INTRO TO SIDBI We empower MSMEs July 26, 2013
SIDBI : Background & thrust areas Risk Capital : Products Service sector 2
SIDBI : Background Apex Financial Institution for MSMEs Impact initiatives o CGTMSE collateral free loans upto Rs.1 crore (> 1million guarantees) Operates through all banks o Promotion of venture capital industry Corpus support to VCFs/ AIFs MSME Risk Capital fund/ India Opportunities Venture Fund o MSME Exclusive SME rating agency o Resource support to NBFCs/ SFCs/ Banks o Micro Finance Direct Finance Practice o Traditional products o Risk capital products o Sustainable finance
SIDBI :Thrust Areas Risk Capital Service Sector focused products Receivable Finance Sustainable Finance
SIDBI : Background & thrust areas Risk Capital : Products Service sector 5
SIDBI Risk Capital Operations Fund of Fund Operations Equity investment through SVCL Direct Risk Capital Corpus support to VC/PE funds 52 funds supported 11 regional and 41 national funds SIDBI Venture Capital Ltd : SIDBI s venture capital arm Managing 4 funds AUM : Rs 1500 crore Dispensed through SIDBI branches Direct disbursements to MSMEs Simpler RC products
Risk Capital Products Equity based Optionally Convertible Cumulative Preference Shares Equity Non-Participative debt based products Subordinated Debt Fixed coupon 7 yr repayment 3 yr moratorium Participative debt products Sub debt/debt/ debentures with Conversion options Royalty features Equity kickers 7
Risk Capital : eligible entities Early Stage Early stage service enterprises Structured debt product Customer acceptance established Need not be profit making Maximum assistance : Rs.1 crore Optionally Convertible Debt Equity Kicker/ conversion rights Tenure : Upto 7 years Under CGTMSE cover Milestone based disbursement Growth Stage Manufacturing and service sector Growing, profitable units with good banking track record Any requirement incl. intangibles Based on cash flows Participative and non participative debt structures Tenure : Upto 7 years with moratorium upto 3 years IRR expectation : around 16%
SIDBI : Background & thrust areas Risk Capital : Products Service sector 9
Service Sector Asset backed Cashflow based
Service Sector Asset heavy projects LAPS Cash flow based Franchisee / Dealer Commercial Real Estate Hotels Hospitals Loan against property Corporate loan IT, Software, BPO, Logistics etc. Other Services Franchisee financing Dealer financing Projects benefitting MSMEs With more than 60% MSME presence
Service Sector : Cash flow based Eligibility o Existing entities with established profitable model (net profits in atleast 2 of last 3 years) o o Quantum New entities promoted by entities/promoter group with such track record in similar/ related line of business VC/PE assisted companies Need based Eligible areas of finance o o o o o Capex, movable assets, current assets, intangibles (marketing, brand building, etc.), WC/ WC margin.
Service Sector : Cash flow based Interest o Internal rating based Repayment o Upto 7 years with moratorium of upto 12 months based on cash flows Promoter contribution o 25% DER 2.5:1
Service Sector : Cash flow based Assistance on the basis of Assets financed + Identified cash flow + Other Collaterals 1 st charge to lender Senior lender status But no comfort on realizable value Escrowed cash flow stream which is reliable Should be able to cover repayment with some margin Any other available collateral hard asset liquid security to cover part of the assistance
Sustainable Finance Pioneered Green Rating Promotes environmental and social standards in MSMEs Funding for : environment friendly technologies Energy efficient equipments
Direct Finance Term products Convertible Debt Convertible Debentures OCCPS / Equity Secured Debt Subordinated Debt / OCSD
Direct Finance Short term products Guarantees / Letter of Credit Bill discounting Working Capital
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