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March 30, 2015

Deal Alert: Aspada invests Rs. 20 Cr in horticulture firm INI Farms

Aspada Investment Company has made a commitment of INR 20 Crores to Mumbai-based InI Farms Pvt Ltd which operates across fresh fruit value chains in crops such as pomegranate and banana. The company provides farm extension services for small-hold farmers coupled with post harvest management and processing for both domestic consumption and export markets. Aspada’s investment will allow the company to continue to build scale in the pomegranate and banana business units while expanding into other fruit categories. 

The company has previously received venture investments from Unilazer Ventures and Aavishkaar along with angel investors like Pavan Vaish and Ashish Gupta.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 24, 2015

Deal Update: Ennovent and Upaya Social Ventures invest in Anant Learning

Ennovent Impact Investment Holding and Upaya Social Ventures have made a seed investment in Delhi based Anant Learning & Development. Anant Learning has been working amongst communities in the skill building space. With the primary focus on post training space in impact analysis, employment/livelihood facilitation, mapping of skilled manpower and assessments, the company has pioneered a technology-based post placement tracking and impact analysis tool enabling real time access to data collected from the field.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 23, 2015

Impact of Finance Bill 2015 on Private Equity in India


By Sesh AV, Managing Director, Basiz Fund Services

The finance bill of 2015, proposed by Shri.Arun Jaitley has made some important big bang reforms for the Private Equity & Venture capital Industry in India. An Industry that invests into the entrepreneurial community every year, has finally been recognized by the government as one of the important contributors to “The Make in India” Programme.
 

I would opine that this bill gives impetus to channeling domestic capital to vehicles like Alternate Investment Funds, that invest into risky areas that need venture and growth capital by introducing a level playing field between domestic and foreign capital.

However there are shortcomings still, which one would hope will be considered for suitable rectification / modification. 

Analysis of impact on Private Equity & Venture Capital industry  in India:

Foreign investment allowed in AIF

The bill proposes to allow foreign investment into AIF. However a 10% withholding tax on distributions made by the AIF puts foreign investments at a disadvantage while coming through domestic AIF v/s an offshore fund. Clearly there needs to be a parity to ensure equal footing. 

Income received by funds from the portfolio companies to be free of TDS

This is a good move as funds by themselves have been declared to be tax pass through. Thus it reduces an administrative hassle of accounting for TDS and claiming it later. 

Pass through for CAT 1& II fundsNo pass through for capital loss to investors, it needs to be utilized by the fund
This has been one of the most important reform moves as far as the Industry is concerned. The Industry has made quite a few representation over the years and finally they have been heard. This introduces parity between domestic and offshore funds at a practical level. Such pass through facility existed only for venture capital firms earlier and based on approval from the Income Tax department. This will be an auto pass through facility. 


However the pass through facility has been diluted to some extent by a withholding tax. There is a school of thought that the withholding tax however can be claimed as credit during the filing of returns by the investor. An important point to be noted is that losses cannot be allocated to investors. Thus investors with long term capital gains in their personal portfolio cannot aim to offset it from the allocation of long term capital loss from the fund/AIF.

No distribution tax on distributions made by the fund, however there is a withholding tax 

This is a very significant move as, distributions made by the fund will not attract a DDT as applicable to corporate that distribute their surpluses. 

 • 10% Withholding tax on distributions made by funds to unit holders other than business income 

This clause in the finance bill has been certainly been a dilution to many positive moves. However considering that that it a withholding and entitled to credit at the hands of the investors while filing their returns may at the most be a timing difference and a administrative hassle. The 10 % withholding/TDS is applicable only to non business gains or income. Most of the funds do not indulge themselves in trade or commerce and thus it looks like they will be able to gain benefit for all of their distributions 

Business income is however not defined

This could lead to litigation's due to differing definitions between the revenue and the assess on income characterizations. This lack of clarity has been going on for a while and has not been resolved. The question is “What constitutes business income for a fund? Common knowledge points out to any income from trade or commerce. However authorities have taken a view earlier that the fund itself is in the business of investing and hence all income/ gains are business incomes. There is a potential that 10% withholding may be applicable to exempt incomes like dividends and capital gains from listed portfolios 

Safe Harbour norms for offshore fund managers established to prevent a permanent establishment.

