State Bank of India’s step-down subsidiary SBICAP Ventures Ltd (SVL) on Monday announced the launch of two separate funds to invest in small and medium enterprises (SMEs) and affordable housing sectors.
SBICAP Ventures, a wholly-owned subsidiary of SBI Capital Markets, plans to raise a corpus of Rs 400 crore ($55 million) for the SME fund, and a Rs 350 crore ($49 million) fund to invest in affordable housing projects in Mumbai, Chennai, Kolkata, Delhi; Pune, Ahmedabad, Hyderabad, and Ahmedabad. It will take stakes in special purpose vehicles for a particular project.
The fund will complement SBI’s role as the largest provider of home loans from the banking sector and also provider of significant loan funding for construction of housing projects, SVL said in a statement.
“With these two new funds, we are looking forward to strengthening our foothold in the economically and socially relevant sectors. These funds shall be an effective tool in addressing the equity gap in the SME sector and in improving the availability of affordable housing in India,” said SBI Capital Markets MD & CEO Varsha Purandare.
While the gap in debt funding to SMEs is increasingly being bridged by NBFCs, there continues to be a significant gap in the equity funding for the sector despite the steep growth rate, the statement added.
“The SME landscape is expected to grow rapidly over the next few years and as per IFC, it is estimated to account for over 40 per cent of the GDP by 2020. Bridging the equity gap in the SME sector is, therefore, crucial for the overall economic development of the country and hence SVL’s launch of the SME Fund,” it said.
The two new funds follow Neev Fund, which was launched by the bank three years ago to focus on small infrastructure projects in low-income states in India. The fund was expected to mark the final close at Rs 500 crore in September.