Venture Capital Funding and Indian Economy

India-focused Venture Capital (VC) funds raised approximately $2.1 billion in year 2019, which was slightly lower than year 2018. Venture Capital fund raising outlook for year 2020 was largely positive among both limited partners and general partners, but it got a big hit due to corona pandemic. Even in the face of worldwide economic uncertainty, year 2019 was the second-most active year globally for venture capital investments. Simultaneously, it was a milestone year for the Indian VC industry too, with $10 billion in capital deployed, the highest ever and about 54% higher than year 2018. Additionally, India witnessed a 29.5% increase in VC volume over year 2018 as well as larger average deal sizes across all sectors.

In the era of evolving new businesses, the start-up ecosystem in India remains robust and is rapidly growing. Between year 2012 and 2019, the number of start-ups in India increased by 18% each year, while funded start-ups compound annual growth rate increased faster at 20% during the same period. Currently, of almost 79,000 start-ups in India, only about 7% are funded, it is indicating bigger room available for investments in India. More than two decades of experience by Birla WP Management team, hereunder summarizing major factors considered by VC team, before investing in a Venture:

• An innovative project is essential but within realistic and logical area, venture capitalists seek any project which promises immense growth potential and competitive ability to succeed and sustain in the market.

• Entrepreneurial personality, experience and his management team contribute towards the execution and success of the project, since they utilize the VC’s fund the venture capitalist make sure of their major role with managing, working, guiding, and co-coordinating the team towards the right path.

• Good team work, the mantra for modern success stories in the market, holds good for venture capital funding too.

• Market characteristics cover the marketability for the product and the competition it faces from other competitors. Returns in the short period depend on the market characteristics of the project hence it is criterion in decision making for capital funding.

About 75% of VC investments in India, during year 2019 were concentrated in four sectors: Fintech, Consumer Tech, Software, SaaS companies and B2B business models. Consumer tech continues to be the largest sector, accounting for approximately 35% of total investments, with several scale deals exceeding $150 million. Within consumer tech, verticalized e-commerce companies continued to be the largest subsegment, but in addition, there were increased investments in healthcare tech, food tech and education tech. Both SaaS and fintech attracted significant investor interest and activity throughout 2019, with several early-stage and increasingly late-stage deals.

In conclusion, it must be mentioned; even though obtaining finance from Venture Capital route is rigid, but the kind of experts and resources available with the Venture Capitalist team; success of the VC invested business is better than entrepreneur’s independent business management. Get geared up for better structuring of your business in emerging Indian economy.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com

Digital Strategies for Emerging Indian Industries

Corona times taught many new aspects of doing business digitally. Its said that god has created good, in every bad event. Covid period shall be considered as adaptive time curve; wherein business owners tried to adopt digital operating and marketing strategies to work from home. Unlike mass marketing, which raise interest of local audience by means of radio spots, newspapers and other direct marketing tools; digital marketing allows companies to nurture a more personal relationship with their consumers from all over the world. With digital marketing, businesses can deliver contents to their customers through personalized and cost-effective communication. Birla WP Management team has prepared following decision matrix for clients to take decision on digital marketing strategies:

1. Track and Measure Data instantly gives your business a better idea of how your marketing campaign if faring. Using these tools, not only can you can make statistical assessment of your campaign, but also illustrate the progress of your marketing campaign in detailed graphics, which send running trend message to all management layers.

2. Impact Assessment shall be done on periodic basis by business owners to grow your traffic, leads, sales and conversions of enquiry to revenue / turnover. Without the ability to measure exact impact on targeted customers, you cannot alter or modify strengths of your products.

3. Quick and Convenient Service Tools to enhance product presence; wherein your digital presence shall start from showing product capabilities to end user and shall remain available till after sale service.

4. Lowest Cost Marketing is biggest benefit to be derived from digital marketing. Digitally it appeal directly to consumer and remain alive for longer duration than print media or other shout media. Cost of per impression or cost of per customer acquisition is lowest in digital media.

5. Demographic Targeting can be easily controlled in digital marketing; wherein you can restrict geographical area of your digital campaign and reduce cost. In facebook, insta, twitter, whatsapp, youtube media, many tools available to filter your customer targets, based on geography, habits, spending capacity, season, reach, fashion etc.

6. Data Bank creation for permanent use by industries and businesses. Transaction thru digital mode allow you to collect basic customer data to enhance sales and build brand goodwill on repetitive basis. Data is fuel to run digital marketing tools, wherein you can filter data and appeal harder to end consumer.

7. Instant Transaction Services is biggest advantage to reduce cost of working capital. Executing transactions is easy and instant on digital payment services, since no need to handle physical cash or time taking bank clearing floats etc. A single click can fetch you fund flow and inventory management.

