A Portrait of my Industrial Visit to Verka Milk Plant,Ludhiana

With my Lovely Professional University friends

International youth Forum,New delhi 2012

With my delegate members

International Youth Forum,New Delhi 2012

Winners of President and Vice president for IYF

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I am still Developing this page so you may find some problems in it..I "ll try to fix this as soon as possible.Sorry for Inconvenience-Abdul Zelani

Wednesday, 7 November 2012

My Short selling Experience by Abdul zelani

Another horrible experience....BAD.. Bad...... muhhhhhhhhhhhh!

Rather than seeing it as a loss i ‘ll say good experience with small loss

Today  I shorted 8 shares of INFY @2401 at around 11 am. And with in two hours it went down to 2390 and then i bought(Short cover)  4 shares at this price..and i was thought it will go to lower than this so at 2.40 pm I made bid of 2385 for remaining 2 and I thougt it will definetly touch this prices and will be traded and then I attended 3-4 and 4-5 classes.. I got a SMS that 4 shares were traded and i thought 8 shares were coverd ...but not,I have was the previous trade SMS
And here comes..I got a horrible mail from Mumbai head office that 6 shares were bought  in auction at 2400 and a penalty of 2% i.e  200 rs + 0.2% intrest very day for 4 days (because i bought it on margin)and some other unknown charges... so totally i lost Rs 242 due to my memory power and 3-4 PEP Class.and next i have called to My broker and shouted and regret for my mistake and then he talked for 20 min and here is what he said in brief..

When you sold short (seller shortage) those shares there was someone on the other side who bought them. He won't get delivery. So your broker will try to purchase them in a buy-in auction market on T+2 day and the settlement of the auction shall be done on T+3 day (where T is the transaction day, holidays are not included).

If the auction is successful the defaulting client (you) will have to pay the actual auction price + interest + a penalty of 2%.

What will be the auction price - That depends on the price of the stock on auction day. The lowest or minimum offer price in auction can be 20% below the closing price on a day prior to the day of auction. If it's lower then you might gain but this difference is not given to you it goes to Investor Protection Fund, if it's higher you will have to pay the difference. Your broker will send you an email at the end of day with the detailed information.

If the auction is not successful, no one is ready to sell in the auction (generally happens when the stock hits upper circuit), the sell transaction is cancelled by the exchange and the defaulting member has to pay the highest price prevailing from the day of trading up to a day prior to the auction day or 20% above the official closing price on the day prior to auction day, whichever is higher. The buyer of those shares gets a full refund. Auction is carried out in case of Short deliveries and Bad deliveries.

My recommendations..

1)      If you are utilising or buying Scrips on Margin then be very carefulll.don’t utilise your full margin limit it’s very danger if you are amateur in Capital Market
2)      Check your order status at 3.15 pm be sure that it was not still open and sell it at current market price don’t try to bargain or don’t Use Bid Ask spread techniques
3)     REMEMBER! While you are Short selling you have to Sell and Buy on the same Exchange if You accidently buy them on BSE while you sold them on NSE it will not be covered because there were no depository in this situation
Ignore Spelling and Grammar mistakes...
Indeed it was technical to understand,it took me 2 days to understand this whole concept.if you have any dought Please give me feedback or any extra information about this topic ....please feel free to say any thing will help me to improve my skills in In upcoming blogs...
you can mail me personally

Abdul Zelani,
Lovely Professional University.

Friday, 26 October 2012

Costs Involved in In stock market investments

Costs Involved in In stock market: As per Oct,2012

My first shocking Experience,
It was my first day in MBA IIIrd  Semester , the faculty  polished our Brain By saying to achieve something. I still remember that class when My SAPM Proff Atin Garg asked “what do you want to become” I just replied Portfolio manager and I don’t know much about that and then he said, do some thing extra in life …. Gain practical knowledge,“Kal subah Janta puchegi,Maa Baap Puchenge, dost puchengy” kya bhai Placement huui yani? What will you say?. On that day I decided to open a real account so that I can become temporary Portfolio manager.

