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Ubharte Sitaare Alternative Investment Fund

  • 23 Aug 2021
  • 7 min read

Why in News

Recently, the Ministry of Finance has launched ‘Ubharte Sitaare’ Alternative Investment Fund to facilitate debt and equity funding to export-oriented MSMEs (Micro Small and medium Enterprises).

  • The fund is expected to identify Indian enterprises with potential advantages, but which are currently underperforming or unable to tap their latent potential to grow.

Alternative Investment Fund

  • Anything alternative to traditional forms of investments gets categorized as alternative investments.
  • In India, AIFs are defined in Regulation 2(1)(b) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
  • It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP), which are not presently covered by any Regulation of SEBI governing fund management nor coming under the direct regulation of any other sectoral regulators in India.
  • Thus, the definition of AIFs includes venture Capital Fund, hedge funds, private equity funds, commodity funds, Debt Funds, infrastructure funds, etc.

Key Points

  • About:
    • Under the scheme, an identified company is supported even if it is currently underperforming or may be unable to tap its latent potential to grow.
    • The scheme diagnoses such challenges and provides support through a mix of structured support covering equity, debt and technical assistance. It will also have a Greenshoe Option of Rs 250 crore.
      • 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 sectors.
  • Criteria for Selecting Companies:
    • Unique value:
      • Companies will be selected for support based on their unique value proposition in technology, products or processes that match global requirements;
    • Financial Strength:
      • Fundamentally strong companies with acceptable financials, and outward orientation; small and mid-sized companies with ability to penetrate global markets, with an annual turnover of up to approx. Rs 500 crore.
    • Business Model:
      • Companies with a good business model, strong management capabilities, and focus on product quality.
  • Support:
    • Eligible companies can be supported by both financial and advisory services by way of equity/equity-like instruments, term loans for modernisation, technology or capacity upgradation; and technical assistance for product adaptation, market development activities and viability studies.
  • Objectives:
    • 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 target new markets through a strategic and structured export market development initiative.

Other Initiatives to Promote MSME Sector

  • Prime Minister’s Employment Generation programme (PMEGP):
    • It is a credit linked subsidy scheme, for setting up of new micro-enterprises and to generate employment opportunities in rural as well as urban areas of the country.
  • Scheme of Fund for Regeneration of Traditional Industries (SFURTI):
    • It aims to properly organize the artisans and the traditional industries into clusters and thus provide financial assistance to make them competitive in today's market scenario.
  • A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE):
    • The scheme promotes innovation & rural entrepreneurship through rural Livelihood Business Incubator (LBI), Technology Business Incubator (TBI) and Fund of Funds for start-up creation in the agro-based industry.
  • Interest Subvention Scheme for Incremental Credit to MSMEs:
    • It was introduced by the Reserve Bank of India wherein relief is provided upto 2% of interest to all the legal MSMEs on their outstanding fresh/incremental term loan/working capital during the period of its validity.
  • Credit Guarantee Scheme for Micro and Small Enterprises:
    • Launched to facilitate easy flow of credit, guarantee cover is provided for collateral free credit extended to MSMEs.
  • Micro and Small Enterprises Cluster Development Programme (MSE-CDP):
    • It aims to enhance the productivity and competitiveness as well as capacity building of MSEs.
  • Credit Linked Capital Subsidy and Technology Upgradation Scheme (CLCS-TUS):
    • CLCSS aims at facilitating technology upgradation of Micro and Small Enterprises (MSEs) by providing 15% capital subsidy for purchase of plant & machinery.
  • CHAMPIONS portal:
    • It aims to assist Indian MSMEs march into the big league as National and Global CHAMPIONS by solving their grievances and encouraging, supporting, helping and hand holding them.

Source: TH

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