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EVCA/IVCA Reporting Guidelines
Results of LP GP Dialogue
Dolly GoklaneyMarch 24, 2009
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OBJECTIVES
Statutory Accounts
Reporting & Templates
Performance Measurement
To initiate a dialogue on whether IVCA should adopt the EVCA
Reporting Guidelines, or modify them to suit our specialrequirements.
IVCA aims to develop reporting guidelines that are globallycompatible and relevant for India.
This should enhance the industrys self regulation and Indias
reputation as a great place to invest.
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IMPORTANCE OF REPORTING GUIDELINES
1. PE/VC Industry should be self regulating
2. Standardization of reporting helps LPs & GPs
3. Guidelines facilitate transparency and creation ofbenchmarks
Self regulation, standardization andtransparency will enhance Indias
reputation as a great place to invest.
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SUMMARY
Statutory Accounts
Reporting & Templates
General considerations
Timing
Fund reportingPortfolio reporting
Capital account
Fees & carried interest
Performance Measurement
IVCA Recommendation
GPs feel they cannotreport as quickly asEVCA Guidelines require.
NAV / Unitwhere applicable.
Need to ensureconfidentiality andavoid repetition.
IVCA has conducted a dialogue with selected VC/PE firms in India, and
has facilitated the evaluation of EVCA guidelines. We believe that theEVCA guidelines, with some minor modifications, are suitable for theIndian Industry.
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BACKGROUND
Update of valuation guidelines expected Q2 2009
EVCA created reporting guidelines in 2000. IVCA needs to make a
decision on whether to adopt or modify them.
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PROCESS
We reviewed each aspect of the EVCA Reporting Guidelines with a select
group of LPs and GPs in Mumbai. They indicated whether each of theguidelines should be adopted, rejected or modified.
Statutory Accounts
Reporting & Templates
General considerations
Timing
Fund reportingPortfolio reporting
Capital account
Fees & carried interest
Performance Measurement
A R M Comments
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List of ParticipantsSal. Name Title Company
Ms Lyn Ngooi Associate IDFC, Singapore
Ms. Anahita Patell Associate IDFC Private Equity
Ms. Shweta Agrawal Associate IDFC Private Equity
Mr. Sanjay Ajgaonkar Financial Controller IDFC Project Equity
Mr. Kaushal V. Kapadia Associate - Finance, IDFC Project Equity
Mr. Vivek Rangachari Business Head - Investment Advisory Dar Capital Advisory Pvt. Ltd.,Mumbai
Mr. Himadri Ghosh Roy Associate - Investment Advisory Dar Capital Advisory Pvt. Ltd., Mumbai
Mr. Vikas Arya Principal Gaja Advisors Pvt. Ltd.,
Mr. Abhinav Jain Head (Finance & Risk) Gaja Advisors Pvt. Ltd.,
Mr. Ankur Maheshwari Investment Manager Walden India Advisors Pvt. Ltd.
Mr. Rajesh Ray Investment Manager DEG India
Mr. Vishal Raj Portfolio Manager DEG New Delhi office
Mr. Kunal Makkar Investment Manager DEG New Delhi office
Mr. Amit Maloo CFO Ambit Pragma
Mr. U.J. Lalwani General Manager SIDBI
Mr. Y. Venugopal Rao AGM SIDBI
Mr. U.R. Tata General Manager SIDBI Venture Capital Limited
Mr. Vamsi Ramana Ravuri Astt. Vice President Aquarius Investment Advisors P. Ltd.,
Mr. Anil Karnik Partner Ray & Ray Chartered Accountants
Mr. Kandarp Shah Partner Ray & Ray Chartered Accountants
Mr. Kanekal Chandrasekhar Astt. General Manager Union Bank of India
Mr. Pranesh Kumar Assistant Manager The New India Assurance Co. Ltd.,
Mr. N.J. Mathure General Manager IDBI
LPs Didn,t participate in the survey
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1. IVCA Survey Results: Statutory Account
17
02
Accept
Reject
Modify
Participants comments Should avoid duplication with statutory
accounts. Adopt only those important contents which are
not covered under statutory account and moremeaningful for investors.