I went to kotak Securities and asked to open a account and then he asked
1) PAN(Permanent Account Number)
2)Savings Bank Account With Cheque Book
3)Adress Proof

It was Aug 18 when I received My trading Account KIT,then I started  to Trade with 5,000 Rs At that time I was just Knowing the Commision of 0.25% over total turnover for Delivery and 0.025% Intraday.

By the blessings of God,The Economic Reforms Part II was releasd, KFA rose from 8 rs per share to 17 rs within 16 days and SAIL,GVKPIL,GMR,SUZLON,BHARTIARTL,RENUKA almost every SCRIP was Up and I made more than  20% return over 5000 in just 45 days…

And then came October, on that day I really realized my real profit by deducting the hidden charges

1)STT(Security Transaction Tax) mandatory_ 0.1% for Buying and 0.1% for selling(it changed to 0.001% in FY13-14 BUDGET)
2)Brokerage:0.25% on Buying and 0.25% on selling(depends on Broker)
3)Service tax on brokerage 12.36% for buying and  12.36 % on selling
4)Stamp Duty : According to scrip but ‘ll be in Rupees only(very less)
5)Depository charges:There is no charge if any scrip is credited in your DEMAT account but they will charge 30Rs + 0.1% total value of  debiting Scrips
6)Annual Maintenance Charges(AMC):600 Rs per Annum.
7)Short term Capital Gain Tax if sold with profit with in 365 days 15% of total Profit...
8)No Long Term Capital Gain Tax if you hold more than 365 days.

In India There are Two depositories NSDL(NAtinal Securities Depository Ltd) and (CDSL) Central Depository Of secutities Ltd…… NSDL is for NSE and CDSL is for BSE Trades…. The charges are subject to Kotak brokerage and NSE,CDSL…it will differ if you trade from others  

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i.e if you bought a share of 80rs then you have to sell it above 81 rs then only you will get may gain 10% on you share from buying ..but when the real profit comes to your account you 'll be shocked to see These deductions.

What is Margin?
Margin is the liquidity which your broker will provide.

Suppose You thought ITC share Price will Rise by 10 rs to 310 rs tomorrow.and you have 3000 rs in your trading Account.but you have balance to buy 10 shares only.Then what you do is Utilize the Margin Provided by your broker.(Margin utilization for Every stock is different if it is good stock then you may utilse 80% levarage .if it is volatile and Bad stock then you will get 0% levarage to buy that share) ITC is a good and less volatile share so you will get 80% leverage to buy this stock.So finally you can buy 50 shares(50*300=15000).This is because you have balance of 3000 rs which is 20% of 15,000 rs.But you have obligation to Pay that 80% margin with in 2 days..else intrest will be charged.Suppose the ITC gone down by 10% then you will get a margin calll to clear the balance else they will sell the shares and reedem the amount.

If you are learner, start trading with not less than or more than Rs 5000/- and when you gain knowledge trade with a minimum of 50,000
2) Utilize the margin Given by your trader in Intraday transactions....why i am saying Intraday becz The brokerage 
'll be 90 times less and there will be no DP(Depository Charges) because there is no delivery.....

I am poor at english so if any gramatic error or spelling mistake found Please let me know by commenting on this blog

if you don't feel comfort please mail your comment here:(;

For National and International Financial Market Updates in Basic layman language Like A Failed Investor Facebook Page

Syed Abdul Zelani,

MBA 2nd year,

Lovely Professional University.

Wednesday, 15 August 2012

Global Stock Markets Timings- by Zelani

Indian Capital Markets

Trading on the Indian Capital Markets segment takes place on all weekdays
There will be No trading on Saturday, Sunday and Published Indian Stock Market Holidays declared by the Indian Stock Exchange in advance.
The Market Opens at: 09:15 hours and Closes at: 15:30 hours
Pre open session will be from 09:00 to 09:15 hours
Pre-open trade session is a 15 minute trade session from 9:00AM to 9:15AM on the 50 stocks of NIFTY index .
Only 50 stocks of the NIFTY index can be traded during this time on both NSE and BSE. Normal trading for all other stocks will start at 9:15AM till 3:30PM.
In stock Markets News Plays a major  role ..sorry not major role it fully depended on it .


In LPU only officia UMS News will effect you but where as in Stock Markets even a foolish Roomer also Effect adversely in stock market.

