature and the entrepreneur or business school literature indicate
the role of venture capital in facilitating innovation and technological
progress (Allen and Hayward, 1990).

According to the entrepreneur school of thought, venture capital firms

overcome the disadvantages of individual entrepreneurs attempting to
bring new or even older products to market. They also provide an
alternative to the inertia and inflexibility sometimes found in product
research and development efforts by established, larger corporations.
By applying scientific breakthroughs in the form of new products and
companies, venture capitalists are a catalyst for technological
progress, thereby enhancing productivity and generating wealth for
the entire economy (Koh and Koh, 2002). In this regard, places such
as Silicon Valley owe their economic growth to a new organizational
model as much as to the development of new technologies (Aoki,
2000). Critics of venture capital retort that especially in times of rapid
economic growth, pressures to generate fast returns has caused
venture capital firms to urge portfolio companies to prematurely make
initial public offering. Further, in the late 1990s, too many venture
capital firms attempted to survive in certain markets, when the need
for venture capital could be met by fewer firms (Gompers and Lerner,
2001).
The formation of new, innovative firms has been placed in the context
of the long wave view of economic development, with such firms
providing the catalyst for the new wave of technology change that
eventually works its way throughout a given economy (Hall, 1981 and
Rothwell, 1984). Venture capital provides an avenue for facilitating
the new formation of such leading firms. Venture capital also could be
seen as playing a key role in new growth theory economic models. In
such models, technology change and the rate of capital accumulation
drive changes in productivity and economic growth. Romer (1990)
made a major contribution in advancing the concept that technology
change is endogenously determined (through the use of knowledge
workers in his basic model) (Grossman and Help man, 1994). Venture
capital easily fits into the worldview of endogenous growth models.
Venture capital firms serve as a way for bringing technological
advances and products into the market place. Thus, venture capital
firms could at the very least speed the diffusion of technologies and
growth in such models. That is, venture capital could be viewed as
part of the process of developing endogenous technology.

Venture Capital in Rural Areas:

