Funding the unfunded in Alternative way through Alternate Investment Fund Route

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April 03, 2023: During FY2022, SIDBI implemented a special liquidity package of `16000 crores of RBI fund [SLF-3] to reach out to a large section of beneficiaries by launching innovative products viz. Double Intermediation (DI) in association with well-rated and established NBFCs/NBFC-MFIs, Partially Guaranteed Pooled Loan Issuance (PGPLI) Scheme in which the pool of receivable with homogenous member NBFCs/MFIs/fintech is funded by SIDBI with a partial guarantee to give the comfort to the lender (SIDBI) to lend such a low/unrated entity. The third type of assistance is aimed at boosting the bond market by subscribing to primary/secondary issues of NCDs of NBFCs/MFIs/Fintech etch through an AIF mechanism.

The key objective of the fund/scheme is to address the issue of funding the unfunded through an intermediary known as an Investment Manager/Fund manager. The smaller/mid-sized NBFCs/MFIs which are having relatively high-risk profiles and are low/unrated, find it difficult to access credit support from mainline/formal funding channels at reasonable rates of Interest. Hence, the risk of funding such low profile Institutions necessitated a common corpus with multiple investors, and diversified risks in the fund wherein SIDBI would be the principal investor. The product was branded as ‘Promising Lenders Fund (PLF)’ and launched in two phases. The main eligibility criteria for IM is it should be a SEBI-registered AIF with, the experience of handling AIF/ VCF schemes (live / closed) in the past. Phase I of the fund (PLF-1) has been fully implemented with target corpus of `300 crore between March 2022 and – October 2022 ) which benefitted about 16 BBB (+/-) or low rated NBFCs/MFIs/Fintech. The IM offers capital loss protection for the investment of SIDBI in the fund, as per objective and structure of the fund. The second phase of the fund with aggregate target corpus of `600 crore (including green shoe option of `200 crore) is launched in March 2023 with the objective of subscribing to the bond issue of 20-25 identified, eligible NBFCs/MFIs/Fintech which is expected to benefit of 4000 MSME borrowers at the bottom of the enterprise pyramid. The PLF-2 of `600 crore corpus is being operated in association with Vivriti Asset management Private Limited, which is a leading fund house in India and manages an AUM of USD 730 mn with, benefit flowing to 250 + mid-market enterprises across various sectors.

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