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Last Updated : Nov 19, 2018 05:50 PM IST | Source: Moneycontrol.com

SBI Ventures floats SME, affordable housing funds totaling Rs 750 crore

Both funds are targeting closure in the second half of next financial year (2019-20). SME Fund will be broad-based fund covering manufacturing and services sector.

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SBI Capital Ventures (SVL), an alternative asset management arm of State Bank of India (SBI) group, will float two funds – Rs 400-crore Small and Medium Enterprises fund and Rs 350-crore Affordable Housing fund.

Both funds are targeting closure in the second half of next financial year (2019-20). SME Fund will be broad-based fund covering manufacturing and services sector.

SBI and SBI Capital Markets will be anchor investors. SBI will invest 10 percent and SBI caps will invest 12-15 percent in the fund. Other investors will be finalised soon by September 2019.

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Varsha Purandare, Managing Director & Chief Executive Officer, SBI Capital Markets said “with these two new funds, we are looking forward to strengthening our foothold in the economically and socially relevant sectors.

“These funds shall be an effective tool in addressing the equity gap in the SME sector and in improving the availability of affordable housing in India, she said.

This is part of plans to expand the portfolio of funds under SVL, a subsidiary of SBI Capital Markets. SVL started off with Neev Fund having a corpus of Rs 430 crore, of which Rs 250 crore have been disbursed, to be invested in nine projects in Orissa and Rajasthan among other states.

Purandare expects the two new funds to have an internal rate of return (IRR) of 18-20 percent. “We expect to close the first investment by September between March to June 2020. This will close only after receiving 60 percent of the estimated funds," he said.

In the housing industry, SBI is already the largest provider of home loans from the banking sector. Further, it has provided significant loan funding for construction of housing projects and through SVL, is now launching a private equity fund, which will focus on four metropolitan areas of Mumbai, Chennai, Kolkata and New Delhi as well as Pune, Ahmedabad, Hyderabad and Ahmedabad. It will pick up stake in special purpose vehicle (SPV) for a particular housing project.

"We plan to close the first deal in the affordable housing segment by December next year (2019)," said Irfan Kazi, Chief Investment Officer - Affordable Housing Fund at SVL.

While the gap in debt funding to SMEs is increasingly being bridged by finance companies, there continues to be a significant gap in the equity funding for the sector despite the steep growth rate.

The SME landscape is expected to grow rapidly over the next few years. As per International Finance Corporation (IFC), it is estimated to account for over 40 percent of the Gross Domestic Product (GDP) by 2020. Bridging the equity gap in the SME sector is crucial for the overall economic development and hence SVL’s launch of the SME Fund said SVL’s Chief Executive Officer M K Sharma.

He added that the fund invests about Rs 35-50 crore in each project, to diversify risks and will exit after a period of 7-8 years.

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First Published on Nov 19, 2018 05:50 pm
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