In case of a major event or announcement comes before market opens like other country news and some news which is declared on holidays etcc. IIP industrial Production Index will comes every third Friday of month if it’s holiday then this give major impact on BSE/NSE. Special events include merger and acquisition announcements, open offers, delistings, debt-restructurings, credit-rating downgrades etc which may have a deep impact on investors wealth. In order to stabilize this, pre open call auction is conducted to discover the right price and to reduce volatility.

The 15 minutes of pre open session is broken into 8 + 4 + 3.
The first 8 minutes:  During this session investors can place/ modify /cancel orders on the basis of which the exchanges would determine the rates at which trading would happen. Orders are not accepted after this initial 8 minutes.
In the next four minutes, orders are matched, executable price is discovered and trades are confirmed. The next 3 minutes ls for hmmmmm for ringing bell? Just kidding lol I don’t know about that 3 minutes.(There is lot more about Pre Market session But I know only this much)

Apart from the BSE and NSE, there are 21 regional exchanges which open at normal hours 9:15  to 15:30 hrs.

As I said above some times announcements comes before market opens like other country  stock exchange performances
Apart from this, global trends in stocks also affect the Indian market when it opens.
WORLD STOCK MARKET TIME ACCORDING TO India (Up to know I have just anlysed opening session ,In two or three days I will update it with closing sessions also)
Shanghai stock exchange  – Opens at 7.30 Am
·         Hong Kong stock exchange -  Opens at 7.55 Am
·         Tokyo stock exchange  - Opens at 5.50 Am
·         South Korea – Opens at 5.50 Am
·         NYSE, New York  – Opens at 8.30 Pm
·         NASDAQ  – Opens at 8.30 Pm
·         BOVESPA , Brazil – Opens at 7 Pm
·         Bogota,  Columbia – Opens at 7 Pm
·         Dow Jones – Opens at 7.30 Pm
·         Bye for now .. presently i am busy with Ramazan month Prayers so  i'll add some more exchanges timings.......... stay updated
…have a nice day !
And also Happy 66th Independence Day Jai hind!

Copy rights at Abdul Zelani,Lovely Proff University.

Monday, 13 August 2012

What happens if your bank goes bankrupt_Abdul Zelani

What happens if your bank goes belly up:
Most banks today agreed to follow the Banking Codes and Standards Board of India’s (BCSBI), code of bank’s commitments to customers. This code, works for fair treatment of customers. However, this code does not do much for you, in case your bank goes belly up. Narayanan Raja, Chief Executive Officer, BCSBI, says, “The code looks into the commitments from banks side to its customers, but does not cover issues which the customer might have to face in case the bank goes belly up. This issue is looked into by DICGC.”
As a depositor you don’t really need to be worried about your bank going belly up, well almost. Reason being, the deposits which you make with your bank come with some sort of a safety net. This safety net, in banking parlance is an insurance provided on your deposits by Deposit Insurance and Credit Guarantee Corporation (DICGC).  This corporation comes under the wings of the Reserve Bank of India (RBI) and as its name suggest, offers an insurance cover on the deposits you make and also guarantee credit. Says, a senior officer, who did not want to be named, from the DICGC, “All commercial banks are covered by DICGC. ” All foreign banks which are currently functioning in India, as well as co-operative banks and rural regional banks are also covered.
So, if you hold Rs 97,000 as principal and Rs 2000 as interest, you will be able to recover Rs 99,000 and not Rs 1 lakh. But, if you hold Rs 2 lakh, you will still get only Rs1 lakh, in case your bank goes belly up.What’s the amount: You get this cover for your funds in the savings account, as well as current accounts. Fixed Deposits and recurring deposits also enjoy this cover. The DICGC official says, “Your deposits are insured up to a maximum of Rs 1 lakh.” So, if you hold a deposit of Rs 20,000 you will only get Rs 20,000. Keep in mind, that this Rs 1 lakh amount includes both the principal as well as interest amount.
Multiple accounts –same bank: If you have multiple accounts in the same bank, DICGC will total the amount while taking into account the insurance cover and you will get a maximum of Rs 1 lakh.
Different Banks: Here the insurance ceiling will apply separately for different banks. So, from insurance point of view, it would make sense to divide your funds in few separate banks, instead of parking it all in the same bank.
Joint Accounts: If you hold a joint account, the insurance limit will be applicable to each holder of the joint account and accounts held in different names of the member of the family.
How are you paid: If the bank fails, DICGC will pay you the amount within two months from the date of liquidation of the bank. If the failed bank undergoes a merger and acquisition, the failed banks’ business is transferred to the healthier bank.
On loans: If you owe any dues to the bank, they have the right to set off such dues, and the remaining amount will be given to you by DICGC. If you have borrowed (loan) from the bank and if your bank goes bust, that does not mean you won’t be liable to pay the debt. Says, a senior, RBI officer, “The apex bank will then appoint an administrator to look into the matters of the bank. As far as loans go, they will be recovered from the borrower as per rules.”
Don’t kill your bank: Banking is all about trust. And while the banking system does seem to provide a safety net, you also have to ensure that you do your bit. Says, RBI officer, “Of course customers have to be cautious while choosing a bank, but they also have to ensure they don’t become the reason for the death of the bank. Never rush to withdraw deposits based on rumors.” Of course, it does not look like any bank is going belly up in the near future, (we hope not) but surely it does not harm to be aware and educated, were the need to arise.
                       Syed Abdul Zelani,Lovely Professional University.

