State Bank of India is set to flood the market with a host of sector-specific private equity funds focused on stressed assets, real estate and small and medium enterprise in addition to a venture capital fund.
This is in addition to the $3 billion (around Rs 15,000 crore) infrastructure fund being set up in association with the Macquarie group and International Finance Corporation.
While SBI and Macquarie would hold 45 per cent each in the fund, IFC's stake would be limited to 10 per cent. The fund has already received commitment for a little over $1 billion (over Rs 4,000 crore) and the rest of the funding was close to finalisation, bank sources said.
They added that some projects had also been identified and the fund would start investments soon. "We do things on a large scale. The investment opportunity is large and it will help finance infrastructure development in the country," SBI chairman Om Prakash Bhatt said.
He added that the bank was in the process of setting up an asset management company to manage these private equity investments.
While the Reserve Bank of India had expressed certain concerns over SBI's private equity investment, Bhatt said regulatory approval had been received. "The delay is now on our part. We have to receive board clearance to operationalise the funds," said Bhatt.
Though SBI would be a late entrant to the private equity space, Bhatt was confident that it would not be a deterrent.
For instance, in the infrastructure space, IDFC Project Equity already has a presence through a fund with a corpus of close to $1 billion and it has invested around $250 million (around Rs 1,000 crore) from the fund.
Similarly, UTI Asset Management Company has also set up a $500-million fund in partnership with Germany's HSH Nordbank and Kuwait's Noor Financial Investment Company.
In addition to the infrastructure-focused funds, the other private equity players are also eyeing the space. But SBI executives said that the focussed funds would look at a longer time horizon than the other players who were looking to maximise returns over the short term.
Similarly, in the other sector-specific space, such as real estate, a host of dedicated funds already have a presence and SBI would have to battle it out. "The requirement is very large," Bhatt said.
In case of segments such as stressed assets, companies such as Tata Capital are also planning a foray. Tata Capital, the non-banking finance company promoted by the Tata Group, is close to tying up capital, though it has refused to disclose the size of the fund.