It is well documented that rural areas have traditionally lacked access
to venture capital financing (Barkley, 2003). According to Schmidt
(2002) in 2001, nonmetropolitan (rural) US counties had 17% of all
US business established, but only 1.6% of businesses receiving
venture capital and only 0.8% of venture capital funding.
Several reasons for the lack of venture capital penetration into rural
areas have been advanced. First, rural economies usually lack the fast
growing sectors that have received venture capital funding, such as
computer software, telecommunications, medical devices and
equipment, biotechnology, and networking and equipment
(Pricewaterhouse Cooper, 2003, Florida and Kenney, 1988). Rural and
smaller metropolitan economies are much more concentrated in
traditional economic sectors that generally provide lower rates of
return on investment than found in newer economic sectors such as
computer software development. Even when such opportunities do
exist in more traditional, rural-based sectors (such as food processing),
venture capital firms may lack the expertise to evaluate and advise
businesses belonging to such sectors where they normally do not
invest.
Another barrier to the use of venture capital in rural areas is the lack
of deal flow or the relatively few investment exchanges made between
venture capitalists and portfolio firms (Barkley, 2003; Barkley and
Markley, 2001). Fewer and more geographically dispersed
opportunities for investment mean higher costs per dollar of actual
venture capital transaction. Good investment opportunities are more
difficult to find, evaluate through due diligence, and to ultimately
monitor after the deal is made.
Another barrier to the use of venture capital in rural areas is the lack
of a proper support network for entrepreneurial activities in general in
many rural areas (Barkley, 2003; Barkley and Markley, 2001). As
previously discussed, venture capitalists rely on well-formed networks
to facilitate venture capital deals, provide critical information flows to
assess potential deals, and to support portfolio businesses. These
networks both among businesses and between the business community
and key organizations such as local universities are often lacking in
rural areas. In particular, the ability of entrepreneurs to network with
each other and provide advice and support is often limited in rural
areas. Such networks facilitate the development of new ideas, and help
fledging businesses get off the ground by obtaining needed support
(Nolan, 2003).
Another possible barrier not discussed in the literature but advanced
by at least some managers of venture capital funds is a lack of
understanding of the nature of venture capital held by many potential
entrepreneurs in rural and small metropolitan areas. According to this
viewpoint, such entrepreneurs have more access to venture capital
than one might expect, but lack a clear understanding of its nature and
requirements. Several types of policies have been implemented in an
attempt to circumvent the problem of lack of equity capital in rural
areas. Markley (2001) has termed these efforts as community
development venture funds while Barkley uses the term non-
traditional venture capital funds. In general, these attempts at
providing venture capital to rural areas have met with, at best, mixed
success.
Non-traditional venture capital funds are of three basic types (Barkley,
2003). One type is where public funding is provided to set up and
sometimes to further subsidize publicly or privately managed venture
capital funds. Such funds have been successful in states such as
Kansas (the Kansas Venture Capital Fund), West Virginia (West
Virginia Jobs Investment Trust) and in other places. In certain states,
such as Mississippi and Colorado, these funds eventually folded with
a loss of the invested state funds and no sustained impact on
employment or economic development. Another example is the New
Market Venture Capital Companies (NMVC), funded by the federal
government under the New Market Venture Capital Program instituted
in 2001 (Barkley). NMVC firms must primarily operate in low income
areas and primarily provide equity capital to smaller businesses as
well as business training and technical assistance. They in turn receive
federal matching funds for technical assistance and up to 150%
matching for loan able funds. Because of a lack of further funding
from the federal government, NMVC have been limited to the seven
currently in existence, four of which operate in rural areas. One of the
latter is the Adena fund, which operates in rural Ohio and to lesser
extent in West Virginia.
Tax credits are another policy tool that has been used to encourage the
development of private venture capital funds in rural areas. Examples
of these include the New Market Tax Credit that has provided tax
credits to Community Development Entities (CDE), which are limited
liability companies or corporations that serve low-income people or
economically depressed areas (Barkley). Under this approach, the
CDE provides equity ownership shares and tax credits to private
investors (usually lending institutions).
