Will govt's $1 bn VC fund for telecom equipment sector help combat China threat?

Given the unquestionable telecom boom that India has been experiencing in the past decade, it is surprising to note that most of the country’s telecom requirements are met through imports. The authorities and the electrical and electronic manufacturershave many a time expressed their security concerns as these imports are mostly from China. The government seems to be stepping up efforts to address the issue.

The_Hindu Business Line_ reports that the National Manufacturing Competitiveness Coucil (NMCC) has proposed an idea to create a billion dollar venture capital fund to encourage indigenous telecom manufacturing, both hardware and software. The Department of Telecom is now considering whether the proposal overlaps with existing schemes.

The article quotes the NMCC note stating: “The fund will invite proposals in a transparent manner and select a few consortia, predominantly 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.”

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[caption id=“attachment_78973” align=“alignleft” width=“380”]  Representational Image. Thinkstock[/caption]

Ventures supported by the fund will receive up to 85 percent funding without management control, the balance being provided by select entrepreneurs in the form of sweat equity.

If the enterprise succeeds and becomes commercially viable then the government fund will hold over 51 percent in equity, to prevent future foreign control. The investment will be written off if the venture fails.

There are talks to bring in venture capital gurus like Sam Pitroda and Vinod Khosla to be part of the fund.

Read the entire_Business Standard_article here.