SEBI notifies rules for angel investors
The new norms would help in encouraging entrepreneurship in India by financing small start-ups at a stage where they find it difficult to obtain funds from traditional sources of funding such as banks or financial institutions
Market regulator Securities and Exchange Board of India (SEBI) on Monday notified new norms for angel investors, who provide funding to companies at their initial stages. With the new norms, SEBI aims to encourage entrepreneurship in the country by financing small start-ups.
Angel investors are allowed to be registered as alternative investment funds (AIFs) — a newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds, a gazette notification said.
In order to ensure investment by angel funds is genuine, the SEBI has restricted investment by such funds between Rs50 lakh and Rs5 crore.
Among other norms included, angel funds can make investments only in those companies which are incorporated in India. These funds needs to be invested in a firm for at least three years, can invest in companies not older than 3 years.
Further, investee company needs to be unlisted and with a maximum turnover of Rs25 crore and this firm may not be related to a group with a revenue of more than Rs300 crore.
Angel funds are required to have a corpus of at least Rs10 crore and minimum investment by an investor should be Rs25 lakh.
SEBI said, “The manager or sponsor shall have a continuing interest in the angel fund of not less than 2.5% of the corpus or Rs50 lakh, whichever is lesser, and such interest shall not be through the waiver of management fees”.
The regulator also stipulated that the fund must not have any family connection with the investee company and that no angel fund scheme have more than 49 investors.
In his budget speech, finance minister P Chidambaram had announced that SEBI would frame guidelines for angel investor pools by which they can be registered under AIF venture capital funds (VCF).
Under SEBI guidelines, AIFs already have sub-categories such as Venture Capital Funds, Social Funds and SME Funds.
Angel fund is likely to be a separate sub-category.
Regarding raising of funds by an individual investor, the person need to have an experience of 10 years and should possess assets of at least Rs2 crore.
In case an investor is a corporate entity, it need to either have a net worth of Rs10 crore or registered as AIF/ VCF with SEBI.
Here are the salient features of angel fund norms...

a. Angel Funds have been included in the definition of 'Venture Capital Funds' and a separate Chapter has been inserted specific to such funds. Angel funds shall raise funds only from angel investors. 
b. In view of the high-risk investments of such funds, certain conditions have been imposed on investors. For instance, individual angel investors shall be required to have early stage investment experience/ experience as a serial entrepreneur/ be a senior management professional with 10 years’ experience. They shall also be required to have net tangible assets of at least Rs2 crore. Corporate angel investors shall be required to have Rs10 crore net worth or be a registered AIF/VCF.
c. Angel Funds shall have a corpus of at least Rs10 crore (as against Rs20 crore for other AIFs) and minimum investment by an investor shall be Rs25 lakhs (may be accepted over a period of maximum three years) as against Rs1 crore for other AIFs. Further, the continuing interest by sponsor/manager in the Angel Fund shall be not less than 2.5% of the corpus or Rs. 50 lakhs, whichever is lesser.
d. For ensuring investments are genuine angel investments, angel funds shall invest only in venture capital undertakings which are not more than three years old, have a turnover not exceeding Rs25 crore, are not promoted, sponsored or related to an Industrial Group whose group turnover is in excess of Rs300 crore, and have no family connection with the investors proposing to invest in the company. 
e. Further, investment in an investee company by an angel fund shall be not less than Rs50 lakhs and more than Rs5 crore and shall be required to be held for a period of at least three years. 


Sensex, Nifty possibly headed lower: Monday closing report

A close below 5810 will be the first sign of correction for Nifty

On Friday (13th September), we had suggested that the Nifty was losing momentum and a close below 5805 would signal that a decline has started. Today, Nifty sold off sharply from the high it hit today morning and went below 5800 but bounced back and closed a tad lower than Friday. A close below 5810 tomorrow will be the first sign that a decline is about to begin.

The domestic indices opened on a positive note on the back of Larry Summers withdrawing his nomination to lead the US Federal Reserve (US Fed). The strong opening all over Asia apart from India, was used by market players to sell. The selling was compounded when latest inflation turned out to be higher than expected.

The BSE 30-share Sensex opened at 19,977 while the Nifty opened at 5,930. Soon they hit their respective intra-day highs of 20,086 and 5,957, highest since 25 July 2013. The indices were pulled into the negative, post the announcement of inflation data. The indices hit the low of 19,596 and 5,798 in early afternoon. The benchmark tried recovering from the low. While Sensex barley managed to close in the positive, the Nifty ended marginally lower. The Sensex closed at 19,742 (up 10 points or 0.05%) while the Nifty closed at 5,841 (down 10 points or 0.17%). The National Stock Exchange (NSE) recorded a volume of 66.10 crore shares.

The top five gainers among the other indices on the NSE were Bank Nifty (1.85%); Finance (1.29%); Consumption (0.49%); PSE (0.46%) and Auto (0.45%). The only five losers were Pharma (2.48%); Realty (2.33%); MNC (1.92%); IT (1.90%) and Metal (1.20%).

Of the 50 stocks on the Nifty, 18 ended in the green. The top five gainers were BPCL (3.88%); IndusInd Bank (3.75%); Maruti (3.50%); I C I C I Bank (2.98%) and Bharti Airtel (2.87%). The top five losers were Ranbaxy (30.03%); BHEL (5.11%); HCL Technologies (4.95%); UltraTech Cement (4.12%) and Sesa Goa (3.94%).

