The small units-focused lender Small Industries Development Bank of India (Sidbi) is ready to fund domestic MSMEs to acquire foreign companies, a top official has said.
"We are ready to fund small and medium companies to acquire foreign assets. We will be funding the acquisition value plus the facilitation charges. The money will come from the Rs 600-crore India Opportunity Fund that we have just launched," Sidbi deputy managing director NK Maini said in an interview here over the weekend.
There are many distressed companies in many Asian countries, especially in the Confederation of Independent States and many domestic MSMEs are looking at entering those markets, Maini informed.
The move comes from its successful participation in incubating and propping up start-ups, under which it has also picked up stakes up to 20 percent.
So far, Sidbi has invested Rs 600 crore in 56 domestic companies through its two funds, Rs 100 crore from the first fund and Rs 500 crore from another.
Out of these 56 companies, Maini said, only seven have failed while nearly a dozen of them are 'star performers' (a term used to describe those companies that are giving 15-20 percent returns on investment annually). While the lender on an average has invested in the range of Rs 1 to 10 crore from the first fund, with the average exposure being Rs 3 crore, with the second fund it has on an average investment of Rs 10 crore in each of them while the top-end being Rs 40 crore, Maini said.
Typically, Sibdi lends at 11.75-13.5 percent, a tad lower than that of commercial banks, Maini said, adding however the problem is that out of the Rs 2.5-trillion that the sector need, the annual fund flow from commercial banks is only around Rs 30,000 crore for the sector as a whole.
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The Sidbi Amendment Bill, introduced in Parliament in May, is expected to empower the state-lender to take quick action against defaulters and enable speedy disposal of such cases. The Bill would streamline the procedure for recovery of loans by Sidbi and also seeks to confer powers on its board to specify the investment limit for small units.
The other changes in the legislation include substitution of the term 'small scale industry' with MSME, while the amendment will also empower it to render financial assistance by way of venture capital, risk capital, factoring and discounting.
When asked whether the lender has any plans to stay invested in these companies with the SME exchanges in place, Maini said, Sidbi is looking at quitting all those companies in which it had invested a decade or so ago. Maini said the 22-year-old Sidbi, which is planning to raise an additional Rs 17,000 crore from different lines of credit this fiscal, recently revamped its business model as part of its attempt to reposition itself in MSME sector.