Other non-traditional efforts have been instigated by all levels of
government “as well as by private and quasi-public business and
community development organizations” (Barkley, p. 109) with the
goal of providing equity capital to rural businesses. One example of
such efforts is regional angel networks. Angel investors are wealthy,
often retired, entrepreneurs who provide both financing and advice to
businesses seeking equity capital. Angel investors have many of the
same requirements as traditional venture capital, but tend to be less
stringent in terms of investment criteria and even investment goals.
Angel networks are loosely organized groups of angel investors, with
the goal of sharing appropriate information and thereby reducing the
costs of making investments. ACE-NET (Angel Capital Electronic
Network) is the most well-known example of an angel network. Angel
networks operating at the state level include Ohio Angels.com. Most
angel networks rely on the internet to share information and to educate
both investors and potential portfolio investment businesses (Barkley).
Procedure Followed by VCs
Receipt of proposal. A proposal is received by the venturecapitalists in
the form of a business plan. A detailed andwell-organised business
plan helps the entrepreneur ingaining the attention of the VCs and in
obtaining funds. AWell-prepared business proposal serves two
functions. It informs the venture capitalists about the entrepreneur’s
ideas.
The main features of venture capital can be summarised as follows:
i.High Degrees of Risk Venture capital represents financial
investment in a highly risky project with the objective of earning a
high rate of return.
ii. Equity Participation Venture capital financing. is, invariably, an
actual or potential equity participation wherein the objective of
venture capitalist is to make capital gain by selling the shares once the
firm becomes profitable. .
iii. Long Term Investment Venture capital financing is a long term
investment. It generally takes a long period to encase the investment
in securities made by the venture capitalists.
iv. Participation in Management In addition to providing capital,
venture capital funds take an active interest in the management of the
assisted firms. Thus, the approach of venture capital firms is different
from that of a traditionalLender or banker. It is also different from that
of a ordinary stock market investor who merely trades in the shares of
a company without participating in their management. It has been
rightly said, “venture capital combines the qualities ofbanker, stock
market investor and entrepreneur in one”.
v. Achieve Social ObjectivesIt is different from the development
capital provided by several central and state level government bodies
in that the profit objective is the motive behind the financing. But
venture capital projects
generate employment, and balanced regional growth indirectly due to
setting up of successful new business.
vi. Investment is liquid A venture capital is not subject to repayment
on demand as with an overdraft or following a loan repayment
schedule. The investment is realised only when the company is sold or
achieves a stock market listing. It is lost when the company goes into
liquidation
Stages of Investing:
Venture capital firms finance both early and later stage investmentsto
maintain a balance between risk and profitability.”Venture capital
firms usually recognise the following two mainstages when the
investment could be made in a venture namely:
A. Early Stage Financing
i. Seed Capital & Research and Development Projects.
ii. Start Ups
iii. Second Round Finance
B. Later Stage Financing
i. Development Capital
ii. Expansion Finance
iii. Replacement Capital
iv. TurnAround
v. Buy Outs
A. Early Stage Financing This stage includes the following:
I. Seed Capital and R & D Projects: Venture capitalists are
more often interested in providing seed finance i. e. makingprovision
of very small amounts for finance needed to turninto a business.
Research and development activities are required to beundertaken
before a product is to be launched. Externalfinance is often required
 by the entrepreneur during the development of the product. The
financial risk increasesprogressively as the research phase moves into
thedevelopment phase, where a sample of the product is testedbefore
it is finally commercialised “venture capitalists/Firms/ funds are
always ready to undertake risks and makeinvestments in such R & D
projects promising higherreturns in future.
II. Start Ups: The most risky aspect of venture capital is thelaunch
of a new business after the Research anddevelopment activities are
over. At this stage, theentrepreneur and his products or services are as
yet untried. The finance required usually falls short of his
ownresources. Start-ups may include new industries /businesses set up
by the experienced persons in the area inwhich they have knowledge.
Others may result from theresearch bodies or large corporations,
where a venturecapitalist joins with an industrially experienced or
corporatepartner. Still other start-ups occur when a new company.
Venture Capital Process:
Types of Participations

