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ICICI Bank Floating $100M SME Venture Capital Fund

11 June, 2010

Is ICICI Bank treading into the territory of its subsidiary ICICI Venture with its new SME fund? India’s largest private sector lender ICICI Bank has said that it is planning a $100-million fund to provide growth capital in the SME and mid-market segment. The Emerging India Fund will be managed by ICICI Investment Management Company Limited (IIMCL), a 100% subsidiary of ICICI Bank, said an ICICI Bank spokesperson.

The Emerging India Fund, which is expecting its first close in the next few weeks at $50 million, has already received firm commitments from several reputed institutions, said the spokesperson.

The move is unusual for an Indian financial services institution. While several banks and financial institutions have private equity arms, the assets are usually managed under a single unit unless they involve proprietory investments. In the case of Emerging India Fund, ICICI Bank is also raising the corpus from external investors. The new fund comes at a time when, globally and within India too, banks are hiving off their private equity interests into an independent entity.

But, ICICI Bank says that this will not be a conflict of interest as the bank’s fund would look at deals below $10 million. “Emerging India Fund will be focusing on SME space and the average deal size would be sub-USD 10 million. As a result, one does not think that there would be any conflict of interest,” according to an ICICI Bank spokesperson.

ICICI Venture which started out as a venture capital fund has morphed into a big private equity player and operates in deal sizes upwards of $20 million in buyouts besides growth capital deals. For instance, its most recent investment was $27 million in Star Health and Allied Insurance Company Ltd.

ICICI Venture mopped up $350 million for India Advantage Fund Series 3 from domestic investors late last year. It is continuing its fundraising and has also now approached foreign limited partners (investors in private  and venture capital funds). It is also launching a $500-million infrastructure fund and a $200-million real estate fund for which both of which it plans to approach domestic and international investors.

Vishakha Mulye, the CEO and managing director of ICICI Venture, also told Mint recently that the company will go for a listing once it expands its variety of funds.

ICICI Bank also had plans to launch a fund of funds before the meltdown. With the economy back in the upswing, these plans could be revived.

After the global meltdown, several financial services majors have decided to spin out their private equity arms. HSBC recently initiated discussions regarding management buy-outs at five of its private equity businesses overseeing $8.8 billion. Other players who have initiated such measures include Barclays and Citigroup.

Several Indian captive private equity players recently have or are in the process of spinning out into independent managers, with their original parents continuing to be shareholders. UTI Ventures, originally promoted by UTI Asset Management Company, recently transformed itself into Ascent Capital. Axis Bank’s PE arm, Axis Private Equity, is also being sold by the banks in a deal that has attracted bids from several players.


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ICICI Bank Floating $100M SME Venture Capital Fund

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