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SIDBI planning to commit ₹675 crores from Fund of Funds to 10 alternate investment funds

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The Small Industries Development Bank of India (SIDBI) is pumping more money to support startups from its Fund of Funds for Startups (FFS), at least according to a report in ET. SIDBI will review ten proposals from alternate investment funds on July 12 in Mumbai. These funds have asked for a commitment of Rs 675 crores from SIDBI.

A committee of SIDBI Venture Capital Investment (SVCL) will review the proposals and present its recommendations in front of SIDBI board on Tuesday.

Commenting on the same, Chairman Kshatrapati Shivaji said,

We are taking 10 proposals, seeking commitment for Rs 675 crore with a total corpus of approximately Rs 4,200 crore, for in-principle clearance from the Venture Capital Investment Committee. The process will be held on July 12 in Mumbai.

This committee comprises of prominent individuals like Infosys CFO Mohandas Pai, Indian Angel Network founder Saurabh Srivastava, former Nasscom chief Kiran Karnik Harkesh Mittal among others.

Notably, SIDBI does not invest directly in startups. Its wholly owned subsidiary — SIDBI Venture Capital (SVCL) — invests in startups. The govt. body in its role, supports venture funds which in turn invest directly in startups. Some of these startup focused funds include Yournest Angels, India Quotient, Blume Ventures, Ivycap, and Orios Venture Partners.

Fund of Funds for Startups

Earlier this year, the govt. body had raised a corpus of 10000 crores from under the Startup India plan. The government has already released a sum of 500 crores from that corpus for this financial year. Another 600 crores will be released in the next financial year.

Out of 500 crores, SIDBI has already invested a sum of Rs 168 crore so far to six alternative investment funds. As on May 31, 2016, it had supported a total of 95 funds. Among these funds, 47 target the startup sector where as others invest in startups as well as growth stage companies including MSMEs.

SIDBI has committed a sum of 895 crores out of 7522 crore corpus of 47 funds targeting startups. It typically contributes up to 25 per cent of the corpus and remaining funds come from other sources like high net worth Individuals (HNIs), corporates, other institutions.

However, alternate investment funds (AIF) need to meet certain conditions to raise funds from the Fund of Funds. They need to register with SEBI under AIF Regulations, 2012, and should have a fund term of up to 10 years as and a commitment of up to five years.

Moreover, AIFs with a corpus up to 500 crores need to invest 50% of the corpus or twice the SIDBI’s contribution, whichever is more. Similarly, AIFs with more than 500 crores corpus have to invest Rs 250 crore or twice the contribution of Sidbi, whichever is more.

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