Why is it in the news?
The Ministry of Finance recently announced the ‘Ubharte Sitaare’ Alternative Investment Fund to help export-oriented MSMEs (Micro Small and Medium Enterprises) get debt and equity financing.
The fund’s goal is to identify Indian businesses that have potential but are either underperforming or unable to realize their full growth potential.
Fund of Alternative Investments
Alternative investments include everything that is not a typical form of investing.
Regulation 2(1)(b) of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 defines AIFs in India.
It refers to any privately pooled investment fund (whether from Indian or foreign sources), in the form of a trust, a company, a body corporate, or a Limited Liability Partnership (LLP), that is not currently covered by any SEBI regulation governing fund management and is not directly regulated by any other sectoral regulator in India.
As a result, venture capital funds, hedge funds, private equity funds, commodity funds, debt funds, infrastructure funds, and other AIFs are included in the definition.
A company is supported under the program even if it is currently underperforming or is unable to realize its latent growth potential.
The program identifies such issues and offers assistance in the form of a structured support package that includes equity, financing, and technical assistance. It will also have a Rs 250 crore Greenshoe Option.
To enhance India’s competitiveness in select sectors through finance and extensive handholding support. Identify and nurture companies having differentiated technology, products, or processes, and enhance their export business; assist units with export potential, which are unable to scale up their operations for want of finance. Identify and mitigate challenges faced by successful companies which hinder their exports. Assist existing exporters in widening their basket of products and targeting new markets through a strategic and structured export market development initiative.
A greenshoe option is an over-allotment option, which is a term that is
commonly used to describe a special arrangement in a share offering for
example an IPO (Initial Public Offering) that will enable the investment
bank to support the share price after the offering without putting their own
capital at risk.
The fund has been set up jointly by Exim Bank and SIDBI (Small Industries
Development Bank of India) which will invest in the fund by way of equity and
equity-like products in export-oriented units, in both manufacturing and services
Companies are chosen based on the following criteria:
Companies will be chosen for support based on their unique value proposition in terms of technology, goods, or processes that meet global needs.
Financial Strength: Companies with sound fundamentals, acceptable financials, and an outward focus; small to mid-sized businesses with the ability to reach global markets and annual revenues of up to Rs 500 crore.
Companies with a good business model, excellent managerial qualities, and a focus on product quality are considered to have a good business model.
Other Initiatives to Promote MSME Sector are also available that support such purposes to give a boost to the economy.