And how much does he need to pay the syndicate, and how much will go to the Long Term Capital Gain (LTCG) tax?
Here is a simple example I shared with him.
Seed Stage Dynamics:
- Let’s say the Investment Amount is INR 10 lakh
- Post-money valuation of the company= INR 15 crore
- Ownership %= INR 10 lakh/ INR 15 crore= 0.6667%
Series A Dynamics:
- Dilution %= 20%
- Angel Investor’s ownership%= 0.6667%*(1-20%)=0.533%
Series B Dynamics:
- Dilution %= 20%
- Angel Investor’s ownership %= 0.533%*(1-20%)= 0.427%
Exit Value= INR 200 crore
Angel Investor’s ownership value= INR 200 crore* 0.427%= INR 85.33 lakh
Profit= INR 85.33 lakh- INR 10 lakh= INR 75.33 lakh
Carry@20% for the Syndicate= INR 75.33 lakh*20%= INR 15.07 lakh
Net Income before Tax= INR 85.33 lakh- INR15.07 lakh= INR 70.26 lakh
Angel Investor Taxable Income= INR 70.26 lakh- INR 10 lakh= INR 60.26lakh
- LTCG Revised Rate without Indexation= 12.5%
- LTCG Value= INR 60.26 lakh*12.5%= INR 7.53 lakh
If we consider the LTCG rate with surcharge and cess 15%, then LTCG value is= INR 60.26 lakh*15%= INR 9.04 lakh
In this calculation, I have considered the LTCG rate as 15%
Net Income after Tax for Angel Investor= INR 70.26lakh- INR 9.04lakh= INR 61.22lakh
Return on Investment= INR 61.22 lakh/ INR 10 lakh= 6.12X
Believe this will give you an idea.
If you need this simple Excel sheet, feel free to message me.
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