SIDBI Venture Capital Ltd and Karnataka IT Venture Fund exit from
ECAD Technologies Ltd., Bangalore
August 05, 2005
SIDBI Venture Capital Ltd (SVCL), today announced acquisition
of ECAD Technologies Ltd (ECAD), an early stage IT company funded by SVCL together
with Karnataka IT Venture Capital Fund (KITVEN) by an overseas Company. Pursuant
to this acquisition both NFSIT and KITVEN have successfully exited from ECAD. After
nurturing ECAD for a period of four years, SIDBI Venture and KITVEN ( who had invested
Rs.2 crore and Rs.1 crore respectively) have fully divested from their investment
for a total consideration of Rs.7.50 crore i.e with a profit of 150% over the original
ECAD was promoted by Shri S.L.N. Murthy, an ex-BEL executive and
others in September 1997. It received venture capital funding from SIDBI Venture
and KITVEN in March 2001. It is engaged mainly in design, simulation and testing
of high end Printed Circuit Board (PCB) used in critical applications. The Company
has built a wide and diversified clientele comprising of reputed MNCs, private sector
companies and PSUs. Its customer list includes Texas Instruments, Sanmina SCI Corp,
National Semi conductors, BEL, HAL, ISRO, Defence Labs etc. The Company is also
engaged in marketing and support of special CAE tools and solutions and represents
internationally renowned companies. The company has been consistently making profit
for the past three years.
Austria Technologie & Systemtechnik AG (AT&S), an Austrian company,
Europe’s largest supplier of printed circuit boards with turnover of about euro
332 million has acquired controlling interest in ECAD.
Announcing SVCL’s exit from ECAD, Shri.N.Balasubramanian, Chairman,
SVCL said, “ We are delighted to announce our exit from ECAD. The most difficult
part of the VC process is the exit and to have accomplished it smoothly is the ideal
end result. The exit of our investment from ECAD vindicates our faith in the SME
segment that it offers good investment and profit opportunities to VCs”.
“SMEs contribute immensely in generating employment opportunities
and also contribute by way of generating revenues, including exports, to the national
exchequer. We are committed to our goal of supporting deserving projects / ventures
in the SME especially for innovative businesses through Venture Capital funding”,
Shri Balasubramanian added.
Shri.S.L.N.Murthy, Founder and Director of ECAD stated, “VC funding
for early stage SME besides being difficult, requires deep understanding of the
special features of the SME units. SVCL assisted in strengthening our systems and
broad basing our Board, linkages with Overseas VC funds and gave us the visibility.
The support provided by SVCL is validated by the rapid growth achieved by us”.
Shri.A.K.Kapur, CEO, SVCL said, “ It gives us great satisfaction
to announce that we have funded and nurtured a small enterprise and barely under
four years, the VCs have been able to make a profitable exit. Our exit establishes
the fact that VCs too can invest in early stage projects in the SME segment and
exit with good returns on their investments”.
SIDBI Venture invested in the company out of National Venture
Fund for Software and IT Industry (NFSIT) which has been set up by Small Industries
Development Bank of India (SIDBI) in association with Ministry of Communications
and Information Technology (MCIT), Govt. of India and IDBI. It is a close ended
10 year fund with an initial corpus of Rs.100 crore. SIDBI Venture, has committed
investments aggregating about Rs.75 crore out of the fund in 30 companies. Investments
made are in BPO/ITES, Software Products, Software Services and Internet related
businesses. The investible corpus of the fund is expected to be fully committed
during the current financial year.
In a span of less than five years since inception, SVCL has funded
over 28 projects spread across the country largely in the Product, Services, IT
Enabled services, Internet and BPO - all in the SME segment. NFSIT along with the
State/regional funds supported by SIDBI, has become the major source of VC funding
for the SME segment. This structure also enables rapidly growing SMEs to avail subsequent
round of funding from bigger VC funds.
SIDBI Venture Capital Ltd. in October 2004 also launched SME GROWTH
FUND, a wide focus new venture capital fund with a large corpus of Rs. 500 crore,
dedicated to the SME sector. The 8-year life Fund is being established with an objective
to meet the long-term risk capital requirement of innovative and technology oriented
units in this sector. SVCL has already committed investment in three companies aggregating
Rs.26 crore. The corpus of SME Growth Fund has been contributed by SIDBI and other
leading commercial banks such as Punjab National Bank, State Bank of India, Bank
of Baroda, Bank of India, Central Bank of India, Union Bank of India, Oriental Bank
of Commerce and Corporation Bank. SME GROWTH FUND distinguishes itself as the largest
domestic VC fund dedicated to the SME.
Karnataka Information Technology Venture Capital Fund (KITVEN
Fund) is an Information Technology specific Rs.15 crore Fund registered with Securities
& Exchange Board of India (SEBI). The Fund has been subscribed by SIDBI, Karnataka
State Industrial Investment & Development Corporation Limited (KSIIDC) & Karnataka
State Financial Corporation (KSFC) in 1999. The Fund has invested in 13 companies
with investment of Rs.12.08 crore, most of them at their start up stage. Some of
the assisted companies have grown in size and KITVEN Fund exited from 6 companies
with 4 very good exits including ECAD and recovered partial amounts in the balance
two. It has returned 38% of the money subscribed by the three institutions. The
cumulative turnover of the assisted companies is about 170 crore, though most of
them were assisted at their infant stage. Some of these companies were able to source
additional investment from bigger venture capitalists / strategic investors. As
KITVEN Fund is early stage investor, lot of support services are extended to the
companies mainly in the area of financial strategies, business strategies, internal
controls, management information system etc.
SIDBI, as the apex Financial Institution for the Small Scale Sector,
has been playing a very active role in the evolution of Venture Capital financing
in the country to support the risk capital requirements of the sector. SIDBI has
been following a three tier approach in this regard. To this end, the Bank has been
investing in several Venture Capital Funds for onward investments in the SME sector.
These include several prominent funds such as India Leverage Fund, India Advantage
Fund, India Development Fund. Recently SIDBI has partnered with Small Enterprise
Assistance Fund, US and Kotak Mahindra Bank Ltd. in setting up India Growth Fund.
Bank has also invested in a number of state level VC funds in collaboration with
local institutions. The sanctions of the Bank relating to Venture Capital operations
aggregate Rs.450.36 crore through various routes, making it one of the largest VC
players in the country.