Comments
Export-Import Bank of India (Exim Bank) and Small Industries Development Bank of India (SIDBI) plan to jointly set up an Alternative Investment Fund (AIF) to provide equity and loan support to small and medium enterprises (SMEs), which could emerge as rising stars in the export firmament.
The AIF is being floated to give effect to a scheme, announced in FY21 Union Budget, to be jointly anchored by the aforementioned government-owned financial institutions to extend support to SMEs in sectors such as pharmaceuticals, auto components and others for technology upgradation, research and development, and business strategy, among others.
This could boost India’s exports and generate higher economic activity and employment.
The scheme ( Ubharte Sitaare ) is aimed at identifying Indian enterprises with potential advantages in technology, production, or processes along with export potential, but have been underperforming or are unable to tap their latent potential to grow.
“So, we are looking at a combination of loans, grant, equity, and consultancy services to support the small and medium enterprises.
“This has been done very successfully in Germany years ago under the ‘Hidden Champions’ programme. Korea did it with reasonable success ...We are trying to do this under the Ubharte Sitaare programme,” said David Rasquinha, Managing Director, Exim Bank.
Regulatory formalities
Once the regulatory formalities related to registering the fund is completed, Exim Bank and SIDBI will quickly get the it off the ground, he added.
As per the Budget, both financial institutions will contribute ₹50 crore each to the scheme (fund). Further, debt funding of ₹900 crore from banks would be made available.
Referring to the dilemma of SMEs wanting to raise equity but not wanting to lose control, Rasquinha emphasised that: “They (promoters) hesitate to bring in a private equity player because they may lose control.”
However, SME promoters don’t have to worry about losing control if they raise equity from the fund as both Exim Bank and SIDBI are not in the business of running companies. The Institutions are there only to support them, he added.
“We will start off small. We want to do it as a kind of proof of concept to begin with...Demonstrate success and then scale it up. We will look at getting other investors in the Fund as well,” said Rasquinha.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.