India's largest bank State Bank of India (SBI) is in advanced stages of setting up a general purpose private equity fund in partnership with the sovereign entities in Oman. The bank has also been designated, by the Indian government, as the operationalising agency for a similar sovereign fund with Qatar.
The bank already has an India focused fund with the Australian firm Macquarie and IFC Washington. The fund has been set up to primarily invest in the country’s infrastructure sector. The fund would continue its fundraising drive this year.
The total capital is projected to be between $2-3 billion, together with contributions from domestic institutions. The fund will provide equity and mezzanine debt instruments like fully convertible and optionally convertible debentures for investment in roads, ports, airports and power. SBI and Macquarie hold 45% stake each in the fund while IFC holds the remaining 10% stake.
The bank has received all the necessary regulatory approvals for operationalising the fund. It has also mobilised over $1 billion from international investors and sponsors.
SBI also holds around 20% stake in Mumbai based private equity firm, Sage Capital Fund Management. The bank had picked up the stake early last year. The fund plans to invest in companies based out of tier-II and tier-III towns and cities.
Last year, The Hindu had reported that the bank was planning to float a private equity fund by roping in local investors for investing in small and medium enterprises.
The bank has also sought government permission to raise Rs 20,000 crore Tier I capital (the bank’s core equity capital ) in the current financial year. The bank is looking at raising the funds through rights issue, which would entail a cintribution of Rs 12,000 crore from the government.