Global development institution IFC is proposing an equity investment of up to $25 million in a 'India 2020' fund that aims to provide capital and strategic assistance to SMEs in the country.
The investment has been proposed in the 'India 2020 Fund II', which is a successor to India 2020 Fund I. The earlier fund with a size of $100 million had earned an estimated gross internal rate of return of 30%.
"India 2020 Fund II has a target fund size of $125 million. IFC is proposing an equity investment of up to $25 million (nearly Rs. 140 crore)," IFC said in a notification.
The board of directors of IFC, a member of World Bank Group, is expected to discuss the proposed investment in a meeting on February 11.
India 2020 Fund-II aims to invest in sectors that benefit from and promote consumer demand and purchasing power like healthcare and education, as well as rural consumption and agribusiness.
MUSE Capital Advisors Limited, a private limited liability company, will act as the investment manager of the fund.
The India 2020 Fund-II aims to invest nearly $5-15 million per investment for acquiring minority stakes in its target entities. Its investment focus will be on high growth businesses with a track record of product and process innovation and which are well positioned to bring about transformation in their respective sectors.
The fund will be a Mauritius-registered company and will operate primarily through one or more subsidiaries formed in the Republic of Mauritius, which will acquire, own and operate the portfolio of investments.
IFC said its commitment will act as a stamp of approval and help mobilise other sources of capital, contributing to a successful closing.
The proposed support will further catalyse interest in equity funding for capital constrained Small and Medium Enterprises (SMEs) looking for growth equity to scale up, it added.