Govt looks to increase MSME Fund of Funds corpus by 10X to encourage public listing for funding

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May 4, 2020 3:05 PM

Credit and Finance for MSMEs: MSME Minister has often urged MSMEs to explore public markets instead of banks for their capital requirements wherein the government will buy 15 per cent of the amount raised as equity stake from the Fund of Funds.

stock market investors wealth increase by 3 lakh crore rs on 30 april, 5 factors why sensex rose more than 1000 points, F&O Expiry, global market sentiments, stimulus package, US Fed, COVID-19 treatment progress, rally in US marketMSME Ministry had announced a Fund of Funds for MSMEs exploring public markets to raise capital.

Credit and Finance for MSMEs: MSME Ministry is looking to increase its Rs 10,000-crore Fund of Funds — announced last year to support small businesses looking to go public to raise capital — by 10X to Rs 1 lakh crore in three-four years. MSME Minister has often urged MSMEs, which have AAA credit rating, to explore public markets instead of banks for their capital requirements wherein the government will buy 15 per cent of the amount raised as equity stake from the Fund of Funds. For example, Rs 7.5 crore in equity will be purchased by the government if the MSME raises Rs 50 crore.

“In three-four years when these shares are priced 3-4X more we will sell them and increase the amount to Rs 1 lakh crore,” said Gadkari in a video conference with the members of the Chartered Accountant Association of India on Sunday. For instance, if shares are offloaded in four years, priced at Rs 60 from Rs 10, the government will add Rs 50 to the fund.

“We are happy that the government has decided to create a fund for investing in the equity of MSMEs. This gives a clear message to small businesses to not just leverage bank funding only but also their own equity otherwise they will create huge stress on their own as well as a bank’s balance sheet. Through equity funding, there will be no monthly liability of interests. It will give them leeway to focus on business and ensure growth is there that will also boost their valuation,” Ajay Thakur, Head- BSE SME, BSE told Financial Express Online.

Also read: Covid relief for MSMEs on anvil: Financial package for small businesses underway, says Nitin Gadkari

Gadkari also informed that the government will set-up a committee to provide the required clearances to businesses in three months to attract foreign investment. “The whole world is ready to invest in India. We have already appointed joint secretary to take care of foreign investment in MSMEs,” the minister said adding that the entire process will be ensured for zero red-tapism, transparency, time-bound decision-making process and qualitative approach. The minister in a similar interaction with the members of the Dalit Indian Chamber of Commerce & Industry stressed the need for enhancing exports and import substitution to replace foreign imports. Indian MSME sector has a share of around 48 per cent in India’s total exports and 29 per cent in the GDP.

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