The Self Reliant India, or SRI Fund, launched in 2021 under the Ministry of Micro Small and Medium Enterprises, is a significant initiative by the Indian Government. The SRI Fund, with a corpus of Rs. 10,000 crore, operates as a Category-II Alternative Investment Fund (AIF) registered with SEBI. In the AIF landscape, Category II includes private equity and debt funds that do not receive specific incentives or concessions from the government or any other regulator.
What Are the Objectives of SRI, or Self Reliant India Fund?
The primary objectives of the SRI Fund revolve around providing crucial funding support to Daughter Funds, which in turn, will offer growth capital to Micro, Small, and Medium Enterprises (MSMEs). This support takes the form of equity or quasi-equity and is aimed at:
- Enhancing equity/equity-like financing for MSMEs and facilitating their listing on stock exchanges.
- Accelerating the growth of MSME businesses to stimulate the economy and create job opportunities.
- Backing enterprises with the potential to transcend the MSME category and become national or international champions.
- Supporting MSMEs that contribute to India’s self-reliance by producing relevant technologies, goods, and services.
Structure and Investment of SRI, or Self Reliant India Fund
The structure of the SRI Fund is based on a Fund of Funds model, wherein the Fund holds a portfolio of other investment funds instead of making direct investments. It comprises Mother Funds and Daughter Funds, both of which are duly registered as Alternate Investment Funds with SEBI.
The Mother Fund’s role is to provide funding exclusively to the Daughter Funds for onward investment as growth capital in MSMEs. The investment in MSMEs is executed by the Daughter Funds under the SRI Fund’s umbrella.
The working of the SRI Fund is facilitated through this mother-fund and daughter-fund (Fund of Funds) structure. The Mother Fund, which is registered under SEBI, invests up to 20 percent of the total corpus. NSIC Venture Capital Fund Limited (NVCFL) serves as the Mother Fund in the SRI Fund implementation. The remaining 80 percent of the capital is raised by the Daughter Funds, primarily comprising venture capital and private equity funds. Notably, this investment by the SRI Fund is leveraged fivefold, resulting in a total investment capital of Rs. 50,000 crore for MSMEs.
Considering the unique nature of MSMEs and the anticipated challenges in exiting investments, the SRI Fund is designed with a longer fund life of 15 years. The commitment period extends up to 6 years from the date of the last closing, ensuring sustained support and growth opportunities for MSMEs through the SRI Fund.