IFCI Venture to rope in foreign partner for mezzanine fund

Delhi-based IFCI Venture Capital Funds Ltd (IVCF) has planned to bring in a foreign partner for its proposed mezzanine fund, to ensure broad-based response, said S P Arora, managing director.

A mezzanine fund is a hybrid of debt and equity financing, typically used to finance the expansion of existing companies. It is debt capital that gives the lender the right to convert into equity interest in the company if the loan is not paid back in time and fully.

Arora said there was good potential for mezzanine funding in the country. The process for IVCF was at an initial stage, so it was too early to indicate specific plans, including size and timing, he said.
 

IFCI VENTURE’S ACTIVE FUNDS
Fund	Rs cr
India Enterprise   Development Fund	250
Green India  Venture Fund	330
India Automotive  Components  Manufacturers Fund	330
Source: Company

IVCF also aims to leverage its investing expertise to raise a mid-market, sector-agnostic fund in this financial year. With a record of investing and understanding of entrepreneurs’ talent pool, IVCF hopes to raise around $200 million (Rs 1,110 crore) for its new fund.

Arora said it had appointed KPMG as an advisor for registration of a mid-market fund. The timing for fund raising would depend on market conditions.

IVCF was set up in 1975 to provide risk capital, mainly to first generation entrepreneurs/technocrats and also to help set up business projects. Subsequently, it evolved into providing capital support to small and medium enterprises towards initial capital and growth.

Since inception, it has provided start-up/growth capital to a little over 400 projects across India. IVCF launched three new investment funds in 2008, with an aggregate corpus of Rs 512 crore. Across its funds, IVCF has a little over 30 investors, including banks, insurance companies and high net worth individuals.

It has invested in 29 companies, providing internal rates of return of 20-43 per cent. Being a financial institution, it gives corporate loans and had built a loan book of Rs 367 crore as of March 31.