Leasing is a widely used financing solution, enabling

companies to use property, plant and equipment without

incurring large cash outflows at the start. Leasing
arrangements satisfy a wide variety of business needs, from
short-terms assets use to long term assets financing. A lease
agreement is a contract between two parties, the lessor and
the lessee. The lessor is the legal owner of the asset, the
lessee obtains the right to use the asset in return for rental
payments.
Advantages and Disadvantages
 Liquidity – the lessee can use the asset to earn without investing money in the asset. He can
employ his funds for working capital needs;
 convenience – leasing is the easiest method of financing fixed assets. No mortgage or
hypothecation is required. Restrictions involved in long-term borrowing from financial
institutions are avoided. Formalities involved in leasing are much less than in case of
borrowing from financial institutions
 Hidden liability – lease obligations are not reported as a liability in the company’s balance
sheet. On the other hand, loans raised to buy assets are reported as liability. Thus, leasing
helps the lessee to report a better debt-equity ratio;
 time saving – the asset is available for use immediately without loss of time in applying for
the loan, wanting for approval and sanction, etc. Lease rentals can be matched with cash
 no risk of obsolescence – the risk of the asset becoming obsolete due to
technological advancements is borne by the lessor;
cost saving – lease rentals are deductible from taxable income. The lessee
has lower obligation in bankruptcy than under debt financing;
 flexibility – leasing arrangement is more flexible. The rental schedule can
be adjusted to accommodate genuine needs and problems of the lessee
Disadvantages :
 the lessee gets only the right to use the asset.
 In case the leasing company is wound up the asset may be taken
back from the lessee thereby disrupting his operations;
 The lessee cannot make alterations or improvements in the asset
without the prior approval of the lessor.
 the lessee has to pay lease rentals on a regular basis to the
Introduction

A project or activity that The money or fund

involves risk
needed business

The capital invested in a project

in which there is a substantial
element of risk, typically a new
or expanding business.
Venture Capital

• Venture capital is a type of private equity capital

typically provided by professional, outside investors to
new, growth businesses .
• The SEBI has defined Venture Capital Fund in its
Regulation 1996 as ‗afund established in the form of a
company or trust which raises money through loans,
donations, issue of securities or units as the case may be
and makes or proposes to make investments in
accordance with the regulations‘.
 VCFs in India can be categorized into following five groups:

1) Those promoted by the Central Government controlled development finance

institutions. E.g.: - ICICI Venture Funds Ltd.

- IFCI Venture Capital Funds Ltd (IVCF)

- SIDBI Venture Capital Ltd (SVCL)

2) Those promoted by State Government controlled development finance

institutions.

e.g. - Punjab Infotech Venture Fund

:
- Gujarat Venture Finance Ltd (GVFL)

- Kerala Venture Capital Fund Pvt Ltd.

- Orissa Venture Capital Fund

3) Those promoted by public banks.

e.g. : - Canbank Venture Capital Fund

- SBI Capital Market Ltd

4)Those promoted by private sector

companies.

e.g.: - IL&FS Trust Company Ltd

- Infinity Venture India Fund

5)Those established as an overseas

venture capital fund.

e.g.: - Walden International

Investment Group

- HSBC Private Equity

management Mauritius Ltd

What is
Factoring?
• Factoring is a financial transaction and a type of debtor finance in
which a business sells its accounts receivable (i.e., invoices) to a third
party (called a factor) at a discount. A business will sometimes factor
its receivable assets to meet its present and immediate cash needs
TYPES OF
FACTORING

RECOURSE MATURITY CROSS-BORDER INTERNATIONA

FACTORIN FACTORIN FACTORING L FACTORING
G G
 • Up to 75% to 85% of Invoice Receivable is
factored.
• Interest is charged from the date of advance to
the date of collection.

RECOUR • Factor purchase Receivable on the condition

that loss arising on account of non-recovery will
SE borne by the Client.
• Credit Risk is with the Client.
FACTORI • Factor does not participate in the credit
NG sanction process.
• In India, factoring is done with recourse.
MATURITY
FACTORING
• Factor does not make any advance payment to the Client.
• Pays on guaranteed payment date or on Collection Receivables.
• Guaranteed payment date is usually fixed taking into account previous collection
experiences of the Client.
• Nominal Commission is charged.
• No risk to Factor.
CROSS-BORDER
FACTORING
• It is similar to domestic factoring except that there are four parties
A) Exporter
B) Export Factor
C) Import Factor
D) Importer
• It is also called Two-factor system of factoring.
• Where foreign currency is involved, Factor covers exchange risk also.
 Modus Operandi
In securitisation following parties are required;
a] The originator
b] A Special Purpose Vehicle (SPV) or trust
c] A merchant or investment banker
d] A credit rating agency

e] A servicing agent-Receiving & Paying agent (RPA)

f] The original borrowers or obligors.
g] The prospective investors i.e. the buyer of
securities.
INTRODUCTI
ON
Securitization is nothing but liquifying
assetscomprising loans and receivables of
aninstitution through systematic issuance
of financial instruments.

Itis a carefully structured process wherebyloans

and other receivables are
packaged,underwritten and sold in the form of
AssetBacked Securities.
FEATURES OF
SECURITISATION
 Marketability

 Merchantable Quality

 Wide Distribution

 Commoditization

3
SECURITISABLE
ASSETS
 Term Loans

 Commercial Loans

 Receivables From Government

 Vehicle Loans

 Lease Finance

 Mortgage Loans

 Credit Cards Receivables

 First securitisation deal in India between Citibank and GIC Mutual Fund in 1991 for
Rs 160 mn
 L&T raised Rs 4,090 mn through the securitisation of future lease rentals to raise
capital for its power plant in 1999.
 India’s first securitisation of personal loan by Citibank in 1999 for Rs 2,841 mn.
 India’s first mortgage backed securities issue (MBS) of Rs 597 mn by NHB and
HDFC in 2001.
 Securitisation of aircraft receivables by Jet Airways for Rs 16,000 mn in 2001
through offshore SPV.
 India’s first sales tax deferrals securitisation by Govt of Maharashtra in 2001
for Rs
1,500 mn.
 India’s first deal in the power sector by Karnataka Electricity Board for receivables
worth Rs 1,940 mn and placed them with HUDCO.
 India’s first Collateralised Debt Obligation (CDO) deal by ICICI bank in 2002
 India’s first floating rate securitisation issuance by Citigroup of Rs 2,810 mn in
2003. The fixed rate auto loan receivables of Citibank and Citicorp Finance India
included in the securitisation
 India’s first securitisation of sovereign lease receivables by Indian Railway Finance
Corporation (IRFC) of Rs 1,960 mn in 2005. The receivables consist of lease
amounts payable by the ministry of railways to IRFC
 India’s largest securitisation deal by ICICI bank of Rs 19,299 mn in 2007. The
underlying asset pool was auto loan receivables.