Kochouseph Chittilappilly, the founder of V-Guard industries, said he has set up a company called K Chittilappilly Capital Pvt Ltd with the purpose of providing venture funding to entrepreneurs.
In a letter to V-Guard industries, Chittalappilly — who founded V-Guard Industries as a voltage stabilizer maker four decades ago — said the new NBFC is part of his philanthropic efforts.
The company will be in addition to the non-profit entity known as K Chittalappilly Foundation (KCF) that he has already set up to undertake charitable causes.
“KCF had been working over the years in the area of entrepreneurial development,” Chittilappilly said in his letter.
“With a vision to expand this initiative by assisting Entrepreneurs who face shortage of funds to scale up their businesses, by providing credit funds at reasonable rates and terms, we have incorporated a company named K Chittilappilly Capital Pvt. Ltd., which has applied for Certificate of Registration as a NBFC from RBl,” he added
Venture Debt is similar to venture investing or venture capital, except that the entrepreneur is not forced to hand over an equity stake in his company in return for the money.
The non-dilution of equity makes venture debt a far more attractive proposition for entrepreneurs and start-ups.
Despite being simpler, most investors do not like to offer venture debt as failure rates tend to be very high among start-ups.
Given that 9 out of 10 start-ups end up in failure, the investor is virtually guaranteed of losing money if he or she invests in start-ups in the form of venture debt instead of venture capital.
In case of venture capital, even if 9 out of the 10 invested firms go belly up, the profit from the successful venture ends up paying for the failed ones.
The only way to make a venture debt firm successful would be for the lender to be extremely hands-on and lend only after considerable evaluation and examination.
In case of Chittilappily, the idea seems to be to focus on those ventures that have already proven their business model, but need money to expand, going by the phrase “entrepreneurs who face shortage of funds to scale up their businesses” in his statement.
Kochouseph Chittilappily is also setting up an 11 acre park along the Seaport-Airport Road of Kochi.
He said he has sold 4 mln shares, worth around Rs 93 cr, on Wednesday to raise funds for constructing the park, as well as for preliminary activities related to setting up the NBFC or non-banking financial company.
Chittilappilly Square, as the park will be known, is being built to serve as a kind of cultural hub for the city of Kochi.
It will have a “vast public park with a garden, walking and jogging tracks, sports and games areas, a yoga and health club, amphitheatres, an auditorium and multiple halls for social gatherings, a heritage and cultural museum, an exhibition centre, a library and reading room and even a model organic farm.