SBICAP Ventures launches funds for small and medium enterprises, affordable housing

Alternative asset manager SBICAP Ventures (SVL), the wholly-owned subsidiary of SBI Capital Markets, on Monday announced the launch of its small and medium enterprises (SME) and affordable housing funds that would target a corpus of Rs 400 crore and Rs 350 crore, respectively. The affordable housing fund would be focusing on eight cities that include Mumbai, Chennai, Kolkata, National Capital Region (NCR), Pune, Bengaluru, Hyderabad and Ahmedabad.

Varsha Purandare, MD and chief executive officer, SBI Capital Markets, told FE over phone that the fund would initially focus on these eight cities which are active real estate markets and then evaluate further options. The SME fund, however, would focus pan-India, she said.

State Bank of India (SBI) and SBI Capital Markets would be the anchor investors for these funds and would infuse about 22-25% of the fund. “We are yet to obtain the necessary licences from the Securities and Exchange Board of India (Sebi). Then we will start our roadshows and will commence approaching the investors.

“Any like-minded investors would be more than welcome to invest,” Purandare said. The first close of the affordable housing fund will happen by December 2019 while for the SME fund, the first close is likely to happen by around March 2020.

The first of the deployments out of the affordable housing fund is likely to happen by June 2020, Purandare said. “We are expecting the average ticket size to be in the range of Rs 35-50 crore for the affordable housing fund while for the SME fund, it should be about Rs 40-60 crore,” she said.

The announcement comes on the occasion of the NEEV fund portfolio day as the fund completes three years. SVL is yet to make any exits from its NEEV fund which was launched in 2015 with the intent to be the country’s first fund focussed on the low-income states in India for small infrastructure projects.

The final close of the fund is likely to be announced by December 2018 at about Rs 520 crore. “Actually, we would have already gone for the final close of the NEEV fund, as we have already received the term sheet. But we are negotiating a few issues and therefore we would do it by December 2018,” Purandare said.

NEEV fund has three anchor investors — the United Kingdom’s Department for International Development, SBI and SBI Capital Markets through SVL. “The fund size as of today is Rs 430 crore and we expect that it should be around Rs 520 crore at the time of its final close, give or take Rs 5-10 crore because of the variation of exchange rate,” Purandare said.

The fund’s mandate is to invest in eight low income/developing states in India i.e. Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttar Pradesh and West Bengal, with a focus on infrastructure sub-sectors such as renewable energy, agricultural supply chain, healthcare, education, urban infrastructure, and roads.

Even in the underdeveloped states, we were able to get some quality assets. We were able to generate about an internal rate of return (IRR) of about 18% as of today in the investments that we have made,” she said. The NEEV fund recently invested in a dialysis company RAHI Care and is likely to make one more investment before its final close.