Statutory accounts aregoverned by the law of thejurisdiction in which the fund orinvestment company isestablished, together with theinvestment agreement and/or
constitutional document of thefund.
The content of statutoryaccounts is not therefore thesubject of the reportingguidelines. The reportingguidelines are designed tocomplement and enhance therequirements of laws regardingthe format and content of thestatutory accounts.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
RESULTS
EVCA Guidelines :
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2. IVCA Survey Results: Reporting & TemplatesGeneral considerations
18
0
1
Accept
Reject
Modify
Participants Comments
Instead of combined statements,individual statements would behelpful, considering that there are
not more than 10-15 investmentsfor a fund.
The recommendation onconsolidation of all investmentvehicles is very much useful forLPs.
Relevance : The informationprovided should allow investors tomonitor their individual investment;
Transparency : The informationon all relevant topics regarding the
evolution of the funds performanceshould be communicated toinvestors in a transparent manner;
Consistency : The informationprovided to investors should beconsistent over time.
Question :Should we add Materiality ?
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26 , 2009
EVCA Guidelines :
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b. IVCA Survey Results: Timing
7
0
12
Accept
Reject
Modify
Participants comments :
Quarterly report would be preferable. 120 days for calendar year
Fund level info. Should be included in allreports.
Reporting should be quarterly and unaudited.Only once audited figure to be provided in 90days.
For full year, 90 days period is required
Should be annual (difficult to get debt numbersfor listed companies to get fair value).
Quarterly should be for 45 days (unaudited) &annual should be 90 days (audited).
It should be quarterly (within 60 days) becausethere is so much volatility in the market, itshould be reported quickly.
Requirement : Reporting shouldbe undertaken semi-annuallywithin 60 calendar days (half year)and within 90 calendar days (fullyear) after the end of the reportingperiod. The extent to which theinformation is required to be
audited will be determined by thecontractual arrangementswith theinvestors.
Recommendation : Reportingshould be produced quarterly withfund level information within 45calendar days (quarter) and within60 calendar days (full year). It isleft to the discretion of the fundmanager to extend its quarterlyreporting to portfolio companylevel information.
MODIFY
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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c. Fund Reporting
Fund Overview
Executive Summary *
Fund Summary *Cash Flow Schedule and Net IRR Calculations*
*Most of the participants indicated that they doprepare reports on these topics for their LPs.
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c. IVCA Survey Results: Fund Reportingi. Fund overview
16
0
3
Accept
Reject
Modify
Participants comments
Give details of management fee / Hurdlerate / carry fixed closing date. Informationabout compliance of statutoryrequirements may be given.
Include information / changes ininvestment team.
Fund Overview ref. C,D
First Closing Date : 30 June 2003Vintage year : 2003
Total commitment : 1 billion
Term : 10 + 2 years
Investment period : 5 years i.e. end of June08
Funds domicile : Jersey
Legal form : Series of limited partnerships:- EVCA Fund A 400 million- EVCA Fund B 250 million- EVCA Fund C 350 million
Structure : One GP & 10 LPs.
Investment focusby stage : Generalist fund :
- Early stage- Development Capital- Buyout investments
Investment focusby geography : Northern Europe including the UK.
Question : Should wemention managementfee and hurdle/carry structure ?
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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ii. IVCA Survey Results: Executive Summary
15
0
4
Accept
Reject
Modify
Participants comments Number of portfolio companies to be
mentioned. NAV per unit, if applicable.
State of the economy/industry in fewlines could form part of the ExecutiveSummary.
Fund Update and Overview :As of 31 December 2005, the Fundhad drawn down 118 million or11.8% for follow-on financing in
those companies where the fundhad invested in an early round offinance. The Fund hadcumulatively returned 200 millionin distribution to Limited Partners(20% of committed capital) and had
a remaining value of 590 million.The net IRR to Limited Partners at31 December 2005 was 19.9%.
