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New co-investment fund to be set up for SME lending
The government is planning to set up a first of its kind co-investment fund with the help of capital market regulator. Initially the fund will have a corpus of Rs 5,000 crore and will be anchored by two state-owned financial institutions, Life Insurance Corporation (LIC) and Small Industries Development Bank of India (Sidbi).
The fund will be modeled following Germany and Austria like developed nations investment vehicles to meet financial challenges to start-ups, especially in technology like high growth sectors as reported by Business Standard.

The Security and Exchange Board of India ( Sebi) is in the process of finalising a frame work for the co-investment fund and the announcement could be a part of the budget speech.

According to a source, “Sebi has sent across the final budget proposal for a co-investment fund that is going to augment the capital requirement for SME”.

Co-investment funds are typically made to meet additional capital needs and adds to a main financial sponsor. Following recent measures such as separate SME exchanges and the institutional trading platform (ITP), it is proposed to set up a SME co-investment fund.

A person privy to the development said that the Sebi framework may allow the co-investment fund to invest in an SME during its initial public offer (IOP) or a company listing directly through the ITP route. ITP is the mechanism of allowing an SME to list directly without an IPO.

Setting a co-investment fund is mainly intended to tackle the financing difficulties of start-ups with high growth potential at the seed and early stages. The idea of such a fund was first mooted during the previous Union Budget and Arun Jaitley, the finance minister, will take a final call.

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