SME financing institution Small Industries Development Bank of India (SIDBI) has floated a private equity (PE) fund with an initial corpus of Rs 100 crore to help its customers expand their operations.
“We have recently set up a fund to provide equity support to existing SME customers to scale up their operation,” SIDBI Deputy Managing Rakesh Rewari said.
It will be on private equity model fund and the average deal would be in the range of Rs 5 crore, he said.
SIDBI has received applications from many companies seeking growth capital, which are being shortlisted. Some identified sectors are auto ancillary, IT, Pharma and textile, he said.
Seeking to expand its footprint and increase profitability, SIDBI has also entered into an arrangement with IDBI to use its channel network for disbursal of working capital.
“As part of growth plan, we recently entered into memorandum of understanding with IDBI whereby its branch would be used for the purpose of disbursal of working capital to SME wherever we are not present,” he said.
Rewari said there is also a proposal to increase branch network from 64 to 100 in the next two years, focusing the SME clusters, to increase its exposure in direct finance.
The direct finance of the institution increased to Rs 511 crore for the year ended March 2007, against Rs 345 crore last year.
When asked about whether the financial institution is looking to foray into core banking operation through reverse merger, he said that as of now there is no such proposal.
The financial institution has planned many other initiatives to augment its profitability, Rewari said.
Last year, SIDBI entered into an MoU with IDBI for co-financing of SME projects and micro credits in industrial clusters.
It has similar arrangement with other banks, including Bank of India.
SIDBI posted a net profit of Rs 303 crore for 2006-07, compared to Rs 276 crore last year while the total income of the bank went up from Rs 974 crore to Rs 1,198 crore.
Source : DNA India