Page 258 - DCOM304_INDIAN_FINANCIAL_SYSTEM

Unit 12: Merchant Banking and Venture Capital

Notes


Case Study Technology Development & Information
Company of India Ltd.

DICI was incorporated in January 1988 with the support of the ICICI and the UTI.
The country's first venture fund managed by the TDICI called VECAUS ( Venture
TCapital Units Scheme) was started with an initial corpus of ` 20 crore and was
completely committed to 37 small and medium enterprises. The first project of the TDICI
was loan and equity to a computer software company called Kale Consultants.
Present Status: At present the TDICI is administering two UTI -mobilised funds under
VECAUS-I and II, totaling ` 120 crore. the ` 20 crore invested under the first fund, VECAUS-
I, has already yielded returns totaling ` 16 crore to its investors.

Some of the projects financed by the TDICI are discussed below:
MASTEK , a Mumbai based software firm, in which the TDICI invested ` 42 lakh in equity
in 1989, went public just three years later, in November 1992. It showed an annual growth
of 70-80 percent in the turnover.
TEMPTATION FOODS, located in PUNE, which exports frozen vegetables and fruits, went
public in November 1992. The TDICI invested ` 50 lakh in its equity.
RISHABH INSTRUMENTS of Nasik got ` 40 lakh from the TDICI. It manufactures a range
of meters used in power stations in collaboration with the ABB Metra Watt of Germany.
After making cash losses totaling ` 25 lakh in two bad years, it turned around in 1989 and
showed an increase of over 70 percent in the turnover.
SYNERGY ART FOUNDATION, which runs art galleries in Mumbai and Chennai and plans
to set up in Pune and Delhi too, had received ` 25 lakh from the TDICI as convertible loans
which were converted into equity on march 31, 1994. Most of this money has been used for
the company's innovative art library scheme at least paintings to corporate clients.
Questions
1. How has TDICI gained through its venture funds?

2. How do you think can TDICI gain further?
Source: www.indiape.com

12.9 Summary

 Merchant Banking is an important service provided by a number of financial institutions
that helps in the growth of the corporate sector which ultimately reflects into the overall
economic development of the country.
 The activities of the merchant banking in India is very vast in nature of which includes the
management of the customers securities, management of the portfolio, the management
of projects and counseling as well as appraisal, the management of underwriting of shares
and debentures, the circumvention of the syndication of loans and management of the
interest and dividend, etc.
 Merchant banks were expected to perform several functions like issue management,
underwriting, portfolio management, loan syndication, consultant, advisor and host of
other activities.
 SEBI was also made all powerful to regulate the activities of merchant banks in the best
interest of investors and economy.

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