Thursday, 22 March 2012

How currency Fluctuates,Syed Abdul Zelani,Lovely Professional University

Rupee fluctuates.Know how it fluctues ,what is cause for it,measures for controling it etc....................

Do we even care if the rupee falls against a dollar? We leave such news to NRIs to worry about the exchange rate. For domestic investors, does rupee fluctuation hardly make any difference? Most investors do not read between the lines regarding how rupee fluctuation impacts their investments. Moreover, the exchange rate phenomenon seems esoteric for most of the common investors. Here are some aspects of rupee fluctuation and its impact on our investments:

"Like stock market it's also a game of demand and supply.when we have a supply more than the demand then the rupee will appreciate (decreases) against dollar, valuae depriciates (increases) when supply is less and demand is more.RBI plays a major role in this to stop the heavy if the value of rupee is appreciating very high (rs.40 hypothetical figure) then RBI will buy much Dolars to create shortage of dollar.. and vise versa..i.e supplies much dollars into market to when the rupee is depreciating(increasing)"--Abhishaik chowdary,Asst proff of Finance,Lovely Professional University.

In dec 2011.india has faced heavy depreciation of rupee nearly 55.then RBI has brought this to around 47 in one month by doing these 
1.Increasing NRI deposit intrest rates(attracted large number of dollars from US)
2.Increasing Gold Import duty by 2%
3.other RBI regulations

Currency fluctuation
There are mainly two ways by which currency rates are managed. Firstly, countries fix their currency against dollar. Hence the exchange rate doesn’t change. Government takes action to manage any fluctuation that may happen. Secondly, countries leave it to the market to decide their exchange rate. In such a system, countries follow policy of non-interference.

India doesn’t have a fixed value of rupee against dollar but it also doesn’t keep its currency completely floating against dollar. We have a system where the central bank allows rupee to fluctuate within a specified range.

Usually, rupee appreciation is taken as economy gaining strength while depreciation is taken as Indian economy losing strength.

How it impacts investors
Let’s look at how rupee fluctuation impacts investors’ decisions. Let’s look at appreciation first.

Rupee appreciation 
Rupee appreciation is considered bad for companies where major part of their revenue comes from export. Appreciation of rupee makes products more expensive for export. When the products become expensive, importing nations either reduce the import or look out for other nations that can produce the same product at cheaper prices. Hence, any appreciation in rupee is often accompanied with clamour by export companies to devalue the currency.

Rupee appreciation is good for companies that depend on import from other countries. For example, oil companies, Pharma, Engineering, and medical device companies will be fine with rupee appreciation. The machinery, oil, and engine used in such industries will be cheaper to buy. Investors can consider investing in such companies when rupees appreciate.