8. Ability to Multitask is another big advantage of digital marketing. Making faq and viral them digitally may save precious time of your marketing team. At the same time data generated from past purchases, can be used for generating new sales. Data of one product and type of customer can be used to sale another product with same set of customers. All these digital campaigns are matter of a single click, without the risk of diminished satisfaction.

Selection of proper digital marketing strategy is continuous cost-benefit analysis by your business advisors; wherein it can reduce cost of interest, better use of working capital, generate more sales with same infrastructure, reduce inventories, reduce payment float etc. Author of the article may be contacted for expert advise, with deep rooted matrix assessment. Be digitally innovative......new digital world is waiting for your business to roll smoother and be front runner for value creation.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com

Liquidity Booster for Domestic Industries by Government

In current scenario, maximum of MSME industries have arrived on a juncture facing big black wall, with no more funds to pump into industries. Hearing this voice, Central Government has come out with certain measures to pump liquidity into market and ease of tax compliance and filings, as detailed below:

MSME Step-1 - 20% top-up loan, on existing outstanding loan to be provided. It will not call additional colletoral, but will be covered with existing security with lenders to MSME. Those MSME having Loan upto 25crs and turnover upto 100crs will be covered in this scheme. This loan will be provided for 4 Years with a moratorium of 12 Months from availement.

MSME Step-2-  Rs. 20,000Crs will be infused as Subordinate Debt for stressed MSME thru CGTSME Trust. Government is also creating a master Fund of Fund, with infusion of  50,000crs as equity to standard and regulated MSME. It will help them to expand their capacities with less paperwork.

MSME Step-3- Definition of MSME changed has been changed with additional classification based on turnover limits (earlier it was based on investment limits). Different between manufacturing and service SME is removed. This will bring turnover limitation to micro industries, wherein their existence will be in controlled environment and boost will be for small industries categories. Wherein Atmanirbhar Bharat needed more secured environment for micro industries.

MSME Step-4- Government has provided secured domestic market to domestic industries; wherein it has banned Global Tender system upto Rs. 200 Crs Government procurement. This will provide boost to msme industries, wherein they will not have to face competition from global players and will get oxygen to survive in front of MNCs and larger corporate. Along with it, Government has also directed to clear all central government outstanding to msme, within 45 days to pump more liquidity to msme.

Labour law and EPF Step - EPF contribution was paid by Government for Covid times, March, April and May 2020. Now this payment support has been extended by another 3 Months, wherein 12%+12% contribution will be paid by Government of India.  Further employer contribution has been reduced from 12% to 10% for those organisation having more than 100 employee registered.

NBFC, MFI, HFC Step - Special Rs. 30,000crs Liquidity window will be given and government will buy debt papers of these institutions even if the same with rating as investment grade. These will be fully guaranteed by Government of India. Further government to provide Rs. 45,000 crs Liquidity to NBFC with this scheme; wherein first 20% Loss will be born by Govt of India. Even unrated papers will get money under this scheme.

Discom Liquidity Steps - Discom are not able to pay the power generation Companies, hence Rs. 90,000crs Special fund created to pay all outstanding of Power Generation Companies; wherein they will be funded thru PFC and REC.

Infra-Contractors Step – Considering lockdown non working period, government has provided an automatic extension of 6 Month to all Govt contractors of Railways, Roads, Other departments. Govt Agencies will also partially release Bank Guarantees to the extent of work completed. It’s a big step to build additional bidding networth capabilities and saving from liquidated damages and penalties.

Real-estate Industry Step - Covid19 shall be treated as act of God, using the Force Major Clause their project registration will be extended by 6 Month automatically; wherein Completion dates of existing projects to be extended automatically by 6 Months by Government authorities. It will be like providing oxygen to realestate segment, already in ventilator stage.

Direct Tax Related Step – for assessment year 2020-21, Government has extended Income Tax Return filing date to 30 November, 2020 (from existing 31^st July, 2020), tax audit date also extended to 31^st October 2020. Government has also reduced Non Salaried TDS and TCS rates by 25%, from existing slab rates. This will be effective from 14^th May 2020 will remain valid till 31^st march,2021. Further Government has directed to issue all pending refunds upto 5 Lakhs to assesses immediately.

If all these steps used with more digital mechanism, ease of business practices and opening of markets for msme, then only AtmaNirbhar Bharat can be thought of with motivated and dedicated Entrepreneurs.

Written by :

CA Yogesh Birla

Director
Birla WP Management
visit us at : www.YogeshBirlaCA.Blogspot.com