Small Industries Development Bank of India (SIDBI) is ready to fund domestic MSMEs to acquire foreign companies, a top official has said.

“We are ready to fund small and medium companies to acquire foreign assets. We will be funding the acquisition value plus the facilitation charges. The money will come from the Rs 600-crore India Opportunity Fund that we have just launched,” SIDBI deputy managing director Mr NK Maini told PTI in an interview here.

There are many distressed companies in many Asian countries, especially in the Confederation of Independent States and many domestic MSMEs are looking at entering those markets, Mr Maini informed.

The move comes from its successful participation in incubating and propping up start-ups, under which it has also picked up stakes up to 20 per cent.

So far, SIDBI has invested Rs 600 crore in 56 domestic companies through its two funds, Rs 100 crore from the first fund and Rs 500 crore from another.

Out of these 56 companies, Mr Maini said, only seven have failed while nearly a dozen of them are ‘star performers’ (a term used to describe those companies that are giving 15-20 per cent returns on investment annually).

While the lender on an average has invested in the range of Rs 1 to 10 crore from the first fund, with the average exposure being Rs 3 crore, with the second fund it has on an average investment of Rs 10 crore in each of them while the top-end being Rs 40 crore, Mr Maini said.

Typically, SIBDI lends at 11.75-13.5 percent, a tad lower than that of commercial banks, Mr Maini said, adding however the problem is that out of the Rs 2.5 trillion that the sector need, the annual fund flow from commercial banks is only around Rs 30,000 crore for the sector as a whole.

The SIDBI Amendment Bill, introduced in Parliament in May, is expected to empower the state lender to take quick action against defaulters and enable speedy disposal of such cases.

(This article was published on July 15, 2012)
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