Nri Firm Plans Rs 100cr Venture Capital Fund

The US-based TIE (The Indus Valley Entrepreneurs) group, promotes by NRIs, has decided to float a Rs 100 crore venture capital fund in association with the National Association of Software and Service Companies (Nasscom).

The new information technology policy is expected in about two weeks time. The software industry has approached the government for enacting necessary legal changes on the issue of lowering the rate of corporate tax on venture capital funds, facilitating the issuance of sweat equity and doing away with the par value of shares.

The TIE group plans to tap overseas Indian entrepreneurs and software professionals to raise the fund corpus. Nasscom will be the catalyst in managing the funds.

Silicon Valley-based NRIs supporting this movement have urged Nasscom to use the fund corpus to promote IT professionals having original ideas and wanting to set up units.

Nasscom has initiated talks with the Centre on speeding up the process of carrying out the necessary changes in the existing companies law. Nasscom has recommended that venture capital firms must be taxed at a lower rate in light of the higher risk.

According to Nasscom estimates, the domestic software industry requires at least $ 500 million in venture capital financing by the year 2000. A TIE estimate reveals that almost 75 per cent of venture capital finance in the US is routed to high technology areas.

To achieve the targeted 23 per cent share in the global customisable software segment and at least 5 per cent in the product market by the year 2002 (the end of the Ninth five year Plan), it is important to boost software product development in the country, says Nasscom. For this, venture capital finance is a critical issue.

Nasscom has urged the Centre to introduce the concept of sweat equity a feature which differentiates venture capital funds from other financing agencies.

The Department of Company Affairs had earlier said that the provisions of Section 75 in the Companies Act allowed the issuance of sweat equity. However, the industry has pointed out that this section is inadequate for issuing sweat equity.

It has also demanded doing away with the concept of par value of shares. Currently, shares can be issued either in denominations of Rs 10 or Rs 100. In the absence of a par value, the question of discount or premium on the issue of shares will not arise.

The Department of Company Affairs had earlier said that the provisions of Section 75 in the Companies Act allowed the issuance of sweat equity. However, the industry has pointed out that this section is not adequate for issuing sweat equity.