Indian government launches PE fund

Two government bodies hope to raise up to $790m over the next two years to invest in SMEs.

The National Innovation Council and the Ministry of Micro, Small and Medium Enterprises in India have together launched a private equity vehicle to invest in venture capital-like opportunities, according to a statement.

The fund, named the India Inclusive Innovation Fund (IIIF), is registered with the Securities and Exchange Board of India as an alternative investment fund Category I and is hoping to raise INR 50 billion (€579 million; $792 million) over the next two years.

The fund has already raised INR 5 billion from investors, INR 1 billion committed by the Ministry of Micro, Small and Medium Enterprises, with the balance coming from banks, insurance companies and overseas financial or development institutions, the statement said.

The government will not have any involvement in the day-to-day running of the vehicle, which will instead be managed by an asset management company, which has not yet been disclosed.

“Lack of capital is one of the major reasons why ventures and entrepreneurs seeking to address the needs at the base of the economic pyramid have failed to take off. IIIF seeks to address exactly this gap and therefore at least 50 percent of its investments initially will be to enterprises that fall in the Micro, Small and Medium Enterprise stage,” the statement explained.

IIIF will target profitable businesses that have an element of social impact in areas including healthcare, agriculture, education, financial inclusion, water and sanitation, among others.

“The needs of the people at the base of the economic pyramid are today served by philanthropy and government grants [and] subsidies which can never be either adequate or scalable. IIIF seeks to leverage the model of venture capital to transform the lives of the less privileged,” Sam Pitroda, chairman of the National Innovation Council, said in a statement.