Sidbi, the department of electronics and IDBI have contributed Rs 50 crore, Rs 30 crore and Rs 20 crore respectively, towards the corpus of the fund. Sidbi managing director Sailendra Narain has been appointed the chairman of the asset management company. "The fund has a life of 10 years and has been given a target of giving venture capital support to at least 40 projects in the IT sector over this period," a senior Sidbi official told The Financial Express.

In a related development, the IDBI has firmed up its plans to launch a VCF for private equity soon. The development financial institution is believed to be deliberating on the possible tax incentives and finalising the projects which will be provided with the VCF assistance.

"A large number of projects awaiting financial closure have been put into cold storage because of lack of funds owing to the lacklustre capital markets," IDBI executive director VP Singh said. "IDBI is looking at infusing funds in some of these projects by way of equity participation."

INSIGHT
Contacts will help

The success of issues such as BFL Software and Polaris--venture funds brought these companies to the market--have increased interest among venture funds, especially in the IT sector. The high discounting being applied to IT stocks has also helped. Foreign private equity funds have already earmarked substantial amounts for investments in India, most of which will go to the IT sector. Indian financial institutions are joining in, although ICICI has long been in this field. However, in view of the fact that most software companies are aiming to export, foreign venture funds, with their network of contacts abroad, could be of more help.

-- Manas Chakravarty