VC Sources

Direct Investing Indirect

Investing

Business Corporate Institutional Single Project Investment

Angels Venture Capital Fund Investments in Funds
Capital
 Investors
y

$ 50-1,000 mill

Venture Capital Fund & “Fund of Funds”

Model
Fund Management

$ 0.5-20 mill.

Portfolio Companies
The Venture Capital Process (Fund)
FUND DESIGN

FUND RAISING

INVESTMENT

PORTFOLIO MANAGEMENT

DIVESTMENTS(
Exist)

=> Distributions to Investors

Liquidation (or
Reinvestment)
MAJOR PLAYERS
Th e fo rerunn er to ventu re cap ital funding in Ind ia was
USAID’s programme for advancement of commercial technology
(PACT), started in1 985 to assist In dian firms in
co mmercializing inno vative techno log ies through Indo-US
joint ventures Subsequently, using the expertise, ICICIs e t u p
the country’s first venture capital company - The
T e c h n o l o g y Development and Investment Corporation of India (TDICI)
in 1986.In India, the venture capital industry has largely been
sponsored by financial institutions and banks like IDBI, ICICI,
UTI, IFCI, SBI, CanaraBank etc.

VENTURE CAPITAL INDUSTRY

The venture capital industry in India, started in mid eighties in still in
a nascent stage , VCFs, particularly the domestic funds which have
relatively small corpus, are engaged in financing small and medium
enterprises which form the hub of the industrial sector of the nation
.1-Lack of Regulatory Frame work: There is no regulatory
frame work for structuring the funds. Most of the domestic VCFs
have been set up under the Indian trust Act which was enacted in
1982 and since then h a s n e v e r b e e n c h a n g e d . O f f s h o r e
Funds are set up through the Mauritius route. While
t h e d o m e s t i c V C F s h a v e t o f o l l o w S E B I Guidelines,
offshore funds are required to follow the RBI Guidelines.
2-Anomaly in Taxation: There is a great anomaly
i n t a x t r e a t m e n t among VCFs and offshore funds. While
offshore funds which cater Mainly to the existing large
companies do not pay and tax, domestic VCFs which provide equity
assistance to small and medium enterprises pay maximum marginal tax.
Even among the domestic funds, funds settled by UTI are totally
exempted from tax.
3-Difficulty in Fund Raising: In absence of any inventive, it is
extremely difficult for domestic VCFs to raise money. Initially
the funds were raised either from multilateral agencies like the world Bank
or all India Finan cial In stitu tions. In th e US. And oth er
d ev elo ped coun tries, pension funds and insurance companies
invest in the VCFs. Duging1997-98; the corpus mobilized by the
VCFs with proven track records ultimately help small and medium scale
companies.
4-Exit: All the early inv estmen ts were made by th e VCFs
in small companies. As OTC exchange could not take off, these investments
are largely illiquid. This is one of the major reasons for domestic VCFs not
take in off. At present, CBDT Guide lines permit investment of 80%of
the funds only in the equity of unlisted companies. This makes it all
the more difficult for theVCFs to exit.If CBDT
Guide lines are c h a n g e d t o i n c l u d e i n s t r u m e n t s
s u c h a s p r e f e r e n c e s h a r e s . Convertibles, Conditional Loans
etc
 CHAPTER-3

Data Analysis
 A COMPARATIVE ANALYSIS OF SBI VENTURES
AND ICICI VENTURES:
I have taken one public venture & private venture i.eSBI Ventures &
ICICI ventures.
SBI VENTURES:
SBI Venture Capital is a Singapore-based, leading private equity firm
that invests in growth capital opportunities across Asia. We have a
proven track record of partnering with growth-stage companies and
assembling critical resources needed to grow businesses in Asia. Our
investment team combines financial acumen, industry insight and
operational expertise to enhance the value of the companies we invest
in.
We evaluate growth equity investments across a diverse range of
industries in companies that meet the following criteria:

• Market-leading products, processes and/or technology, presenting

opportunities for growth
• Capital requirements of between US$5 million and US$30 million
• Companies that are generating revenues and are preferably cash flow
positive
• Participate only in friendly, negotiated private equity transactions
• A strong management team with whom SBI Venture Capital can
partner
• Companies looking to raise equity or equity-linked financing

We invest across a variety of sectors and have made investments in

Financial Services, Internet & ICT, Bio Tech, Clean tech, Consumer,
Industrial, Healthcare and Education sectors.
SBI Venture Capital is the overseas private equity arm of SBI
Holdings (Japan) which, in addition to being one of the largest
Japanese PE firms (with AUM in excess of US$3 billion), is a leading
global internet-based financial conglomerate. The SBI Group has
invested in more than 800 companies globally and we leverage this
broad platform to further drive the value of our investments.
The SBI Group's core businesses include Asset Management
(managing Private Equity AUM in excess of US$3 billion), Financial
services, including securities, banking, insurance and biotechnology-
related business. As of March 31, 2012, the SBI Group consists of 140
 companies (including consolidated partnerships, equity method
affiliates and 6 publicly listed companies). SBI currently has
investments in more than 13 countries across Asia.