Let’s take an example. Suppose the rupee dollar exchange rate is 50 (i.e. Rs 50 - $1). A company in export sector earns a profit margin of 15% from export. If the rupee appreciates and the new exchange rate is Rs 40 = $1. In this case, the company has lost 20% of the income.

This impacts investors in sectors that depend on export for their income. The typical examples are software industry and textile. Their dependence on export is heavy. Any rupee appreciation will hit software and textile industries hard. We have seen what happened in 2008 when America went into recession, dollar lost value and rupee appreciated against dollar. There were lay-offs, increased hours, flat revenues, and reducing profit. Investors in export oriented sector will be hit by any appreciation in rupee.

Rupee depreciation 
Rupee depreciation is when it loses value against dollar. For a nation like India where import is more than export, rupee depreciation makes things worse because imports get expensive. This increases the deficit. Rupee depreciation is not a good signal except for export driven companies.

For Indian economy, which depends on oil import, any fall in rupee will impact its oil bill. This will increase inflation because of increased oil bill. Increased inflation eats into the returns of investors. Moreover, a high inflation reduces the economic activity and consumption.

Software companies, textile companies, and many other export driven sectors such as tourism are the ones where investors can think of investing. Their export becomes cheaper and hence they can sell more to the overseas clients. These companies will do well.

Important points to keep in mind
Since the global crisis is yet to stabilize, there will be extreme fluctuation of currency or rupee. Greek crisis, Eurozone, America’s growth, and many other factors will impact the currency rate. Investors are advised to trade based on currency fluctuation only when they have some expertise in this. There will be times when rupee fluctuation may not impact individual companies or sectors because of other factors present. For example, if rupee depreciates against dollar further, there is not much chance that software industry will improve its income as they did in the past. They have become quite matured and going from here to the next level will require different ways to develop software.

Finally, the rupee dollar exchange rate will remain volatile till the crisis persists. Hence investors should practice caution when investing in exchange rate sensitive sectors.

Monday, 30 January 2012

Where and how to find the money for your entrepreneurial dream

Where and how to find the money for your entrepreneurial dream......

The signs are everywhere. Students, women, yuppies, the unemployed, those facing a mid-life crisis, and a whole lot of other categories have succumbed to the e-bug. Frankly, the environment has never been more conducive. Of course, the risks associated with start-ups remain (see Hurdles you will face), with more than 50% of all start-ups failing within the first five years. 

It's just that landing funds to fuel your venture is easier than ever before. 
Venture Intelligence, a research firm focused on venture capital and private equity deals in India, says there are 43 angel networks, 111 venture capital investors and 37 incubators in the country 

Also read: 
It's worse to borrow from your father-in-law than a VC: Anand Lunia, Seedfund. 
Hurdles that budding entrepreneurs face and how to overcome them 

We have certainly come a long way from the days when bootstrapping-falling back on savings, fixed assets, and money from friends and family-was the only option. Nonetheless, this is still the most preferred starting point for a majority of new businesses. 

The trouble with bootstrapping is that it usually means scrimping on capital, which, in turn, curtails the start-up's flexibility and ability to grow. There is also a very real risk of fledgling entrepreneurs overleveraging themselves. Says Nishant Verman, associate, Canaan Partners: "It is not uncommon to see entrepreneurs taking a huge credit card debt for their start-ups. They should take calculated risks and not become reckless." 

A less risky way to raise seed capital is to pool resources with a group of people who have shared interests and work together to escalate a business idea to at least a prototype. This is how the Bangalore-based CustomerXPs, a software product company, stockpiled its seed capital of Rs 2 crore. 

"I came across Aditya Lal, Balaji Suryanarayana and Sandhya V, all people with whom I had worked earlier, and decided to set up my venture with them. All of us invested equal amounts of money in the start-up and have equal stakes," says Rivi Varghese, CEO, CustomerXPs. 

However, if you are sure of the scalability of your venture and are not obsessive about retaining independent control, private funding could be the best option. This type of funding comes in various forms, each typically catering to different stages of a start-up, such as the seed stage, early stage and growth stage. Here are some of the options. 

These are high net worth individuals, who invest in a start-up in return for a minority share in the business. They are usually serial entrepreneurs or heads of major multinational firms. They can also be a group of individuals who pool in funds to invest. The key networks include
 Mumbai Angels, Indian Angel Network, Hyderabad Angels, Pune Tech Angels, Business Angel Network of Kerala and East Angels. 

