11 April 2005 | News
How
different is the SME Growth Fund from SIDBI's NFSIT?
The Small Industries Development Bank of India (SIDBI) has been disbursing
funds through its branch offices across India. In 1999, SIDBI set up a first
national venture fund called National Fund for Software and IT Industry (NFSIT).
This was the first sector-specific fund with a corpus of Rs 100 crore set by
SIDBI in association with IDBI and the Ministry of Communications and
Information Technology. SIDBI accounted for 50 percent of the total
contribution, IDBI for 30 percent and the rest coming from the Ministry. This
was a 10-year fund and we have invested in 25 software, ITES and IT companies.
In October 2004, we launched another fund called SME Growth Fund. It is general
fund with focus on growing sectors such as life sciences, clinical research,
biotechnology, retailing, light engineering, food processing, information
technology, infrastructure-related services, healthcare, logistics and
distribution, other than IT and software. The fund has a targeted corpus of Rs
500 crore with a life of eight years. SIBDI has committed Rs 100 crore while
other banks have committed Rs 375 crore. The banks include State Bank of India
and Punjab National Bank (Rs 100 crore each), Bank of Baroda and Oriental Bank
of Commerce (Rs 50 crore each), Corporation Bank, Bank of India and Union Bank (Rs
25 crore each). We will be closing this fund within a month's time and
announce the total amount that has been raised for the SME Growth Fund shortly.
Have you earmarked funds for each of the sectors you
noted for disbursement?
No, we haven't earmarked any specific amount for each of the focus
sectors. We would look at as many opportunities as possible to these different
sectors under the Growth Fund. Allocation of funds for individual sectors has
not been attempted so far.
Some sectors like the biotechnology have longer
gestation periods. Will such a sector get affected if you run out of funds?
It doesn't happen that way, as the fund (Rs 500 crore) will normally be
invested over the next three-four years. So we wouldn't see such a situation
wherein we run out of the venture capital funds. If we are in such a scenario,
then instead of making the investments over four years, we may end up with two
years and may look at increasing the fund or look at coming out with another
fund. There is that flexibility and we will look at all opportunities that come
up for consideration. Or it also could be the other way round.
What would be the average size of funding?
Our definition of a SME is one whose net investment in plant and machinery
does not exceed Rs 10 crore. Though the government has defined SSIs, it hasn't
strictly defined a SME. Some of the international definitions for SMEs are based
on employment and turnover. SIDBI has been considering SME as an industry where
the net investment in plant and machinery is not more than Rs 10 crore in terms
of depreciation. We are looking at making an investment in the range of Rs 5-15
crore. But we haven't specified the minimum range. Even smaller investments
would be considered, if we look at follow-on investments to happen. We may
consider investments that are lesser than Rs 20 crore for the biotech sector.
Do you have any plans of funding R& D companies?
Pure R&D outfits will not be funded, as the SME Growth Fund is basically
a venture fund. The investors seek return on investments. In biotechnology,
there will always be some component of R&D. But if it is purely R&D, it
will have to be commercialized subsequently. This relates to an early/seed stage
requirement. We are into growth stage and are not investing in seed/early stage
companies. We expect the revenue model to be clear. However, we will also look
at companies that are expanding from early to growth stage.
Have you received any proposals from biotech
companies?
We are looking actively at the biotechnology sector and have got about
five-six enquiries from this space and about three-four proposals are under
consideration. We are also in discussion with APIDC Biotechnology Venture to
pursue investment in this space. We look forward to invest in many biotechnology
companies.