CanBank partners six banks to launch VC fund

Canara Bank, in association with six other nationalised banks, has announced the launch of a Rs 55 crore venture capital fund, Bharath Nirman Fund.

This is the fourth and largest fund from CanBank Venture Capital, with its earlier three funds raising in all Rs 57 crore.

The focus of the fund will be on investing in emerging Indian businesses in ITPO, telecom, biotechnology, healthcare, pharmaceuticals, engineering, auto and auto components, textiles, infrastructure-led sectors and domestic demand driven segments. Canara Bank has made a contribution of Rs 15 crore for this new fund, and the remaining is being pooled from Vijaya Bank, Oriental Bank of Commerce, Allahabad Bank, Corporation Bank, Indian Overseas Bank and Small Industries Development Bank of India.

Said M B N Rao, CMD, Canara Bank: "This is a maiden venture formed at the initiative of six banks and SIDBI for promoting entrepreneurship, to give an impetus to the manufacturing and services sectors in the country."

The business environment in India today presents "a vast potential for venture capital and the outlook for industry is bright as several India-focussed funds have been launched recently and we will exploit the potential," he said.

The period of maturity of the fund is eight years and the average size of investment is targetted at Rs 5-10 crore. Rao further added that CanBank Venture Fund may also look at setting up a dedicated infrastructure fund with a corpus of around Rs 100 crore.

"Higher returns and new investment opportunities now available in India are expected to give a thrust to investment in Indian companies this year. The growth is likely to continue given the robust economy, healthy stock market and rising domestic demand," Rao added explaining the logic behind the fresh thrust.

The fund is being launched at a time when venture capital and private equity investments in Indian companies have surged as the Indian economy has emerged among the fastest growing economies in the world over the past two years.

In 2004 VE/PE investment in Indian firms totalled $1.1 billion, up 42 per cent over $774 million of 2003. The amount has already been exceeded in the first nine months of 2005 with an $1.3 billion investment.

Added Rao: "We are looking at exits in a 3-5 year period and so far in the three existing funds we have made 46 successful exits from the 61 companies we have invested in. We will continue to invest smartly in emerging companies."