The Union Ministry of Finance has launched the ‘Ubharte Sitaare’ Alternative Investment Fund to facilitate debt and equity funding to export-oriented MSMEs (Micro Small and Medium Enterprises) and Start-ups. The ‘Ubharte Sitaare Fund (USF)’ will be jointly sponsored by EXIM Bank and SIDBI (Small Industries Development Bank of India).
About the Ubharte Sitaare Scheme
The “Ubharte Sitaare Programme” identifies Indian companies that are future champions with good export potential. An Identified company should have potential advantages in terms of technology, product or process.
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 help through a mix of structured support covering equity, debt, and technical assistance. It will also have a Greenshoe Option of ₹ 250 Crore.
Objectives of the Scheme
- To enhance India’s competitiveness in select sectors through finance and extensive handholding support.
- To identify and nurture companies having differentiated technology, products or processes and enhance their export business.
- To identify and mitigate challenges faced by successful companies which hinder their exports.
- To assist units with export potential which are unable to scale up their operations for want of finance.
- To assist existing exporters in widening their basket of products and target new markets through a strategic and structured export market development initiative.
Nature of Assistance
The Ubharte Sitaare Fund has been set up jointly by EXIM Bank and SIDBI. The Bank can support eligible companies with both financial and advisory services through:
- Support by way of equity/equity-like instruments.
- Debt (funded/non-funded): Term loans for modernisation, technology or capacity degradation, Research & Development, and balancing of production facilities by investment in activities, such as:
- Machinery and equipment;
- Tool, jigs and fixtures;
- Testing or quality control equipment;
- Land and building.
- Technical Assistance for product adaptation and improvement, training expenses, costs for certifications, market development activities, etc.
Criteria for Selecting Companies
- Companies will be selected for support based on their unique value proposition in technology, products or processes that match global requirements.
- Fundamentally strong companies with acceptable financials, and outward orientations.
- Companies with a good business model, strong management capabilities, and focus on product quality.
- Small and Medium-sized companies with the ability to penetrate global markets, with an annual turnover of up to approx. ₹ 500 crores.
- Indicative Sectors: Aerospace, Automobiles and Auto components, Capital Goods, Chemicals, Defence, Food Processing, IT & ITeS, Machinery, Pharmaceuticals, Precision engineering, Textiles, and allied sectors.
Alternative Investment Fund
Anything alternative to traditional forms of investments gets categorised as Alternative Investments. Ubharte Sitaare Fund is a type of Alternative Investment Fund.
In India, ‘Alternative Investment Funds (AIFs)’ are defined in Regulation 2(1)(b) of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
AIF refers to any privately pooled investment fund (whether from India or foreign sources) in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP), which are neither presently covered by any Regulation of SEBI governing fund management nor coming under the Direct Regulation of any other sectoral regulators in India.
The definition of AIFs includes Venture Capital Fund, Hedge funds, Private equity funds, Debt funds, commodity funds, infrastructure funds, etc.
What is an ‘Alternative Investment Fund’?
An Alternative Investment Fund (AIF) refers to an investment that differs from conventional investment avenues, such as stocks, debt securities, etc.
AIF means any fund established or incorporated in India, which is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
AIF does not include funds covered under the SEBI (Mutual Funds) Regulation 1999, SEBI (Collective Investment Schemes) Regulations 1999, or any other regulations of the Board to regulate fund management activities.
What is the ‘Greenshoe Option’?
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.