Sidbi's VC investment panel commits Rs 300 crore in 9 funds

Sidbi has doubled its fund of funds operations in FY17 to Rs 1,112 crore, supporting 30 funds

In its seventh meeting on February 11, 2017, SIDBI’s Venture Capital Investment Committee (VCIC) examined requests from 11 fund managers and sanctioned requests from 9 funds aggregating Rs 300 crore, the lending institution said in a press statement Sunday night.

The names of these funds and money sanctioned to each of them were not disclosed by SIDBI, but in reply to an RTI from Business Standard, it had disclosed in early-February that it had disbursed Rs 110 crore to four funds: Orios Venture PartneRs Fund II (Rs 50 crore), Kae Capital (Rs 45 crore), funds, Saha Trust (Rs 10 crore) and Kitven Fund III (Rs 5 crore).

SIDBI manages several fund of funds, including the Rs 10,000 crore fund of funds for start-ups. As a manager of these funds, it had constituted a VCIC which includes experts like Mohandas Pai, Sanjeev Bikchandani, Saurabh Srivastava, H.K.Mittal, Prof. Vaidyanathan, Kiran Karnik.

SIBDI has seen a surge in the fund of funds operations as seen from the number of funds supported by SIDBI during the current FY. During FY15 and FY16, sanctions were made to 11 funds (Rs 314 crore) and 16 funds (Rs 607 crore), respectively while the number during the current FY has already crossed Rs 1112 crore to 30 funds.

The government had announced establishment of Rs 10,000 crore fund of funds to support AIFs who invest in Startups. This money will be released spread over two finance commission cycles (14th and 15th till 2025) based on the scheme’s progress. An amount of Rs 500 crore has been released so far to SIDBI which is managing the programme. 

It may be added that SIDBI is also operating various other fund of funds programmes by  investing in MSMEs and start-ups– India Aspiration Fund  (IAF) launched formally by Finance Minister Arun Jaitley in August 2015, ASPIRE Fund focused on agri and rural enterprises launched by Jaitley for MSME last year and Rs 200 crore on behalf of LIC. 

Out of the those cleared earlier by VCIC, SIDBI has so far accorded formal sanction, for an aggregate contribution of Rs 1,619.25 crore after undertaking detailed appraisal and due diligence (including Rs 1580 crore under IAF/FFS and Rs 39.50 crore under ASPIRE). Operations under IAF and FFS are complimentary as both target startups and the exact coverage depends on the status of compliance to the guidelines under these funds at the time of signing of the contribution agreements.

FFS initially focused on motivating AIFs to float schemes which will invest in startups alone. With difficulties expressed by the industry in this regard, the government is re-examining the issue. With the modification proposed, coverage under FFS is expected to stand at around Rs 600 crore in respect of 15 AIFs by March 31, 2016.

These programmes are serving the objectives with which these funds were formed. For example under IAF based on the drawals of Rs 177 crore made, the investments by the supported funds are reported to be in 124 MSMEs/Startups for an aggregate support of Rs 452 crore.

Thanks to the rise in AIFs supported under the above programmes, there is significant investment happening in startups as well, with current year expected to close with around 150 startups receiving Rs 588 crore. This is expected to grow fast in the next year as investments by AIFs supported pickup.  The investment in startups by the 15 funds as aforesaid is likely to investment approximately Rs 187 crore in startups by March end.

AIFs have a long investment / divestment cycle of 7-10 years with investments beginning a good 6-9 months (or longer) after an AIF gets its approval from SIDBI and scales gradually thereafter. It is expected that the investment in startups by the Funds supported under FFS may cross Rs 1200 crore over next twelve months as they raise the balance contribution from other investors and pick up the pace of investing.