Thursday, 4 February 2016

RBI eases stake sale rules in start-ups

The Reserve Bank of India (RBI) allowed overseas investors to sell their stakes in Indian start-ups to local companies, potentially giving foreign venture capital (VC) funds an easier exit route. The regulator also allowed start-ups to file reports over the Internet, and eased rules governing share transfer transactions, according to a statement posted on RBI’s website.
More options for VC funds to profit from their investments or exit struggling companies will attract more overseas investors into Asia’s third-largest economy that’s experiencing an Internet start-up boom. RBI governor Raghuram Rajan’s move follows Prime Minister Narendra Modi’s decision to set up a Rs.10,000 crore ($1.5 billion) fund to encourage start-up businesses and government pledges to offer tax breaks.
“This was a big pain point for foreign VCs in India,” said Anil Joshi, founder of Unicorn India Ventures. “If they are able to ease out that one problem, certainly it will attract a lot of overseas VC money.”
The central bank also said it would allow start-ups to access rupee loans under the external commercial borrowing (ECB) framework from eligible lenders. RBI also said that it would facilitate the issuance of innovative instruments such as convertible notes by start-up enterprises in an effort to make it easier for them to attract foreign direct investment. The changes will be finalized in consultation with the government, said RBI.
The changes will enable start-ups to receive foreign VC investment and also transfer shares from foreign venture capital investors to other residents or non-residents, RBI said in a statement issued outside the scheduled monetary policy review.
The central bank also said it would permit, in case of transfer of ownership of a start-up enterprise, receipt of the consideration amount on a deferred basis up to a period of 18 months.
RBI said it would clarify certain other issues that are permissible under current rules. These include the issue of shares without cash payment through sweat equity or against any legitimate payment owed by the company. The issue of collection of payments by start-up enterprises on behalf of their subsidiaries abroad would also be clarified, RBI said.
The proposals will help make both the investment and exit process smoother for investors, according to Anand Lunia, founder and partner at early-stage VC fund India Quotient.
The burgeoning start-up industry in India has lured billions of dollars and raised questions about whether valuations are becoming stretched. Much of the money is coming from foreign investors such as SoftBank Group and Tiger Global Management Llc.
In 2015, VC funding touched $5.4 billion (across 473 VC deals), up from $2.3 billion (across 307 deals) in 2014, according to data from VCCEdge, the financial research platform of
Existing rules
Under existing rules, shares held by foreign investors are subject to more restrictions than those held by locals.
“This is a reasonably good package,” said Harish Visweswara, a partner at consultant Grant Thornton India Llp. Most of the changes involve “procedural simplifications which would make life easier for entrepreneurs and investors”.
Certain announcements such as those involving foreign loans and convertible notes are a welcome move, experts said, as they will help boost investments.
“Proposals like permitting start-ups to access foreign loans, issuance of convertible notes will improve investor participation and also help start-ups raise capital at low cost,” said Amarjeet Singh, partner, tax, at audit and consulting firm KPMG.
According to Lunia of India Quotient, there is significant demand for debt from start-ups.
“After a point, (promoters of) start-ups would not like to dilute too much equity to raise funds. On the other hand, availing bank debt is a difficult proposition for start-ups,” he said.
Convertible notes carry a certain amount of interest and are convertible into equity shares based on certain criteria.
“Most angel or seed investments that we have seen outside of India typically happen through convertible notes. It works well for early stage investors as it allows investors to redeem their notes at a later date with a certain amount of return in a worst case scenario,” said Nitin Bhatia, managing director at tech-focused investment bank Signal Hill.
A lack of tax breaks has also curbed the involvement of local investors and encouraged entrepreneurs to domicile their companies in countries that offer lower levies.
In the past decade, most of India’s best performing Internet start-ups have chosen to establish themselves in countries such as Singapore, even though all of their business is in India.
Union budget
“I can’t say people won’t go to Singapore” because of the changes, Grant Thornton’s Visweswara said, referring to RBI’s rules. “But I would say that this was one of the steps that was required to encourage people to stay back.”
All eyes are now on 29 February, when finance minister Arun Jaitley presents the budget. Start-ups and investors are waiting to see if the government will ease taxes relating to capital gains on start-up investments. Any easing of those rules—for instance, exempting levies on gains made after holding for a year or more—could have a “huge impact”, Joshi said.
If Jaitley relaxes capital-gains tax rules “you will see a lot more money coming, not only from India but also from outside India”, Joshi said.

Monday, 19 October 2015

Startups Initiative by Government of India “Stand Up India”

Brief about “Stand Up India”

Prime Minister Narendra Modi is leading an ambitious bid to take India to the head of the Global entrepreneurship by offering

a)       Tax incentives for the investors and ESOPs for employees;
b)      Incubation centers (they provide support functions, mentorship and resources to individual entrepreneurs and to their set ups; giving the all the expert advice and technical guidance);
c)       Single window clearance;
d)      Amendment to the bankruptcy laws to ease entry and exit norms; and
e)      Changes in the intellectual property rights
Also, the government wants to direct their startup energy toward 25 focus areas which were identified in Make in India plan which extends to textiles, leathers, gems and jewellery.

This initiative will lead to investment of $5 billion in India

Tuesday, 15 September 2015

Benefits of Working with Virtual CFO Services in India

A Chief Financial Officer plays an important role in business. One is tasked to handle everything that is connected to the company’s finances. One also manages the finance unit of the company and supervises the budgeting requirements that include working with fundraising firms in NCR to cost benefit analysis. 

Some companies try to do that tasks themselves, but it is advisable to leave the task to a professional virtual CFO services in India. They have the expertise and knowledge to get the job done right. Below are some of the benefits of outsourced CFO services. 

Save Money

Hiring a full time CFO can cost a lot of money. Virtual CFO services in India allows you to fill the position at a portion of the cost of a full time employee. You will be able to save time because the virtual CFO can start right away. With a virtual CFO, the owner will have more time for the core business of company. One will be able to devote more time in growing the business, which is important in the long run. Plus, a virtual CFO will provide a high quality of work without having to pay for health and other benefits. 

Quality deliverables at an affordable cost

Mid-sized organization is benefitted with expertise of seasoned and mature CFOs at an affordable cost; to address complex business needs and quality output.

Provide Flexibility

Another advantage of hiring outsourced CFO services is the flexibility they offer. They provide bespoke services that your company requires. Whether you need mergers and acquisition advisory firms or business valuation services in Delhi, you have the luxury of adding or reducing the services you want with regards to your actual needs. 

Understand the Numbers

A virtual CFO understands the numbers better than most business owners. Financial advisory firms in Delhi are able to help you understand the meaning behind the numbers of your financial statement. That way you are able to make better decisions for the good of the business. 

Help Business Grow

Even if the company has systems for the financial aspect of the business, it can be had to actively grow the business because one lacks the oversight of a senior level financial officer. Virtual CFO services can provide the company expert advice on how to proceed with the business. They can be part of the management team who are able to provide good advice that will give owners the confidence that will help the business grow. 

Improve Efficiency 

Virtual CFO services in India allow companies to become more efficient with their financial matters. They have the knowledge and experience to deal with almost all situations. They can act as one of the debt financing companies in Delhi if you need them to. The best thing about dealing with outsourced CFO companies is that you don’t need to wait for their learning period to end because they are able to move forward with any particular service you need. 

Outsourced CFO services allow you and your employees to focus on what you do best. It is recommended for business owners who have been struggling with the financial aspects of their business.