IFC to make $25 mn equity investment in IBEF IIA Fund

India Business Excellence Fund IIA planning to set up a $100-mn fund to provide assistance to SMEs

International Finance Corporation (IFC) is planning to make an equity investment of upto $25 million in India Business Excellence Fund IIA, which is planning to set up a $100 million fund. The Investment Advisor has appointed Motilal Oswal Private Equity Advisors Private Limited as investment sub-advisor.

India Business Excellence Fund IIA (IBEF IIA), is a fund which aims to offer growth equity and strategic and operational assistance to Small and Medium Enterprises (SMEs) in India. Focus of the fund will be on high growth businesses and also focused on Tier II and Tier III cities in India.

According to the project document, India Business Excellence Fund IIA has a target fund size of $100 million with an option to accept additional commitments as may be recommended by the Investment Advisor. IFC is proposing an equity investment of up to $25 million.

The Fund aims to invest in sectors which benefit from demand led by Domestic consumption and Infrastructure enablers. The Fund is second series to India Business Excellence Fund I – a 2006-07 vintage fund of $82.5 million which is fully deployed.

It (the Fund) will be a limited liability Mauritius registered company, which will acquire, own and operate the portfolio of
investments. The Investment Advisor has appointed Motilal Oswal
Private Equity Advisors Private Limited as investment sub-advisor.

According to the document, target investees will include SMEs, which traditionally have been capital constrained with limited access to bank debt or capital markets for financing their growth strategies.

The Corporation stated that it's commitment will act as a stamp of approval and help MOPE attract institutional investors in a
stronger and more stable manner. IFC will help the fund adopt best practice structure and terms.

IFC's support could catalyse further interest in equity funding for capital constrained SMEs looking for growth capital and very high quality functional expertise to scale up.

“Main E&S risk and impacts of the project emanate from the sectors in which the fund will make investments which include light and heavy engineering, construction and mining, logistics, and agri/food products,” according to IFC.

At present the fund does not have an E&S risk management system. The fund will be required to develop and implement an E&S risk management system benchmarked to IFC Performance Standards, said the Corporation.