SBICAP Ventures launches SME, affordable housing funds

A man walks past a logo of State Bank of India outside a branch in New Delhi, India, February 1, 2017. REUTERS/Adnan Abidi

SBICAP Ventures (SVL), an alternative asset manager and a wholly owned subsidiary of SBI Capital Markets, on November 19 launched two funds for the small and medium enterprises (SMEs) and affordable housing sectors.

The SME fund is expecting to raise a corpus of Rs 400 crore, while the affordable housing fund would look at raising Rs 350 crore.

"For the SME, we want to start with Rs 400-crore fund. It will be an equity fund and there will be two anchor investors - SBI and SBI CAP/SVL," SBI Capital Markets managing director and chief executive officer Varsha Purandare told reporters here.

"We are expecting an internal rate of return (IRR) of anywhere between 18 per cent and 22 per cent," she added.

The SME fund will be starting in September 2019 and the first close, which will be at least 60 per cent of the fund, or around Rs 240 crore, is expected by June 2020, according to Purandare.

Country's largest lender State Bank of India (SBI) is limited by 10 per cent and SBI Capital will be putting in another 10-12 per cent, she said.

She noted that while the gap in debt funding to SMEs is increasingly being bridged by non-banking financial companies (NBFCs), there continues to be a gap in the equity funding for the sector despite the steep growth rate.

For the affordable housing fund, again an equity fund, Purandare expects the first closure, which is at least 60 per cent, or Rs 210 crore, by December next year.

The fund will invest in project-specific venture and the company is expecting an IRR of 20 per cent for the same, she said.

In the initial phase, the focus will be on eight cities - Mumbai Metropolitan Region, National Capital Region, Kolkata, Bengaluru, Chennai, Hyderabad, Ahmedabad and Pune.

She added that the funds will be deployed in at least seven to eight projects, approximately Rs 35-50 crore in each project, which meets the Rera guidelines on affordable housing.

Also, the fund will limit itself to maximum of 30 per cent investment in a city or a maximum of 30 per cent to a developer, according to Purandare.

Before this, SBICAP Ventures had launched a fund named Neev Fund in 2015 with a focus on the low-income states for small infrastructure projects. The fund was launched in partnership between SBI and UK's Department for International Development.

Purandare said the total corpus of Neev Fund as on date is Rs 430 crore after the first close, and the investible amount is around Rs 382-383 crore.

The firm is expecting additional funds, which will take the fund size to Rs 525 crore, she added.

The fund started its first investment in February 2016, and invested in nine projects, with a total disbursal of Rs 260 crore so far, according to her.