Avishkaar plans MFI fund

Avishkaar Venture Capital, a micro-finance industry (MFI)-focused venture capital (VC) fund, is planning to hit the market with a $100-million fund, which it hopes to close by December.

The fund will be raised through Avishkaar Goodwell India Microfinance Development Co, a venture between Avishkaar India and Dutch investment firm Goodwell. In 2007, the joint venture raised its first fund ($18 million), which invested in half-a-dozen companies such as Share Microfinance, Equitas, Suryoday and Utkarsh Micro Finance.

The fund is in talks with another company for investment with a likely deal size of up to Rs 11 crore.

“We are in talks with pension funds, development financial institutions, other micro-finance investment vehicles, high net worth individuals and a string of mainstream limited partners for contributors for our second micro-finance fund,” said Avishkaar Investment Manager Megha Jindal.

Investors in the first fund include micro-finance investment vehicles such as Blue Orchard and banks such as Deutsche Bank.

The second fund will be called Avishkaar Goodwell II.

Of late, private equity (PE) and VC players have been upbeat on the micro-finance sector, which is growing over 75-125 per cent annually. VC firms said the sector was largely unaffected by adverse global developments.

With the Reserve Bank of India guidelines mandating 15 per cent capital adequacy from April 2011, MFIs are expected to seek investments of around Rs 15,000 crore from private equity (PE) and VC firms over the next few years. Since 2006, PE players have invested Rs 2,500 crore in the sector.

In addition, Avishkaar India Micro Venture Capital Fund ($14 million), another fund of Avishkaar India, has invested in 17 companies. This fund focuses on other sectors such as handicrafts.