Karnataka Unveils First Venture Cap Fund For It

The Karnataka government yesterday launched the first of the venture capital funds promoted by a state for infotech (IT) industries. It has launched Kitven Fund, a Rs 15 crore fund in collaboration with the Small Industries Development Bank of India (Sidbi). The 10 year, close-ended venture capital fund (Karnataka Information Technology Venture Capital Fund) has set a target of Rs 100 crore by inviting more institutions to join the fund.

The fund has been conceptualised and funded by Karnataka State Industrial Investment and Development Corporation (KSIIDC), Karnataka State Financial Corporation (KSFC) and Sidbi.

The Karnataka government had all along evinced a keen interest in venture capital funds to help make the state more attractive to IT companies.

 

The efforts of the state government were speeded up with neighbor Andhra Pradesh already way ahead in wooing top IT firms. The launch follows the state government's plans to boost software exports to Rs 10,000 crore by the year 2002.

A minimum of 10,000 software professionals are expected to be trained during the period from 1999 to 2000.

Chief minister J H Patel said Kitven Fund is dedicated to investing in companies in the IT industry operating in the state. The fund has already attracted 20 proposals so far, according to N Vishwanathan, principal secretary, commerce & industry department, Karnataka.

While Sidbi has invested Rs 7.5 crore into Kitven Fund, KSFC and KSIIDC has put in Rs 3.75 crore each. About 51 per cent of the fund is proposed to be invested in small level IT companies.

"The fund's objective is to help provide long-term funds to new and unlisted companies in the start-up stage," Vishwanathan said. The fund will invest in the range of Rs 25 lakh to Rs 1.5 crore per investee company. The preferred form of investment will be equity. However, the fund will be also open to other forms of funding like preference shares, redeemable and convertible shares, debentures, etc.

KSIIDC and KSFC have also promoted a separate asset management company, the Karnataka Asset Management Company Pvt Ltd (Kamco), to manage the fund. Sundaram Finance Services are the advisors to the fund. The state government also disclosed that it was in plans to negotiate with OTCEI (Over The Counter Exchange of India) for listing the shares of firms being funded by the Kitven. This is expected to provide them `exit' route when they so desire. The government is also scouting for a CEO for the fund.