However the conditions stated to be exempt from permanent establishment do not seem to be practical given how offshore funds work. It however seems that funds that have only capital gains as return on investment, may be able to take advantage of the status by having fund managers located in India. Clarity is needed and there will be a wait until the fine print emerges. A discussion with players in the Industry does not seem to suggest that there will be a rush to relocate fund managers to India. The reform while being brilliant in its intention to get fund managers into the country, has many riders like “connected persons” which may make implementation tough. 

Deferment of GAAR to 2017

This is welcome step and has been discussed for many years now. However a lot of clarity will need to emerge on actual rules on the ground. 

Tax on Indirect transfers

They have been very clearly clarified to prevent unnecessary litigation. This brings in immense relief. For tax on Indirect transfer the Indian assets should form more than 50% of the total assets of the offshore entity and value of Indian assets should be more than Rs 10 Cr. Further small shareholders in offshore funds owning less than 5% of the offshore fund or 5 % of the underlying fund that holds the Indian assets will be exempted from the definition of indirect transfer. There are also stringent reporting requirements on the Indian portfolio company that has a offshore fund/entity as its investor to report any change in shareholding of its offshore investors/entity without any reference to minimum threshold. 

MAT on FPI long term capital gains removed.

However there is MAT on short term gains and income. It however seems that there is still a MAT on offshore entities/funds and the exemption is only for FPI’s.

Sesh A.V. is a member of the Institute of Chartered Accountants of India and the MD of Basiz Fund Service Pvt Ltd, a $13.6 bn in assets under administration fund administrator that services PEVC funds, hedge funds, family offices & foundations globally and in India. His Contact Information:

Sesh A.V ACA
Managing Director
Basiz Fund Services Pvt. Ltd
M: +918286008554
sesha@basizfa.com
http://www.basizfa.com

March 18, 2015

Why TaxiForSure had to sell out

Mint has a blow-by-blow account. Hats off to Raghunandan G for being so open.

Extracts from the article - that reminded me a lot of the John Maynard Keynes quote "Markets can remain irrational longer than you can remain solvent":
Ola’s rival, across town, TFS, was watching the firm’s every move closely. Ola’s logic was clear. The company had raised Rs.250 crore in a round of funding in July 2014 and was burning money to get more customers and drivers on its platform. In the process, it was losing as much as Rs.200 on every ride. 
...On 1 November, TFS decided to play the game. It came up with a simple strategy. Thanks to the higher per km rates, consumers weren’t using the service for short distance travel. So, at the consumer end, TFS dropped rates. To Rs.49 for the first 4km and then Rs.14 per km. But at the driver’s end, it needed to incentivize drivers to pick up rides. So it held on to the old rates for drivers (Rs.200 for the first 10km). So if a customer was paying Rs.49 for a 4km run, the driver would still receive Rs.200. To put it simply, TFS was losing Rs.150 per ride.  
...Things looked good.  In early 2014, skeptics had questioned the size and scale of the Indian taxi aggregation business, but with SoftBank’s $210 million investment in Ola, almost overnight, the market was validated. Everyone agreed that it was a multi-billion-dollar opportunity. Private equity and hedge funds in the US and Hong Kong were excited. “We were bleeding,” says Raghu, “but we took a call to get aggressive. We saw a 4X jump and our investors were so happy. It was amazing. So many investors were interested in participating. And everybody was telling me, this is amazing Raghu, this is great. We can put in a large sum of money.”
Looking forward to the day when cab drivers will turn around at the end of a ride and give me cash for giving them my business. That would be Uber Cool.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Deal Alert: YourNest to pick up 20% in GolfLAN.com for Rs.2-Cr

YourNest, via YourNest Angel Fund-Scheme I, is to invest up to INR 2 crore for a 20 % stake in Delhi-based GolfLAN Technology Solutions Pvt Ltd which runs golflan.com, an online community for golfers. The fund will subscribe to 92,212 Series A Compulsorily Convertible Preference Shares and 100 Equity shares at INR 217 each aggregating to INR 2 Cr, regulatory filings reveal. The target company has created an ESOP Pool which would constitute 15% of the share capital of the company on a fully diluted basis. Sunil Goyal of YourNest joined the board of the target in February 2015. 

