NEW DELHI, AUG 5: In an effort to increase its venture capital investments in the infotech sector, Industrial Development Bank of India (IDBI) has decided to set up a new venture capital fund subsidiary. This new arm of IDBI would be a 100 per cent subsidiary of the parent institution. Talking to The Indian Express top officials of IDBI said that the new subsidiary would concentrate only in investments in the IT sector and would have an initial corpus to the tune of Rs 50 crore. This would go up gradually as the new arm becomes operational. The new subsidiary is expected to be in place in three months time. According to sources, IDBI would first set up a trustee company which would put in place an Asset Management Company (AMC). The AMC would, in turn, go ahead with the setting up of the new venture capital fund. The financial insitution has already made foray in venture capital funding. However, at present, the venture capital funding by the institution is done out of the balance sheet of the parent institution. Elaborating on the present venture capital funding, IDBI sources stated that in the last year the institution had done venture capital funding to the tune of Rs 80 crore. However, this is not substantial given the fact that there is potential for much more. Further, till date, IDBI is yet to do any venture capital funding abroad. With the setting up of this new subsidiary, IDBI would be in a position to bring in the necessary expertise to increase its venture capital funding and go for venture capital funding in the foreign countries. In fact, the recent move by IDBI to set up a separate subsidiary for venture capital fund is on the same lines of the operation of another institution ICICI. Among the Indian FIs, ICICI is the only FI which has met with a lot of success in venture capital funding. Talking to The Indian Express, top officials in the ICICI Venture Capital, the venture capital subsidiary of ICICI, said that in the last three years of its operations, the ICICI Venture Capital has done business to the tune of $250 million. In fact, according to the official, the company plans to double this by the end of the current fiscal. "We plan to reach $500 million turnover by the end of March 31, 2001", the official added. Elaborating on the success of ICICI's venture capital funding, officials in ICICI Venture Capital said that till date the company has done 12 fundings abroad which includes funding in Niko, Neo Pharma, Bridge Solutions etc. The ICICI Venture Capital is a 100 per cent subsidiary of ICICI's Asset Management Company. Elaborating on the revenue model, ICICI Venture Capital officials said that the revenue model is basically two fold. It is profit based and fee based and varies from case to case basis. According to analysts, the recent move by IDBI would also help the institution in getting the new expertise to develope venture capital funding. Till date, since IDBI is funding venture capital from its own balance sheet, they have not been able to reconcile with a situation where the institution can fund something which is not tangible. "The FIs are used to term loans and funding bricks and mortars. Venture Capital funding is not just about investments, it is also about helping the entreprenuers in developing their business. For this you need professionals who understand this business", FI sources added. While IDBI and ICICI has made some headway in venture capital funding, another financial institution IFCI is yet to make any progress in this front. While IFCI has a arm in the form of IFCI Venture Capital Fund, till date the arm is yet to make any fruitful investment in venture capital funding, sources added.