MODIFY
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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Executive Summary (contd)
Executive Summary (ref. C 2)
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iii. IVCA Survey Results: Fund Summary
13
0
5
Accept
Reject
Modify
Participants Comments
Multiples to investors break-up not required.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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iv. IVCA Survey Results: Cash flow schedule and Net IRR calculations
15
3
1
Accept
RejectModify
Participants comments
IRR & Multiples alreadygiven in summary.
It can be a lengthy reportover the life of the fund.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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d. Portfolio Reporting
Realization Summary
Current PortfolioSummary
Portfolio Companies
Funds Investment
Most of the participants indicated that they already prepare reportsalong these lines for their LPs.
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d. IVCA Survey Results: Portfolio reportingi. Realization Summary
17
2 0
Accept
Reject
Modify
Participants' comments All these details get covered in portfolio
summary & portfolio company details.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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ii. IVCA Survey Results: Current Portfolio Summary
19
0
0
Accept
Reject
Modify
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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iii. IVCA Survey Results: Portfolio Companies
17
2 0
Accept
Reject
Modify
Participants comments Original date of investment by LP. Key
contact person in portfolio company.
Brief note on the promoters on theportfolio companies could be helpful.
Amount committed should also bementioned.
Question : Should we mentioncommitment amount ?
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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iv. IVCA Survey Results: Funds Investment
16
3 0
Accept
Reject
Modify
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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e. Capital Account
Individual Investor Own Capital Account
All Investors Capital Account
Most participants indicated that they normally prepare thisreport for their LPs, but the cumulative operating income and
expenses column is generally not shown.
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e. IVCA Survey Results: Capital accounti. Individual Investor Own Capital Account
15
1
3
Accept
Reject
Modify
Participants comments
Not date wise and in 2 parts-inception & qtr.
Can give summary of fundperformance till date.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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ii. IVCA Survey Results: All Investors Capital Account
116
2
Accept
Reject
Modify
Participants comments Giving information on other investors would
be helpful (e.g. commitments, drawdown,redemption etc.
Confidentiality should be maintained. Details of other investors should not be
disclosed. This is a mathematical calculation which is in
same ratio for all investors. Does not makeany sense for analytical purpose. Redundant data. Duplication of work plus
confidentiality issues. Should include, allocation / distribution of use
of funds called, by investment company, bycategory (e.g. management fee, legal etc.).
This is irrelevant since all LPs are pro-rata;their share in the fund.
MODIFY
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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f. IVCA Survey Results: Fees & carried interest
14
4
1
Accept
Reject
Modify
Participants comments
Does not have any analyticalvalue.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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3. IVCA Survey Results : Performance Measurement
18
1 0
Accept
Reject
Modify
Participants comments
Gross and Net is fine.
Only 2 IRRs should be there.Gross and Net combined forrealized and unrealizedinvestment.
ACCEPT
Source: IVCA GP-LP Dialogue, Feb 26, 2009
EVCA Guidelines :
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IRR #1
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IRR #2 (Breaking IRR #1 Into Two Parts)
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IRR #3
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IVCA members would like to enhance EVCA Guidelines as follows:
1. General considerations
Materiality
2. Fund overview
Management fee Hurdle and carry pattern
3. Fund summary
NAV per unit, if applicable
Number of portfolio companies
4. Portfolio company
Commitment amount
FINAL COMMENTS
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1. General Considerations : The requirements are followed in India
2. Fund Reporting :
Overview: Very familiar and common in India Executive Summary : Generally given Fund Summary : Generally given
3. Portfolio Reporting : Current Portfolio Summary : very common
Portfolio company : quite common
4. Capital Account Individual investor owned capital account : commonly done
but the cumulative operating income and expenses columnis missing
Some EVCA Guidelines already being followed in India.
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For feedback, please write to :[email protected]
mailto:[email protected]:[email protected]