Monday, March 17, 2014

Govt plans billion-dollar fund to seed desi tech firms

 If the Government has its way, the next Apple or Ericsson could be from India. In a bid to encourage local technology in the manufacture of telecom equipment and devices, the National Manufacturing Competitiveness Council (NMCC) has floated a plan to set up a venture capital fund with a billion-dollar war chest.
 
It proposes to rope in prominent Indian venture capitalists such as Vinod Khosla, Sam Pitroda and Gururaj Deshpande to be part of the investment committee of the fund.
 
“The fund will invite proposals in a transparent manner and select a few consortia, pre-dominantly comprising Indian-origin scientists and technologists. The full cost of the start-ups, from conception to proof of concept and then manufacturing, will be met through equity infusion,” stated the NMCC note, which is now under the consideration of the Department of Telecom.
 
According to the NMCC proposal, the fund will provide 85 per cent of the equity without management control and the remaining 15 per cent can be provided by the selected entrepreneurs in the form of sweat equity. The promoter of the company will have full control of management, subject to a review by the expert committee.
 
In case the start-up does not succeed in the venture, the money given will be written off. But if the venture becomes commercially viable then the proposed fund will maintain an equity holding above 51 per cent to prevent any foreign entity from gaining control over the firm. “The fund will look at breakthrough technology, and not return on capital, as a measure of success,” the note, seen by Business Line, said.
 
The move has been initiated in a bid to make India a global technology manufacturing hub. Despite being a major consumer of telecom network and device products, almost all of its requirements are imported at present.
 
Though the Government has brought in several policies to encourage local manufacturing, including the preferential market access policy, not much investment has come in till now. The mobile devices segment has seen some investments by the likes of Nokia and Motorola but this has also declined in the last one year.
 
DoT officials, however, said that while the NMCC proposal is right in intent, it has to be seen whether it overlaps with other schemes being implemented.

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