INDIAN VENTURE CAPITAL SCENARIO
The venture capital industry in India is of relatively recent origin. Before its emergence, the elopement finance institutions (DFIs) had been partially playing the role of venture capitalists by dividing assistance for direct equity participation to ventures in the pre-public issue stage and by elusively supporting new technologies. The need for venture capital in the country was felt around 1985 when a lot of investors burnt their fingers by investing in fledgling enterprises with yen projects which were not yet commercialized after the setback in the stock markets and amendment in the Securities Contracts Regulation Act barring companies having an equity 1 of less than Rs 3 crore from, being listed on stock exchanges. Against the background of two developments, the creation of a venture capital fund on an experimental basis was need in the document on Long Term Fiscal Policy presented in Parliament by the Ministry of e in December, 1985. The concept was ope rationalized only in the fiscal budget for 1987-88 access of up to 5 per cent was introduced on all technology import payments to create a
of funds. Until recently, a part of the pool of funds was being drawn by the Industrial Bank of India (IDBI) for providing financial assistance under its venture capital fund scheme.
Although the DFIs started coming with venture capital schemes as early as 1986 to provide to technology based entrepreneurs for their research and development efforts at innovative processes, the real thrust was provided by the Finance Minister in the budget speech for announcing the formulation of a scheme under which venture capital funds (VCFs) capital companies (VCCS) would be enabled to invest in fledgling enterprises and be concessional treatment of capital gains to non corporate entities. This was followed by comprehensive guidelines on November 25, 1988 by the Controller of Capital (CCIs) for setting up of VCFs Cs for investing in unlisted companies and to avail of facility of capital gains these guidelines construed venture capital rather narrowly fledged for equity oriented finance for technological up gradation and commercialization of promoted by relatively new entrepreneurs. Yet, they institutionalized the venture cent which received official recognition through them. Consequent upon the empower the Securities and Exchanges Board of India (SEBI) in April 1995 to regulate VCFs Cs, the issued by the CCI became dysfunctional and were repealed on July 25, 1995.
Other recommendations relating to Government/RBI/CBDT are being pursued by SEBI. The salient features of the Indian venture capital industry are briefly outlined in this Section in terms the (i) recommendations of the Chandrasekhar Committee, (ii) amended SEBI VCFs Regulations, 1996, and (iii) SEBI Foreign Venture Capital Investors Regulations, 2000.