The Ministry of Finance recently launched the ‘Ubharte Sitaare’ Alternative Investment Fund (AIF) to boost funding options for export-oriented Micro, Small and Medium Enterprises (MSMEs). Designed to identify and uplift underperforming enterprises with untapped growth potential, this initiative opens up a plethora of opportunities for such businesses in India.
Understanding the Ubharte Sitaare AIF
Alternative Investment Funds are non-traditional forms of investment vehicles. In India, they are defined under Regulation 2(1)(b) of the Securities and Exchange Board of India (SEBI) Alternative Investment Funds Regulations, 2012. AIFs include privately pooled investment funds from Indian or foreign sources, functioning as trusts, companies, body corporates, or Limited Liability Partnerships (LLPs). These funds are not covered by any direct regulatory body governing fund management in India, and include venture capital, hedge funds, private equity funds, commodity funds, debt funds, and infrastructure funds.
Beside offering financial support to businesses, this AIF provides technical assistance, thereby encouraging these enterprises to grow and succeed. Additionally, it introduces a Greenshoe Option of Rs 250 crore—an adjustment providing stability to a share’s price post its offering, eliminating the need for the investment bank to risk its own capital.
Execution details of the Ubharte Sitaare AIF
This fund is set up jointly by the Exim Bank and the Small Industries Development Bank of India (SIDBI). Investments will be made in the form of equity and equity-like products in export-oriented units spanning manufacturing and services sectors.
Selection Criteria for Companies
Companies will be selected based on four primary parameters.
1. Unique Value: Companies with unique technology, product, or process that align with global requirements will be considered.
2. Financial Strength: The fund will target fundamentally strong and outward-oriented small and mid-sized companies.
3. Business Model: Preference will be given to enterprises with a solid business model, strong management abilities, and focus on product quality.
4. Support: Both financial and advisory support will be provided to eligible companies.
Objectives of the Ubharte Sitaare AIF
The fund aims to bolster India’s competitiveness in select sectors through extensive support. Its objectives include nurturing companies with differentiated technology, products, or processes, enhancing their export business, assisting units with untapped export potential, and expanding the market reach of existing exporters.
Other Initiatives to Promote MSME Sector
The Indian Government has previously launched several initiatives to strengthen the MSME sector. Some noteworthy ones include the Prime Minister’s Employment Generation Programme (PMEGP), the Scheme of Fund for Regeneration of Traditional Industries (SFURTI), a Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE), and the Interest Subvention Scheme for Incremental Credit to MSMEs.
The government has also introduced the Credit Guarantee Scheme for Micro and Small Enterprises, the Micro and Small Enterprises Cluster Development Programme (MSE-CDP), the Credit Linked Capital Subsidy and Technology Upgradation Scheme (CLCS-TUS), and the CHAMPIONS portal. These initiatives have not only facilitated better flow of credit but also provided a platform for resolving grievances and hand-holding MSMEs on their journey to success.