SUBSIDIARIES OF SBI

State Bank of Bikaner & Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore

ICICI VENTURE
ICICI Venture is a specialist alternative assets manager based in India.
The firm is a wholly owned subsidiary of ICICI Bank), the largest
private sector financial services group in India.
ICICI Venture has been at the forefront of driving entrepreneurship in
India for over two decades, both as a partner and capital provider for
individuals with a clear common objective, the passion to pursue
business ideas in the quest for creating value for all stakeholders and
for the larger good of the nation. Till date, various funds managed by
the firm have invested in over 500 companies. ICICI Venture
continues to remain committed to this mission.
The firm has played a key role in establishing the foundation for
several new age businesses in India, by providing growth capital
funding to companies in sectors as diverse as Information Technology,
Life Sciences and Healthcare, Media & Entertainment, Banking &
Financial Services, Infrastructure, Retail, Aviation, Auto Components,
Construction services, Real Estate, Biotechnology, Textiles, Fine
Chemicals, Consumer Products, Logistics, etc. The firm played a
pioneering role in the Indian Venture Capital industry during the
1990s but shifted focus to other alternative asset classes during the
 past decade in line with the evolution of Indian industry. Across
sectors, the firm has helped in establishing several new business
models to enable productivity improvements, technology upgradation
and import substitution as a means of enhancing the competitive
advantage of Indian industry in a rapidly changing global market
environment.
The firm is widely regarded as a prime mover in the Indian alternative
assets industry, having established a successful track record of
investing and nurturing companies across economic cycles and across
various classes of alternative assets such as Private Equity, Real Estate
and Mezzanine Finance, with Infrastructure & Special
Situations being the latest additions to its spectrum of activities.
Going forward, the firm continues to explore new avenues within the
alternative assets industry as a means of addressing funding
requirements of Indian entrepreneurs and also as a means of offering a
comprehensive alternative asset management platform to long term
investors who are interested in participating in India's economic
development.
Board of Directors of ICICI Venture:

• Ms. Lalita D. Gupte

Chairperson
• Mr. KashiMemani
Director
• Mr. H N Sinor
Director
• Mr. K Ramkumar
Director
• Mr. SubrataMukherji
Director
• Mr. RakeshJha
Director
• Ms. VishakhaMulye
Managing Director & CEO
• Mr. PrashantPurker
Executive Director
• Mr. MohitBatra
Executive Director
SUBSIDIARIES OF ICICI

NATIONAL INTERNATIONAL

ICICI Lombard ICICI Bank UK PLC

ICICI Prudential Life Insurance Company ICICI Bank Canada

Ltd

ICICI Securities Limited ICICI Bank Eurasia LLC

ICICI Prudential Asset Management

Company Limited

ICICI Venture

ICICI direct.com

ICICI Foundation

FOR THIS PURPOSE THE FOLLOWING PARAMETERS

HAVE BEEN STUDIED:

CREDIT DEPOSIT RATIO:

YEAR SBI ICICI

2007-08 77.57 84.99

2008-09 74.97 91.44

2009-10 73.56 90.04

2010-11 76.32 87.81

2011-12 78.50 92.23

MEAN 76.184 89.302

CGR 1.19 8.51

Interpretation:
Table depicts that over the course of five financial periods of study the mean of
Credit Deposit Ratio in ICICI was higher (89.302%) than in SBI (76.184%). But
the Compound Growth Rate in SBI lowers 1.19% than in ICICI (8.51%). In case
of SBI the credit deposit ratio was highest in 2011-12 and lowest in 2009-10.
But in case of ICICI credit deposit ratio was highest in 2011-12 and lowest in
2007-08. This shows that ICICI Bank has created more loan assets from its
deposits as compared to SBI.
INTEREST EXPENSES TO TOTAL EXPENSE:

