Canara Bank set for its sixth VC fund

Eyes to raise Rs 500 cr to fuel SME growth

Canara Bank, amongst the top public sector lenders in India, is gearing up to launch its sixth venture capital fund with a targeted corpus of Rs 500 crore, similar to its fifth fund which is expected to be drawn down by September, 2014.

Canara Bank manages the venture capital fund through a wholly-owned subsidiary Canbank Venture Capital Fund which was set up during late 1989. It is understood that Canbank Venture Capital was looking at raising its sixth fund with a corpus of Rs 1,000 crore but which was decided against. "That was the initial proposal which the board debated on. However, we have been advised that we should target a Rs 500 crore fund," S Thiruvadi, MD, Canbank Venture Capital told Business Standard.

This development comes at a time when the SMEs (small & medium enterprises) are finding it tough to raise resources in the marketplace and Canbank Venture, which looks at funding SMEs primarily in the manufacturing segment, may stand to gain.

"We have a healthy internal rate of return on our funds and out of our earlier fund, we have given out non-binding term sheets for the rest, which we expect to commit by September. We expect to start the process of our next fund from April," Thiruvadi added.

He further noted that while a clutch of around 18 PSU banks and financial institutions are investors in the fifth fund, Canbank Venture is looking to reduce the number of investors for its fresh fund.