Index Methodology

Understanding how the India Venture Index is constructed and calculated

Overview

The India Venture Index (IND-V) is a benchmark index tracking the performance of Indian "New Economy" (Startup/Tech) companies listed on the stock exchanges (NSE/BSE). The goal is to track how Indian VC-backed startups perform as an asset class.

Data Source: NSE/BSE, Company Documents, Google Finance, and Gemini

Base Date

January 1, 2021

Base Value

100.00

Universe

~30 Companies

Construction Rules

1. Universe Selection

The index applies a straightforward selection criteria: companies that have raised more than $10 million in venture capital funding and completed their public listing after January 1, 2021. This currently encompasses approximately 30 VC-backed Indian companies including Zomato, Paytm, Nykaa, PolicyBazaar, Delhivery, and other new-economy firms listed on NSE/BSE.

Note: If you believe a company meeting these criteria has been excluded, please bring it to our attention.

2. Weighting Methodology

The India Venture Index uses Total Market Capitalization weighting, where each company's weight is proportional to its total market cap.

Note: This differs from Nifty 50, which uses Free-Float Market Capitalization. The IND-V methodology includes all shares (including promoter holdings) to reflect the total value of the startup ecosystem.

3. Capping & Rebalancing

The index currently implements no capping mechanism. The aggregate market capitalization is directly scaled to determine the index value, preserving natural market-cap weighting across all constituents. No periodic rebalancing is currently performed.

Calculation Logic

"Same Store Growth" (Chain-Link Method)

The index uses a "Same Store Growth" approach to prevent artificial spikes when new companies list. This means we only measure growth from existing companies, not from adding new ones.

New companies are included in the index calculation starting from the month after their listing. This gives the stock time to stabilize and ensures we're tracking meaningful performance. Once included, their market cap movements affect the index value using the same store growth method.

Example:

Let's say on March 31st, the index has 3 companies with a total market cap of ₹100,000 crores, and the index value is 150.

April 30th - No new listings:

• The same 3 companies now have a total market cap of ₹110,000 crores (10% growth)

• Index value = 150 × (₹110,000 / ₹100,000) = 165

May 31st - New company lists:

• The 3 existing companies grow to ₹115,000 crores

• A new company (Company D) lists on May 15th with ₹20,000 crores market cap

• Total market cap = ₹135,000 crores

• Index value = 165 × (₹115,000 / ₹110,000) = 172.5

Note: We exclude Company D's ₹20,000 crores from the growth calculation. It gets added to the total market cap but doesn't inflate the index on day one.

June 30th - New company now included:

• The 3 original companies grow to ₹120,000 crores

• Company D (listed in May) grows to ₹22,000 crores

• Total market cap = ₹142,000 crores

• Index value = 172.5 × (₹142,000 / ₹135,000) = 181.4

Note: Now Company D is included in the calculation since it's been more than a month since listing. Its growth from ₹20,000 to ₹22,000 crores contributes to the index movement.

Corporate Actions

The index accounts for various corporate actions including:

  • •Share Count Changes: Acquisitions, QIPs, and fundraises (e.g., Zomato's Blinkit acquisition, Paytm's buyback)
  • •Bonus Issues: Stock splits and bonus shares (e.g., Nykaa's 5:1 bonus issue)
  • •Buybacks: Share count reductions through buyback programs
  • •ESOP Exercise/Issuance: Employee stock option exercises and issuances that change share count

Note: Historical market capitalization has been calculated using share price multiplied by shares outstanding. Due to the complexity of tracking all corporate actions and the limited availability of comprehensive historical share count data, minor discrepancies may exist in historical calculations.

Last updated: November 30, 2024