YEAR SBI ICICI

2007-08 61.85 66.135

2008-09 63.27 64.10

2009-10 61.62 60.71

2010-11 54.93 60.70

2011-12 57.90 65.19

MEAN 59.9 63.36

CGR -6.38 -1.46

 Interpretation:
The table shows that the ratio of interest expenses to total expenses in SBI was
highly volatile it increased from 61.85 per cent to 63.27 per cent during the
period 2007-08 to 2008-09. Afterwards it was decreased till 2010-11 and then
again increased to 57.90 per cent. The ratio of interest expenses to total expenses
in ICICI was also decreased from 66.135 per cent to 64.10 per cent during the
period 2007-08 to 2008-09. It remain stable from 2009-10 to 2010-2011 but
Further it was increased to 65.19 per cent in 2011-12 . It has been found that the
share of interest expenses in total expenses was higher in case of SBI as
compared to ICICI, which shows that people preferred to invest their savings in
SBI than ICICI.
INTEREST INCOME TO TOTAL INCOME:

YEAR SBI ICICI

2007-08 83.89 77.61

2008-09 83.40 79.29

2009-10 82.58 77.90

2010-11 84.49 78.51

2011-12 88.12 80.92

MEAN 84.49 78.84

CGR 5.04 4.26
Interpretation:
The table represents that the ratio of interest income to total income in SBI and
ICICI both is quite stable and volatile over the years. The growth rate of SBI is
5.04 while that of ICICI is 4.26. Thus, the proportion of interest income to total
income in SBI was higher than that of ICICI, which shows that people preferred
SBI to take loans and advances.

OTHER INCOME TO TOTAL INCOME:

Year SBI ICICI

2007-08 16.10 22.38

2008-09 16 20.70

2009-10 17 22.09
2010-11 16 21.48

2011-12 11 19.07

MEAN 15.22 21.44

CGR -31.6 -14.7

Interpretation:
The table shows that the ratio of other income to total income was decreased
from 16.10 per cent in 2007-08 to 11.00 per cent in 2011-12 in case of SBI.
However, the share of other income in total income of ICICI was also decreased
from 22.38 per cent in 2007-08 to 19.07 per cent 2011-12. The table shows that
the ratio of other income to total income was relatively higher in ICICI (21.44%)
as compared to SBI (15.22%) during the period of study.

NET PROFIT MARGIN:

Year SBI ICICI
200708 12.64 11.81

2008-09 13.11 11.45

2009-10 10.54 13.64

20110-11 8.55 17.52

2011-12 9.73 17.45

MEAN 10.91 14.37

CGR 23.02 47.7
Interpretation:
The table reveals that the ratio of net profits to total income of ICICI was varied
from 11.81 per cent to 17.45 percent whereas in case of SBI it is not stable. It
increased to 13.11 percent from 12.64 percent in 2008-09 then further decreased
to 10.54 percent in 2009-10 and 8.55 percent in 2010-11 and finally increased to
9.73 percent in 2011-12 during the period of 5 years of study. However, the net
profit margin was higher in ICICI (14.37%) as compared to SBI (10.91%)
during the period of study. But it was continuously decreased from 2007-08 to
2011-12 in ICICI. Thus, the ICICI has shown comparatively lower operational
efficiency than SBI.

NET WORTH RATIO:

Year SBI ICICI
2007-08 12.64 11.81
2008-09 13.11 11.45
2009-10 10.54 13.64
2010-11 8.55 17.52
2011-12 9.73 17.47
MEAN 10.91 14.37
CGR 23.02 47.07
Interpretation:
It is clear from the table 1.6 that the net worth ratio of SBI was increased from
13.70 per cent to 14.36 per cent during 2007-08 to 2011-12, and decreased in
2009-10 and 2010-2011. Whereas the ratio was increased from 8.94 per cent to
10.70 per cent in ICICI. The table showed that the net worth ratio was higher in
SBI (14.11%) as compared to ICICI (8.87%) during the period of study, which
revealed that SBI has utilized its resources more efficiently as compared to
ICICI.
GROWTH OF PROFIT:
Year SBI ICICI
profit %change profit %chang
2007-08 6729 4157.73
2008-09 9121 35.5% 3758.13 -9.61

