SBI, Japanese firm plan $100 mn fund

State Bank of India (SBI) and SBI Holdings, part of Japan's financial services provider SBI group, are setting up a $100 million venture fund for investing in unlisted Indian companies.

A senior SBI official said, "We have reached an understanding on the formation of the fund, which will be managed jointly. The modalities will be worked out soon and the venture fund is expected to start operations in the next 2-3 months."

This is first of the three venture funds SBI is planning to set up in partnership with global companies. Two more such tie-ups are expected to be announced in the next couple of months.

The venture fund being set up with the Japanese entity would invest in unlisted companies including in the information technology, pharmaceuticals, infrastructure and manufacturing sectors.

The proposed venture fund would look at enterprises in the knowledge economy space including biotech industry. The Japanese partner may establish a special purpose vehicle in a tax efficient country for the collaboration.

SBI Holdings, an entity listed on the Tokyo Stock Exchange, has five core businesses "� asset management, brokerage & investment banking, financial services, real estate, and life related network.

India's largest commercial bank has already established SBI Venture, a venture capital company, as a fully-owned subsidiary of SBI Caps.

The new firm is likely to pick up stake in a host of start-ups and private equity funds in the country as SBI does not want to directly deal with private equity funds. If something goes wrong, the bank's balance sheet would not get exposed.

SBI has already launched a real estate venture fund in collaboration with Housing Development Finance Corporation (HDFC). It will take equity stakes in real estate projects in the country.

HDFC Property Fund will start with a fund size of Rs 1,000 crore capital, which will be privately placed with banks, insurance companies, corporates and high net worth individuals.