A. Venture Capital Fund for Scheduled Castes
The Government of India has launched the Venture Capital Fund for Scheduled Castes’ with initial capital of Rs. 200 crore. IFCI Ltd. will act as Sponsor, Settler and Asset Management Company (AMC) / Nodal Agency to operate the scheme. The IFCI Ltd. would contribute Rs 50 crore which would comprise Rs 5 crore as sponsor and Rs 45 crore as investor.
Under the scheme, financial assistance up to Rs.15.00 Crore for a period up to 6 years would be provided to the SC entrepreneurs.
The objectives of the Venture Fund are as follows:
- It is a Social Sector Initiative to be implemented nationally in order to promote entrepreneurship amongst the SCs who are oriented towards innovation and growth technologies.
- To provide concessional finance to the SC entrepreneurs, who will create wealth and value for society and at the same time will promote profitable businesses. The assets so created will also create forward/ backward linkage. It will further create chain effect in the locality.
- To increase financial inclusion for SC entrepreneurs and to motivate them for further growth of SC communities.
- To develop SC entrepreneurs economically.
- To enhance direct and indirect employment generation for SC population in India.
Investment under the fund will be categorized as follows:
- Financial assistance up to Rs 5 Crore – Investment under this category shall be funded maximum up to 75% of the project cost and the balance 25% of the project cost will be funded by the promoters;
- Financial assistance above Rs. 5 Crore
- Investment under this category shall be funded maximum upto 50% of the project cost. At least 25% of the project cost has to be financed by bank/other institutions. Balance 25% of the project cost will be funded by the promoters.
- The proposals forwarded by Banks or other financial institutions with sanction of 25% of the total project shall be considered. In this case, the projects shall have to be compulsorily.
- The projects/units being set up in manufacturing and services sector ensuring asset creation out of the funds deployed in the unit shall be considered.
- While selecting the SC entrepreneurs, women SC entrepreneurs would be preferred.
- Companies having at least 60% stake holding by Scheduled Caste entrepreneurs for the past 12 months with management control.
- Documentary proofs of being SC will have to be submitted by the entrepreneurs at the time of submitting the proposals.
- The SC promoters of Investee Company will not dilute their stake below 60% in the company till the exit under the scheme. However, in the event of any conversion of quasi-equity instrument under the scheme, strategic investments, buyouts etc, which result into dilution of stake of SC Entrepreneur, a prior written approval from Asset Management Company (AMC) would be required.
- The companies applying for assistance of more than Rs. 5 Crore, shall preferably get their project appraised by the banks / FIs before approaching for assistance under the scheme.
- For companies with sanctioned assistance of above Rs. 5 Crore, the money released by the Trust/ Fund Manager would be in proportion to the loan tranche released by the bank.
B. Venture Capital Fund for Backward Classes
The Government of India under the Ministry of Social Justice and Empowerment has initiated the Venture Capital Funds scheme to promote entrepreneurship and to provide financial assistance for the Backward Class (BC) entrepreneurs. The Industrial Finance Corporation of India will act as Sponsor, Settler and Asset Management Company (AMC) or Nodal Agency to implement the scheme. Under this scheme, assistance up to Rs.5 crores for a period up to 8 years will be provided to Backward class entrepreneurs. In this article, we look at the Venture Capital Funds for Backward class entrepreneurs in detail.
Objectives of the Scheme:
The objectives of the Venture Capital Fund scheme for BC are mentioned below:
- It is a social initiative to be performed to promote entrepreneurship amongst the Backward class who are determined towards innovation and growth technologies.
- To provide financial assistance to the BC entrepreneurs, who will build wealth and value for society and promote profitable businesses.
- The assets so provided will produce forward or backward linkage. It will further make a chain effect in the locality.
- To increase the financial structure for BC entrepreneurs and to motivate them for further growth of BC communities economically.
- To provide direct and indirect employment generation opportunities for the Backward Class (BC) communities in India.
The eligibility criteria for the entrepreneurs to avail assistance under the scheme are as follows:
- The units or projects being set up in the manufacturing and services sector ensuring asset creation out of the funds deployed in the group is eligible for the scheme.
- While choosing the entrepreneurs, women and disabled Backward Class (BC) entrepreneurs are preferred.
- The companies were applying for the assistance of below Rs.50 lakhs, should hold 51% stake holdings by BC entrepreneurs for the past 6 months before requesting assistance under the scheme.
- For companies applying for the assistance of above Rs.50 Crore, should hold 51% stake holdings by BC entrepreneurs for the past 12 months before requesting assistance under the scheme.
- Proofs of being Backward Class (Caste Certificate) will have to be enclosed by the entrepreneur at the time of submitting the proposal.
Quantum of Assistance:
The minimum quantum of assistance under the venture capital scheme for BC will be of Rs.20 lakhs and the maximum quantum of assistance will be Rs.50 crore per entrepreneur.
Note: The maximum aggregate assistance should not be more than 2 times of the current net worth of the company.
Repayment Period: The maximum repayment period for the entrepreneur loan is 8 years, including a moratorium for first-time assistance, and the repayment can be made in equated monthly installments (EMI).
Instruments for Investment: Equity, optionally convertible preference shares, compulsorily convertible preference shares, compulsory debentures, non-convertible debentures, etc. are the instruments required for investments.
Investment under the fund will be classified as follows:
Financial assistance up to Rs.1 Crore: Investment under these criteria will be funded maximum up to 75% of the project cost, and the remaining 25% of the project cost has to be contributed by the promoters.
Financial assistance above Rs.1 Crore: Investment under these criteria will be funded maximum up to 50% of the project cost. At least 25% of the estimated project cost has to be financed by the bank or other institutions. And the remaining 25% of the project cost has to be contributed by the promoters.
Note: Proposals forwarded by Banks or other institutions with the sanction of 25% of the total project. In this case, the approved project report will have to be enclosed compulsorily.
The moratorium period will be for 36 months from the date of investment in the company. However, the coupon payment or interest would commence from the date of investment in the company at a regular interval as identified by the Investment Committee of the fund.
Rate of Interest
The rate of interest for financial assistance to entrepreneurs are given below:
|Particulars||Rate of Interest|
|Equity instruments||15% per annum|
|Debt or Convertible Instruments||8% per annum|
- For disabled or women entrepreneurs, the interest will be at the rate of 7.75% per annum.
- For companies owned by a BC Women entrepreneur, should hold at least 51% of the share in the company and must be a managing director of the company.
- In the case of disabled entrepreneurs, the guidelines issued by the Department of Empowerment of persons with disabilities for qualifying as disabled will be followed.