2009-10 9161 49% 4024.98 7.10

2010-11 8265 -9.8% 5151.38 27.9
2011-12 11707 42% 6465.26 25.50
MEAN 8996.6 4711.49
CGR 73.97 55.49
Interpretation:
The table highlights that the mean value of net profit was higher in SBI (Rs.
8996.6 crores) as compared to that in ICICI (Rs. 4711.9 crores) during the
period of study. Further the growth rate of Net Profits was also higher in SBI
(73.97%) than that in ICICI (55.49%) during the study period. The table also
shows that the annual growth rate of profit in SBI was highest in the year 2009-
10 and was negative (-9.8%) in the year 2010-11. In ICICI, the annual growth
rate of profit was highest in the year 2010-11(27.9%) and was negative in the
year 2008-09 (-9.61%).
GROWTH IN TOTAL INCOME:
Year SBI ICICI

Income Income%change
%change
2007-08 58,348.74 39,667.19

2008-09 76,479.78 31% 39,210.31 -1.15%

2009-10 85,962.07 12.3% 32,999.36 -15.8%

2010-11 96,329.45 12.06% 33,082.16 0.25%

2011-12 120,872.90 25.4% 41,450.75 25.2

MEAN 87,598.58 37,282.14

CGR 107.15 4.49

Interpretation:
The table highlights that the mean value of total income was higher in SBI (Rs.
87,598.58 crores) as compared to that in ICICI (Rs. 37282.114 crores) during
the period of study. However the rate of growth regarding total income was
higher in SBI (107.15 %) than in ICICI (4.49 %) during the period of study
TOTAL EXPENDITURE:
Year SBI ICICI
Exp%change Exp%change
2007-08 51,619.622 35,509.47
2008-09 67,358.55 30.4% 35,452.17 0.16%
2009-10 76,796.02 14.01% 28,974.37 -18.2%
2010-11 88,959.12 15.83% 27,931.58 -3.59%
2011-12 109,186.99 22.73% 34,985.50 25.25%
MEAN 78,784.06 32,570.61
CGR 111.52 -1.47
Interpretation:
The table discloses that the mean value of total expenditure was higher in SBI
(Rs. 78,784.06 crores) as compared to that in ICICI (Rs. 32570.61 crore) during
the period of study. But the rate of growth regarding expenditure in ICICI was (-
1.47 %) than that in SBI (111.52%) during the same period. It is clear that ICICI
is successful in decreasing their total expenditure as compared to SBI. The table
also highlights that the annual growth rate of expenditure in SBI was highest
(30.04) in the year 2008-09 and was lowest (14.01) in the year 2009-10. In
ICICI, the annual growth rate of expenditure was negative in the year 2009-10
and 2010-11 i.e. (-18.20) and (-3.59) respectively. Hence it is clear that ICICI is
more efficient as compared to SBI in terms of managing expenditure.
TOTAL ADVANCES:
Year SBI ICICI
Advance %change Advance %change
2007-08 416,768.20 225,616.08
2008-09 542,503.20 30.16% 218,310.85 -3.25%
2009-10 631,914.15 16.48% 181.205.60 -16%
2010-11 756,719.45 19.75% 216,365.90 19.40%
2011-12 867,578.89 14.6% 253,727.66 17.26%
MEAN 646,578.89 224,645

CGR 108.16 12.45

Interpretation:
Table 1.9 presents that the mean of Advances of SBI was higher (646,578.89) as
compared to mean of Advances of ICICI (224,645). Rate of growth was also
higher in SBI (108.16 %) than in ICICI (12.45%). Table also shows the per cent
Change in Advances over the period of 5 years. In case of SBI Advances were
continuously increased (with a decreasing trend) over the period of study.
However Advances in ICICI were decreased till 2009-10 but these were
increased in the subsequent years.
TOTAL DEPOSITS:
Year SBI ICICI
Deposits %change Deposits %change
2007-08 537,403.94 244,431.05
2008-09 742,073.13 38.08% 218,347.82 -10.6%
2009-10 804,116.23 8.36% 202,016.60 -7.40%
2010-11 933,932.81 16.14% 225,602.11 11.6%
2011-12 1,04647.36 11.7% 255,499.96 13.2%
MEAN 812,234 229,179
CGR 94.20 4.52

