Panel for sops to foreign venture investors

After the one-year period the VC would be free to sell his stake in thesecondary market or when the company makes a fresh equity offering. It has been proposed that they should also be allowed to invest at 30 per cent of their investible funds in listed securities. Quoting Oracle as an example, Chandrasekhar said venture capitalists had invested in the company when it was going through a bad patch in 1990.

The report also proposed a tax pass through where there would be a single point taxation at the investor level and not a pool level. "There is already a successful precedent in the form of mutual funds," Sebi senior executive director L K Singhvi said.

With regard to employee stock options, the report recommended employees of a start-up should be allowed to acquire sweat equity at a substantial discount rate at which allotment was made to venture capital financiers. "In the US, typically it is 10 per cent of the prefrential allotment," he said. Sebi chairman D R Mehta said the regulator had already moved the government to tax the options only at the exit point.

Thetarget is to mobilise $ 10 billion in three to five years and generate close to 1 million new jobs. This would be done by widening the source of mobilisation of funds both domestically and globally. "There is Rs 60,000 crore locked up only in PF fund and similar amounts in mutual funds, banks and insurance," said Chandrasekhar, "There is no organised way to channelise these resources into the market now." The report also recommended quality initial public offerings by non-profitable companies be introduced in the market with adequate disclosures for investor protection. The proposals have drawn from the Israel, US and Taiwan models for fastest conversion of R&D products to commercialisation.