The duo zeroed in on the angel option for their company which digitises documents. "We got Rs 1.5 crore within 30 days of sharing the business idea," says Mahajan. He feels this route is quicker than a
 bank loanand easier than the venture capital option. "The more unique a business idea, the harder it is to convince a venture capital firm or a bank. An angel investor invests in the entrepreneur's credentials, not the company's," adds Chand. 

How angel investing works
Angels typically come into the picture at a start-up's seed stage, when the business idea is just a concept. The wannabe
 entrepreneur has no team, no product and no customers. The business plan itself is very iffy. So what draws an angel's attention? Business ideas that have the potential to generate solid returns, as well as the person behind it, but they are basically in it for altruistic reasons. Says Saurabh Srivastava, co-founder, Indian Angel Network: "Angels like mentoring an entrepreneur and nurturing a start-up in its initial stage." 

Since all start-ups are risky propositions at this stage, angels typically don't put in a huge sum. "We invest in start-ups that are unlikely to draw the interest of venture capitalists since the size of investment is rather small, from Rs 50 lakh to Rs 5 crore, depending on the angel approached and the business idea. Only in special circumstances will the deal size stretch to Rs 10 crore," adds Srivastava. In return, they take a 20-30% stake in your firm.

Angels are patient investors; they typically remain invested for 7-8 years. They review the progress regularly and are even willing to go back to the drawing board, if required. "Angel investing provides an immediate induction of more minds, which helps in efficiently strategising for the challenges that can be faced by start-ups," says Siddhartha Nigam, partner, M&A, at Grant Thornton, a managed accounting and consulting firm.

No wonder Sasha Mirchandani, co-founder of Mumbai Angels, claims that angel-backed companies tend to do better than the ones that directly approach venture capital investors. You can also expect quick access to funds. It can take anywhere between a day and three months to close a deal.
The concept of angel funding is still at a nascent stage in India, so they are difficult to find. You need to boast the right contacts/professional network to bag such funding, besides having the right credentials. Says Srivastava: "Factors like the entrepreneur's reputation, integrity, clarity of mind and his response to feedback are important for me. He should also be a good listener."

Mirchandani, on the other hand, is more concerned with the capital efficiency of a business idea. "We write small cheques, so the start-ups approaching us need to be extremely careful with the capital," he explains. This is why so many IT start-ups, typically both capital-efficient and easily scalable, find favour with angel investors.

However, as Verman stresses, easy funding is still difficult to come by. "India is no Silicon Valley, where a super angel like Mike Maples will invest in a product when it's no more than a blueprint sketched on a notepad, as in the case of
 Twitter," he warns. 

Hot sectors
"Currently, angels are interested in funding education, mobile value-added services and apps, innovations in healthcare and rural entrepreneurship," says N Muthuraman, director, RiverBridge Investment Advisors, a boutique financial advisory firm.

For the uninitiated, venture capital firms invest their shareholders' money in start-ups in return for a minority share in the company.

Before he got lucky with Draper, Kacker's idea of producing coffee-table books had been rejected by about 15 venture capital firms. "Be absolutely sure of your business plan before you go to a venture capitalist," he says. Incidentally, he recommends starting with angels. He too had approached angel investors, but took the venture capital route as he needed more money.

How venture capital works
They typically invest at an early stage of a start-up; unlike angels, precious few are willing to back an idea at the concept stage. That's logical, because a start-up needs more funds at the early stage when the working capital requirement is high. This is when the fatter cheques of venture capitalists come into play. Venture capital firms have been known to help start-ups organise the next round of funding as well.

Says Arvind Modi, associate vice-president (investments),
 Gujarat Venture Finance Ltd, which provides venture capital to tech start-ups: "We like ventures where the product or service is established and the start-up requires funding for commercialisation or scaling up of operations. Venture capital players may not invest in research and development activities." 

