After working as a small fund in its two-decade-old existence, Bangalore-based Canbank Venture Capital Fund is planning to grow big with a new fund of Rs 1,000 crore in the next financial year.
Canara Bank promoted CVF closed a Rs 500-crore fund named “Emerging India Growth Fund” (EIGF) last month. It has roped in 18 banks. Canara Bank was the anchor investor for fund launched in June.
Its director D S Anandamurthy told Business Standard there was substantial contribution from public sector banks, financial institutions and insurance companies. CVF will scale up its activity level in the future and the size of the next fund would be larger. It would be floated after completing investments from EIGF.
One banking sector analyst said banks are not forthcoming to commit large sums for venture funds due to stiff regulatory norms. Reserve Bank of India would consider such investment as exposure to the capital market, which is a sensitive sector attracting higher risk weights. Plans are also afoot to link capital market exposure to the capital adequacy of banks.
EIGF shall invest in diverse sectors. The prime focus shall be on extending assistance to units in the micro, small and medium enterprises (MSME) sector and investments in industries with outlook.
Murthy said a very small portion of the EIGF corpus would be set aside for start-ups. The venture fund has already sounded out investor banks to refer proposals of their MSME clients who need capital to scale up operations. The fund intends to complete the investment by the end of this fiscal.
According to Venture Intelligence, a firm focusing on private equity and M&A transactions in India, the cumulative investment in 2010 is pegged at $6,566 million (across 231 deals), more than twice the $2,502 million invested (across 179 deals) during the same period in 2009.
