MUMBAI, February 6: The Small Industries Development Bank of India (SIDBI) has shifted its focus to venture-capital financing. The move follows the raising of the financing limit for the small-scale industries (SSI) sector last month. Companies with an investment up to Rs 3 crore in plant and machinery are eligible for the status of small-scale industry, effective January 1998. The earlier ceiling was Rs 60 lakh.The nodal-financial institution for the SSI sector is in the process of setting up a series of state-level venture-capital funds (VCFs) in association with the state financial institutions (FIs) and industry-specific funds with the industry associations. SIDBI'S managing director Shailendra Narain said: "Now our focus will be on venture-capital financing. At present, there are no real venture-capital funds, which finance pure start-up ventures. We are negotiating with the state governments to set up dedicated VCFs, where we are willing to put in 50 per cent of the corpus." Talks for the setting upof VCFs in Andhra Pradesh, Karnataka, Tamil Nadu, Punjab and Orissa are at a final stage. Two SSI-dedicated VCFs, with participation from SIDBI and state-level institutions, are already in place in Maharashtra and Gujarat. The institution will soon initiate talks with other state governments too, said senior SIDBI officials.
In Andhra Pradesh, the fund will be initially of a size of Rs 15 crore, with SIDBI putting in 50 per cent. The remaining will be contributed by the Andhra Pradesh Industrial Development Corporation, the Andhra Pradesh State Financial Corporation and an yet-to-be-shortlisted institution.
In Karnataka, the initial Rs 15 crore-fund will have participation from SIDBI, KSFC, KSIDC and Nasscom. In Tamil Nadu, the initial Rs 30-crore fund will have an equal participation from Tidco, IL&FS and SIDBI. To start with, SIDBI will launch industry-specific venture funds in software, auto-ancillaries and agro-processing. One auto-ancillary VCF from SIDBI is already being managed by IL&FS. SIDBI andthe states associated with VCFs have taken a special interest in the software sector for the deployment of venture capital. Some states like Karnataka, where the software industry is flourishing, are trying to rope in leading firms like Infosys Technology and Satyam Computers to participate in the software sector-specific venture fund. "We are determined to see that the software industry will boom. With the new Rs 3 crore investment limits for SSIs, we can finance nearly all the software ventures that are going to come up in the near future," said Narain.
All these are apart from SIDBI's own Rs 60-crore VCF set up in 1992 and its participation in various other venture-capital funds, promoted by other public-sector institutions and private companies. With the enlarged size of an SSI unit, it is now viable for SIDBI to participate in the equity of a start-up venture through the venture-capital route. Earlier, the smaller size of the SSI units had acted as a barrier against equity participation from venturefunds. The small size limited the exit option by way of an eventual listing on a stock exchange. The investment limit of Rs 3 crore in plant and machinery, in effect, brings in projects with a cost of Rs 10-15 crore into the ambit of the SSI sector.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
