The Union Finance Minister in his budget speech proposed to set up a Rs.5,000-crore India Opportunities Venture Fund with SIDBI to enhance availability of equity to micro, small and medium enterprises (MSME) sector.
Raja Kumar, Chief Executive Officer, Ascent Capital, said this was the government's direct initiative for early stage funding for MSMEs. He suggested that a part of the fund should be created as “Fund of Funds” (FOF) and it should be administered by SIDBI. He said there were 200 independent fund managers in the country. All these independent managers' had good risk-taking ability and also had access to high-end deals.
Mr. Raja Kumar also pointed out that these independent managers were backed by sophisticated investors across the globe. If SIBDI would help these independent investors by providing funds to them, then the main objective of the government would be achieved, he added.
When contacted, SIDBI officials said it would create a “Fund of Funds” for the independent investors, which would increase the equity availability to these fund providers.
K. A. Srinivasan, Chief Financial Officer, Ventureast Fund Advisor, said the Centre had finally recognised private equity investors and venture capitalists. However, he stated that removal of restriction on venture capital funds to invest only in nine specified sectors was applicable to only domestic venture capital funds.
Foreign venture capital funds were already enjoying the benefits as these funds were invested through Mauritius. But the major hassle was coming through the introduction of GAAR (General Anti Avoidance Route), which would restrict the flow of offshore funds into the country.