66_Results of Reporting Guidelines Dialogue on Feb 26

8/3/2019 66_Results of Reporting Guidelines Dialogue on Feb 26

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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


General considerations

Timing

Fund reportingPortfolio reporting

Capital account

Fees & carried interest


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


General considerations

Timing

Fund reportingPortfolio reporting

Capital account

Fees & carried interest


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


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


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


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


EVCA Guidelines :


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iv. IVCA Survey Results: Cash flow schedule and Net IRR calculations

15

3

1

Accept

RejectModify


IRR & Multiples alreadygiven in summary.

It can be a lengthy reportover the life of the fund.

ACCEPT


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


EVCA Guidelines :


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ii. IVCA Survey Results: Current Portfolio Summary

19

0

0

Accept

Reject

Modify

ACCEPT


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


EVCA Guidelines :


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iv. IVCA Survey Results: Funds Investment

16

3 0

Accept

Reject

Modify

ACCEPT


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


Not date wise and in 2 parts-inception & qtr.

Can give summary of fundperformance till date.

ACCEPT


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


EVCA Guidelines :


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f. IVCA Survey Results: Fees & carried interest

14

4

1

Accept

Reject

Modify


Does not have any analyticalvalue.

ACCEPT


EVCA Guidelines :


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3. IVCA Survey Results : Performance Measurement

18

1 0

Accept

Reject

Modify


Gross and Net is fine.

Only 2 IRRs should be there.Gross and Net combined forrealized and unrealizedinvestment.

ACCEPT


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]
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66_Results of Reporting Guidelines Dialogue on Feb 26

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