Costs of indenminifying the PE promoters in the VCC ircle round up in mint highlight the indeminity clause which demands buyback by the promoters after 5 years ar a deal that fialed because of an ant bribery clause even as exits come closer to the price of investing itself globally and the political risk counted among the world's banana republics for much in demand Indian cart start ups and others in power and infrastructure. while global finance is primarily required thru debt and venture in PIPE or plain vanilla infrastructure deals, too, start ups are increasingly signing traps for themselves in contracts with their PE promoters.

Indeminty covering losses and liabilities had been enoughtfor the regulators to shy away from counting PE inputs as equity, preference being classic debt in indian law, the demands for interest and "clawback" for graft, canceling of licences, withholding of taxes and all litigation costs being excluded from the computation oft he VC/Pe's profit, making it more and more ike a bonded warehouse, to woot yet without any effective revenues or payback for the VC involved and adding costs in the name of safeguarding the quasi promoters' interests.

Nominee/ Executive Directors on board the investment also have to be indeminified, PE initiated Environmental clauses and checks on ERP  and monthly reports a part of the process. Bank guarantees for a startup to complete the requirements of indemnification are due discouragement from lying about one's prospeects and though mint mentions a ine year deal closure period, it looks like a prospective play has to be around for 3-4 years just to sort out its investors plus the 5 year it has to put in as operational performance, with competing investments willing to pay 100% indeminification than part indemnity as earlier. 

Posted via email from The India Investment Post