GolfLAN offers subscription based membership to golfers which allows them to play golf in various countries as well as e-tails golfing equipment. It clocked revenues of INR 1.43-Cr in FY14 compared to INR 60 Lakhs in FY13.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Deal Alert: RVCF invests in mobile card payments firm Mosambee

Rajasthan Venture Capital Fund (RVCF) has invested in Synergistic Financial Networks Pvt. Ltd which owns Mosambee, a Mumbai-based provider of mobile card payment services. Mosambee, founded in 2008 by Alok Arora, Bhushan Thaker & Sameer Chugh, enables mobile phones to function as card reading machines for real-time bill payments. The company plans to have over 250,000 users across India in the next two to three years and a presence in 10 geographies within the next 12 months. 

From the Venture Intelligence PE Deal database: In April 2013, Mosambee had raised INR 4 Cr from SIDBI VC. (Subscribers to the database can login to view the valuation, deal structuring and other transaction details.) 

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 16, 2015

Coming This Summer: Desi Startup Masala Gets Spicier

March 11: Snapdeal in talks to acquire Komli Media for $300-M
Economic Times

March 12: Foxconn may invest $600-M in Snapdeal
Business Standard

March 16: Snapdeal in talks to acquire logistics firm GoJavas for Rs 200 crore
PTI


What's today's snap deal?

Flipkart seems so last week!

Actual / rumoured deals by these guys are what fills Page 3 of the business papers (formerly Page 1 - before Housing.com / Olacabs / Hotstar took that over). And of course, there's the Uber style bad behaviour.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 04, 2015

Off Topic: How Indians Buy Shares

Anuvab Pal has a funny - but so true - article in Economic Times on how the average Indian buys (typically when high) and sells (typically when low) equity. Extracts:

We think differently. A broker told me, "Boss, all that Buffett-Shuffett doesn't work in India. Annual reports, company's patents, customer base, who is competition — too complicated. Customers just ask: will it go up or down? And on what I say, they put money." With that logic, the public are better off putting their money on Sleeping Beauty at the 3:45 derby.  
Respected mutual funds consistently try to do their best to inculcate an investor mindset: invest when stocks are down, don't run when stocks fall and buy 32 gold necklaces. Stocks are here forever and the returns outmatch any asset. Read the prospectus. Read anything, something. What the Indian 'investor' hears is 'Blah blah blah.'  
One such 'investor' told me, "I put in money because my wife's cousin's uncle said to do it. He said the company was into pharma. But they are into shoes actually. Doesn't matter. It won't affect the price." And, naturally, in a speculative market where no one reads what the actual company does, it is ripe for middlemen to lie.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 02, 2015

Under Promising & Over delivering is for Amateurs?!

Clearly, our entrepreneurial ethos and role models are going through a massive generation change. The quotes from Infosys founder N.R. Narayana Murthy that entrepreneurs in the 1990s took to heart included:

``Under promise and over deliver. Investors respect this.'' (On why Infosys gets the kind of valuations it does) 

"Revenue is vanity; profit is sanity; cash is reality"

and

"PSPD: Predictable, Sustainable, Profitable and De-risked"

Cut to 2015. Mukund Mohan, Head of Microsoft Ventures, writes:
Amateurs under promise and over deliver. They are the ones I hear always complain about valuations. They fail to realize that the “professional” entrepreneur friend they have is growing at an insane rate, but they choose to only compare “valuations” and dilution.
And what do the "Professionals" do to make "investors chase them"?
Professionals over commit and outperform. They are the ones that get the best valuations and are diluting very little. They push their entire team to crush already high expectations. They dont heed the “research” that says that it does not pay to over deliver. They crush their metrics on all accounts and deliver growth that’s off the charts.
The times are indeed changing. What do you make of this?

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

March 01, 2015

A follow-on investor's take on Seed Capital sources in India

Sandhya Hegde of Khosla Impact has listed out the seed capital sources she likes in India and why. Extracts:
I have categorized them in 3 different groups — angel networks, fundraising platforms and seed funds. Over time, group 2 will eat group 1 (à la Angel List). 
...I am really excited about the potential of angellist-like platforms in India where startups are more geographically dispersed and it’s often harder to get meetings quickly for founders. Platforms are efficient, help standardize terms and give more power to entrepreneurs. We need some of that. I already see IAN members rapidly signing up on these sites☺ 
...Everyone’s doing seed investments at this point so nothing, apparently, is too early for institutional capital. Accel, SAIF, Kalari, IDG, Accel, Helion, Sequoia, Matrix, Nexus.. I begin to think even Tiger Global might make a seed investment in the right team given the exuberant environment in India. If you have their attention, you are winning.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.