The Government of India has been instrumental in bringing many
different schemes for the benefit of the MSMEs. The MSMEs serve as
the backbone of an economy like India. Majority of the exports in India
are self reliant on the outputs that are derived from this sector. It is thus
the government’s imperative to keep the flow of this sector intact and
help in removing any hurdles that this sector faces. They have been
extremely successful in their attempt so far. The MSMEs on the other
hand have received a boost in the growth and many new entrants have
started developing their business in this sector. There are a lot of
schemes offered by the Government for the development of this
sector. One of the key funds that was established to benefit this sector
was the Self Reliant India (SRI) Fund.
Self reliant India fund MSME is implemented by a special purpose vehicle,
NSIC Venture Capital Fund Limited, which is a 100 per cent subsidiary of
National Small Industries Corporation, a mini-Ratna under the Ministry
of MSME. SRI fund was launched by the Government of India in order
to make equity investments in MSMEs. 88 MSMEs across various
different fields have received an aggregate amount of Rs 1,600 Cr. The
plan of the Government is to eventually invest around Rs 50,000 Cr in
the MSME sector. It is a known fact that MSMEs are not generally
known to be equity seekers. This scheme was a first of its kind where it
was promoted in order to get more private sector VCs to come and
collectively invest in the best MSME ideas. The first set of 88 MSMEs
that received the funding were allotted Rs 200 Cr by the Government
and the rest Rs 1400 Cr was raised from the private sector VCs.
There is a lot of outside money that is waiting to invest in this sector
but only the MSMEs that prove their mettle will rightfully receive this
allocation from the private sector. This is precisely the reason why
many new quality MSME businesses are being registered with the
Government that have the potential to develop into high quality full-
fledged businesses. Many VCs are keeping a watch on the best ideas
that come out of the MSME bandwagon and jump in at the right
moment when they get their chance. The Covid crisis was a real test of
the endurance of the MSME sector and they proved to be very good t
what they do. The government is the sole anchor investor in SRI fund
India with the initial budgetary support of Rs 10,000 crore as the
mother fund, while the rest is expected to come from daughter funds
that will raise capital from outside sources such as banks, financial
institutions, private equities and venture capital investors. It is the
sheer amount of development capacity of the MSME businesses that
will prove to drive their demand amongst the Venture Capitalists.
SRI Fund guidelines and Objectives of SRI :
The objective of the Self Reliant Fund Scheme is to provide funding
support to the Daughter Funds for onward provision to MSMEs as
growth capital, through equity, quasi-equity and debt, as may be
permitted under relevant SEBI guidelines to achieve the following
objectives:
1.) Supporting faster growth of MSME businesses and thereby ignite
the economy and create employment opportunities.
2.) Supporting enterprises which have the potential to graduate beyond
the MSME bracket and become National / International champions.
3.) Supporting MSMEs which help making India self-reliant by producing
relevant technologies, goods and services.
4.) Enhancing equity, quasi equity and debt financing, as permitted
under relevant SEBI guidelines, to MSMEs.
For more information: https://smeventure.com/top-steps-taken-by-msmes-during-recessionary-conditions/
Benefits to MSMEs:
The launch of the SRI Fund MSME provides equal opportunities and
benefits to MSMEs to avail the support of the Venture Capital from the
private sector. Businesses that were unable to come into fruition now
have the doors open to outside capital for their growth and
development. There are no stones left unturned if any MSME wishes to
secure funding for their businesses. There is also the factor of private
sector expertise that comes into play if the MSMEs are operated along
with the supervision of the VCs as they know the primary driving factors
to establish and grow a new business. The entry of private sector VCs
will lead to an increase in the promotion of the MSME sector thereby
helping the MSMEs in organic marketing.
MSMEs spread across the country and have structures different than
Startup and VC investing. It would thus be important to create a new
set of institutions who can help setup MSME investing ecosystem by
contributing to daughter funds.
Structure of SRI Fund:
Fund is an investment strategy of holding a portfolio of other investment
funds, rather than investing directly. In the context of AIFs, a Fund of
Fund is an AIF which invests in another AIF. Accordingly, SRI Fund
Scheme will be a combination of Mother/Daughter Funds which will
leverage private equity/ other funds and thus will multiply the impact
of the initial budgetary infusion. Mother Fund will provide funds only to
the Daughter Funds for onward investment as growth
capital, while the investment in MSMEs will be done by the Daughter
Funds. Both the Mother and Daughter Funds will be duly registered as
Alternate Investment Funds with SEBI. With a view to providing
flexibility to the Daughter funds in providing both equity and debt
funding to the MSMEs, the Daughter funds would be Category I or II
AIFs registered with SEBI.
Do watch: https://www.youtube.com/shorts/q910Wvu5JwM
The Self Reliant Fund Scheme has proven to be one of kind scheme for
the MSME participation and grow in tandem with help from the private
sector. It will be very compelling to watch the further development of
the MSMEs as more and more money from the government as well as
the VCs come inside the MSME ecosystem and ultimately impact the
overall performance of the MSME sector and help India to achieve its
goal of Aatma-Nirbhar Bharat.