However, there are exceptions. Many firms, such as
 Accel India Venture Fund, Sequoia Capital, Seedfund, Ncubate Capital, Nexus India Capital and Draper Fisher Jurvetson (DFJ), are increasingly willing to provide seed stage funding, but let us consider the thumb rules. 
A typical player is willing to put $2-8 million (Rs 10-40 crore) in return for a 10-40% stake in the start-up, say industry insiders. If the investment amount is higher, the venture capital firm may choose to take a minority stake and invest the balance in convertible instruments, such as debentures and preference shares. 

If you are planning to approach a venture capital firm, be prepared to answer questions on the kind of bond you share with your business partner or the rapport with your team. Don't balk. Seeing their investment going down because of a silly feud between the core team members in a start-up is the last thing they want.

Also, these investors usually don't believe in one-man shows; it is risky if everything depends on one person. "Unless an entrepreneur is very experienced, he won't be able to deal with the challenges posed by a start-up single-handedly," adds Verman.

You will also need to have an exit strategy. The basic purpose of any venture capital investor is to sell his stake for a profit after 4-5 years. So, cover options for the next round of investment, typically from a private equity player, the possibility of an IPO or a potential buyer, along with an approximate exit valuation, in your presentation.

This is practically the only option that gives entrepreneurs access to deep pockets at a time when they are trying to build the company. Private equity's fatter cheques are typically reserved for mature companies. You also get expert help and access to the firm's entire network

"Venture capital funds in India are risk-averse; they require proof of concept and decent revenue visibility before investing," says Muthuraman. In addition, each player will have sectoral preferences. They don't just offer you funds for your business, but also bring along their expertise.

If they do not have prior experience in investing or running a business in your sector, they won't be able to understand your business and, hence, will not invest in it. "So if you are a healthcare company, there is no point approaching an early-stage tech-focused firm like ours," says Verman.

Also, a typical player expects an internal rate of return of 25% on the investment in 4-5 years. "To meet the expectation, the company's compounded annual growth should be over 25%," says Modi. A business with low scalability may not be able to provide them with the desired returns on their investment and, hence, will be rejected outright. The safest bets are the ones where there is a business and professional connect.

"It is a highly dilutive way of raising capital. It suits companies that have very high scalability and don't need too much recurring capital," advises Muthuraman. Also, be prepared to wait for 3-6 months to close a deal.
Hot sectors

Hot sectors
The most sought-after sectors by this segment are biotech, mobile value-added services, education, healthcare, e-commerce, IT-ITeS, infrastructure and green technology.

This is a medium-term loan that is exclusively provided to companies backed by venture capital firms.
How venture debt works.

Batra sought venture debt because he saw it as a cheaper way of funding his business. "This is a great option for a services firm like mine," he says. The loan provider,
 Silicon Valley Bank, was comfortable with his venture capital backers and, hence, getting funds was not difficult. His advice to aspiring entrepreneurs: get into venture debt as early as possible. 

How venture debt works
The USP here is that no collateral is required to be eligible. Instead, venture debt providers evaluate applicants on the basis of a start-up's fundamental enterprise value, assessing how it will grow and, thereby, pegging its future cash flow and ability to repay the loan. You can expect funding of Rs 2.5-20 crore, depending on the growth stage of company and the nature of requirement.

Says Ajay Hattangdi, managing director, SVB India Finance: "An experienced founding team, a credible business plan and a solid venture capital investor base are some factors that we would consider in our assessment." He adds that the interest rates are fixed for the tenure of the loan and are competitive compared with rates that SME clients can usually obtain from banks.

Venture debt financing is structured specifically to support seed and early-stage start-ups. Hence, it understands that a venture is prone to volatility early in life and, consequently, provides more flexibility to entrepreneurs. According to Muthuraman, this is a useful tool for an entrepreneur wanting to minimise his equity dilution early on as it can bridge the gap between the funds provided by the venture capitalist and his actual requirement.

These funds come with the least amount of restrictions and can be utilised for any business initiative, from basic operations and working capital to supporting capital expenditures and making acquisitions.

Apart from the interest on the loan, venture debt providers typically require an equity kicker, or shares of your company, to compensate for the higher risk taken. "The kicker enables us to get a share in the upside if the company does well. It also enables us to keep our loan interest rate down to a minimum," says Hattangdi

This is a standard option for entrepreneurs but not for seed-stage start-ups. Says Sushil Munhot, chairman and managing director, Small Industries Development Bank of India (SIDBI): "One should look at bank funding only after the product has gone through seed or venture cycle and one wants to commercialise it further."