Interpretation:
Table presents that the mean of Deposits of SBI was higher (812,234) as
compared to mean of deposits of ICICI (229,179%). However the rate of growth
was higher in SBI (94.20%) than that in ICICI (4.52%) during the period of
study. Table also shows the per cent Change in Deposits over the period of 5
years. In case of SBI Deposits were continuously fluctuating over the period of
study. However deposits in ICICI were decreased in 2008-09 and 2009-10 but
these were increased in the year 2010-11 and 2011-12 with 11.6% and 13.2%
respectively
CHAPTER-4
Finding of the Study
FINDINGS:
The study found that the mean of Credit Deposit Ratio in ICICI was
higher (89.302 %) than in SBI (76.184%). This shows that ICICI Bank
has created more loan assets from its deposits as compared to SBI.
The share of interest expenses in total expenses higher in ICICI (63.36
%) as compare to SBI (59.99 %) and the proportion of interest income
to total income was higher in case of SBI(84.49 % ) as compared to
ICICI (78.84%), which shows that people prefer ICICI to invest their
savings and SBI to take loans & advances. The ratio of other income
to total income was relatively higher in ICICI (21.44 %) as compared
to SBI (15.22 %). The Net Profit Margin of ICICI is higher (14.37 %)
whereas in SBI it was (10.99 %), which shows that ICICI has shown
comparatively better operational efficiency than SBI. The growth rate
of net profit is 73.97% in SBI which is higher than ICICI which is
55.49%. This shows that SBI performed well as compared to ICICI.

The mean value of total income was higher in SBI (87,598.58) as

compared to that in ICICI (37,282.114). Net worth ratio was also
higher in SBI (14.11 %) than ICICI (8.87 %), which revealed that SBI
has utilized its resources more efficiently as compared to ICICI.
The mean value of total expenditure was higher in SBI (Rs. 78,784.06
crores) as compared to that in ICICI (Rs.32,570.61) and the combined
growth rate of expenditure was negative (-1.47%) in the case of ICICI
whereas in SBI it is 111.52%. Deposits in SBI were continuously
increased. However deposits in ICICI were decreased (with a
declining trend) till 2009-10 but these were increased in the
subsequent years. In case of SBI Advances were continuously
increased (with a decreasing trend) with the combined growth rate of
(108.16 %), However Advances in ICICI were decreased (with a
declining trend) till 2009-10 but these were increased thereafter with
combined growth rate of (12.45 %). It shows that ICICI has suffered
with funds or avoid providing advances through 2007-08 to 2009-10.
Hence, on the basis of the above study or analysis banking customer
has more trust on the public sector banks as compared to private sector
banks.
 CHAPTER-5
Conclusion
Suggestion
Bibilography
CONCLUSION:
India has all the main ingredients for venture capital business,
viz, large investible funds with the public, a sound
technological base, a large number of risk takers, professional manager,
entrepreneurs and scientist and growing capital market. If the concept
of venture capital is successfully implanted, it will not only provide the
stimulus for an industrial leap but also pave the way for the private
sector sharing the responsibility of industrialfin an ce with the
pu blic secto r. And , to th at exten t, th ere is a g radu al
loosening of the government’s budgetary support for the
private sector’s development through concessional long term credit
from the public sector. It will also bring a new deal for the fast
growing technocrats, managers, and professionals in our country
with an instinct for entrepreneurial risk taking Thus, venture capital
promotes entrepreneurships, accelerates the process
of i n d u s t r i a l i z a t i o n , p r o m o t e s n e w p r o d u c t s a n d
s e r v i c e s a n d g e n e r a t e s emp loy men t oppo rtun ities to
skilled as well as unskilled wo rk ers. The economy receives a
new boost.