AMC of Karnataka IT Fund to be privatised

The Karnataka Asset Management Co Pvt Ltd (KAMCO), managers of Karnataka Information Technology Venture Capital Fund (KITVEN), will be privatised shortly.

The company, which has been promoted for supporting IT entreprenuers, currently has two Karnataka State Agencies "" KSIIDC and KSFC "" holding 25 per cent stake each "" besides SIDBI holding the remaining 50 per cent stake.

Senior government sources indicate that privatising the company will give it much more leverage, in the software industry which is growing at a fast clip, without the required procedural delays one could expect from an "government agency".

Said R B Shetty, MD, KAMCO: "KITVEN has been performing pretty well during the past years where we have incubated companies such as RelQ Software which has now grown to be major IT firm focussing on software testing. Our first fund of Rs 15 crore will be drawn down shortly and we are now planning for our second fund which will be around Rs 30 crore. We are not yet sure if the KSIIDC or KSFC will share the same amount of equity when we expand. In this scenario, we will surely look for a private player to be part of our company."

However, Shetty asserted that there has been no interference from any government authorities or agencies in management of the company. He further added that KITVEN is being managed pretty conservatively and is not like "an adventure capital" investing in any kind of IT vertical.

"The process of allocating funds is rigorous and we consciously avoided the dot-coms and now we are avoiding the call centre boom. In addition to this, we adopt a mix of instruments to expose ourselves in companies we invest in, so as to mitigate our risk to minimum. This strategy had yeilded us good benefits so far and we have returned an appreciable 31 per cent back to our shareholders," noted Shetty.

In addition to this, KAM is allowed to invest only 10 per cent of its fund (i.e.) a maximum of Rs 1.5 crore in a company.

"Considering the funds which are required nowadays to expand an IT company, this is not adequate and with our second fund the limit might go up," said Shetty.

About 51 per cent of the Fund woould be invested in small scale industry in the IT sector and as a new avenue, it is also "open to exploring select growth oriented buy-out situations with modest leverage."

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Decks cleared

• Private investor may be brought in
• 31% return for shareholders achieved
• Leveraged buyouts will be considered
• Individual exposure norms may be relaxed