Instead of a business loan, he took a personal loan to fund his venture. Two PSU banks junked the idea due to the dismal balance sheet. Finally, one bank gave him Rs 5 lakh in 2005. Now that his venture is stable, he has borrowed `50 lakh against his Mumbai house. Shah likes the fact that he is not answerable to an equity stakeholder, which is the case with angel investing or venture capital.

How bank loans work
Usually banks and finance companies fund up to 80-90% of the loan-to-value ratio (borrowed amount divided by the asset value you are purchasing or refinancing), depending on the credit history of the borrower and the collateral put up, be it property, machinery or marketable securities. Bank loans can be availed of for short or long term, but the latter is usually given to established start-ups.

However, Muthuraman says banks now give importance to cash flow rather than the primary security or additional collateral. Recognising the fact that the collateral requirement deters many a start-up, particularly in the early stages, the government and SIDBI have set up a
 Credit Guarantee Fund Trust for Micro and Small Enterprises. The scheme lends up to Rs 1 crore to small enterprises for working capital and capital expenditure without collateral. 

Incidentally, finance companies also offer collateral-free working capital loans to small enterprises with at least three years of operations. "Such loans are disbursed on the basis of historical cash flows and ability to repay," says Kavi Arora, CEO, Religare Finvest. These are available at interest rates of 16-20%, while loans against property cost 12-18%.

It is usually the cheapest source of funding and helps in controlling costs. Besides, if a start-up maintains a healthy credit track record while servicing the loan, access to all other sources becomes easier.

Such loans typically go to existing small businesses which have shown over three years of profitability and credit history.

Ultimately, the key to landing smart funding is to never lose hope. If you are convinced that you have identified a genuine market need and that you can actually implement your innovation, just put together a convincing business plan and start scouting for suitors. This is one area where the more the cooks, the better the broth. Sooner or later, someone is sure to say 'I will'


Essential lessons when you embark on the entrepreneurial journey. 

Prepare your family 
"My wife wasn't too comfortable with my entrepreneurial zeal, so we agreed to give it a year. If I failed to zero in on something within this period, I would return to a job." - Rivi Varghese, Customer XPs. 

Plan your finances 
"You might not earn anything in the first 2-3 years, so you need to plan your family's finances accordingly. A capital cushion is essential to ensure that your family lives comfortably." - Ashutosh Garg, Guardian Lifecare 

Forget the job perks 
"As a manager in a company, you are accustomed to other people doing things for you. In a start-up, you have to take care of everything yourself- from operational expenses to food bills." - Jiggy George, Dream Theatre 

Learn to cope with failure 
"I met 15 VCs before one agreed to fund me. One investor rejected my proposal within five minutes of a presentation. Instead, he spent an hour trying to convince me to go back to my job." - Kunal Bahl, Snapdeal 

Have a plan 'B' ready 
"After the first few months, we realised that service was not our core competence. Besides, the margins were quite low. This was the time we concluded that it was better to focus on products." - Rahul Anand, Happily Unmarried 

Don't take too much debt 
"If you are thinking of starting up, this is the best time. But don't take a home loan since it kills entrepreneurship. You can never get out of it." - Binny Bansal, Flipkart 

Gain enough experience 
"I used to teach at a diving centre in Lakshadweep. After teaching more than 600 students for eight years, I decided to float my own diving company." - Anees Adenwala, 
Orca Dive Club 

Interact with like-minded 
"My partner Abhishek was running an e-commerce portal, which was acquired by a bigger website. He expressed interest in working with me and we launched our site." - Chetan Bafna, 

Believe in yourself 
"Belief in one's idea can take you a long way. Our concept was ahead of its time, but I didn't give up on my vision. At every step, there were people who ridiculed the idea. I had the last laugh." - VSS Mani, Just Dial 

Have a plan that is unique 
"The business plan should be unique and clutter-free. An entrepreneur must look into his area of core competence and use it to devise a strong plan." - Kavindra Mishra,