The annual rate of inflation, based on the monthly wholesale price index (WPI), accelerated to 6.1% in August 2013, from 5.79% in July 2013, according to data released by the government today. A surge in primary food articles inflation to 18.2% in August 2013 from 11.9% in July 13 mainly contributed to increase in inflation during August 2013. Meanwhile, the government revised the rate of WPI inflation for June 2013 to 5.16%, from the 4.86% reported earlier.

Build up inflation rate in the financial year so far was found to be 3.91% compared to a build up rate of 4.35% in the corresponding period of the previous year.

The market now awaits the US Fed move on tapering of the stimulus at the meeting to be held on 17 September and 18 September 2013 and Reserve Bank of India's mid-quarter monetary policy review on 20 September 2013.

HSBC downgraded Indian shares to "underweight" from "neutral", citing the recent rally and downside risks to growth. The bank says that after the recent bounce, India looks relatively expensive and is most exposed to growth adjustments. HSBC adds that it expects GDP forecasts to decline and earnings growth forecasts to follow.

US indices closed in the positive on Friday in spite of the average retail sales report and a disappointing read on consumer sentiment. The consumer sentiment reading in September issued by Thomson Reuters and the University of Michigan was 76.8, down from the 82.1 reading in August.

The US and Russia announced a deal on Saturday, 14 September 2013, for Syria to destroy its chemical-weapons stockpile by the middle of 2014. The agreement halted preparation for a possible US attack on Syrian government targets in retaliation for the apparent use of chemical agents on civilians last month.

Except for Shanghai Composite (down 0.22%) and KLSE Composite (down 0.09%) all the Asian indices closed in the positive. Jakarta Composite, top gainer, up 3.35%.

European indices were trading in the positive and the US Future was trading a 1% higher.


E-Insurance launched; IndiaFirst offering demat for all policies

IRDA's Insurance Repository System is going online. Insurers will save money with the green initiative due to less paperwork, mailing and one-time KYC. But will they pass on the savings to customers?

In a move to lower the costs for insurance companies and bring transparency to policyholders, finance minister P Chidambaram on Monday launched the Insurance Regulatory and Development Authority (IRDA)'s  Insurance Repository System (IRS). The System will help insurers to save costs on printing and dispatching policies.

IndiaFirst Life Insurance is amongst the first to offer all life insurance policies in demat format. Its press release states, "The electronic insurance account will do away with the need for KYC norms like address and identity proof for every purchase and will bring in all the benefits of demat to the insurance business, including automatic reminders for premium."  

According to IRDA's senior official, Life Insurance Corp of India (LIC) spends Rs600 on storing each policy. With e-insurance, insurance companies will save crores of rupees every year on storing of physical insurance documents, mailing and repeat KYC. According to IndiaFirst press release, "Insurance companies will have a huge cost incentive in encouraging customers to hold their policies in electronic form."  But, will the savings be passed to policyholders with increased bonus or lower premium? Unlikely, because insurance companies will be paying the 'insurance repositories' for maintaining the data in an electronic format. The savings on dematerialisation of stocks has not been passed on to customers (i.e. shareholders), so why would it be any different this time?

According to Dr P. Nandagopal, CMD, IndiaFirst Life Insurance, "Going forward, we will also implement the demat format for low cost plans especially micro insurance.  In these cases the costs saved will automatically be transferred to the customer.  This will be taken into consideration while designing the plan itself."

IRDA recently said that five companies have been given the status of insurance repositories and are provided with a licence that will be valid till 31 July 2014. Insurers can enter into agreements with one or more repositories. The five companies are: NSDL Database Management Limited, Central Insurance Repository Limited, SHCIL Projects Limited, CAMS Repository Services Limited and Karvy Insurance Repository Limited.

The repository will give a unique number to every individual and all his life insurance policies will come under that account. The IRS will also have digitised non-life insurance policies soon. The data maintained by the repository will include history of the claims of the individual. It will also have the names of the beneficiaries, assignees and nominees. There is no trading of insurance policies in demat form and, hence, this facility may be of limited use for the customer.

Procedure for opening an e-Insurance account:

    Download the e-Insurance Account opening form from the IndiaFirst website
    Fill the form and provide the KYC documents (attested)
    Send the filled e-Insurance Account application form to IndiaFirst
    e-Insurance Account form will be sent to the respective IR (Insurance Repository) by IndiaFirst
    IR (Insurance Repository) will generate the e-Insurance Account number on the basis of information in the account opening form and inform the e-Insurance Account number to IndiaFirst Life
    IndiaFirst will credit the policy information in electronic form against the customer e-Insurance account on IR portal
    IR will intimate customer on successful upload of his policy in e-Insurance account




3 years ago

AlankitGroup:-Very Useful information on E-insurance.


4 years ago

There appears to be a clear cut case for payment on interest on monthly basis as interest is charged on loans and advances on monthly basis. By applying the same yardstick it is anybody's guess why interest is not paid monthly

manish wani

4 years ago

Why one more unique number? The AADHAR number should have been used for the unique identification and all policies could have been linked and stored in the repository under that number.
This would have been one more incentive to have a AADHAR number. Henceforth, for any such activity one option should be to link to AADHAR number till the time that everybody gets it and after that it should be the only number which should be used everywhere.

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