SRI Fund Meaning, Structure of Self Reliant India Fund Scheme, Objective of Self Reliant India Fund Scheme in MSMEs

Introduction

Establishing an MSME fund under the moniker SRI (Self-Reliant India) Fund would directly address these issues, provide the businesses a boost to overcome their obstacles, promote corporation, and enable them to develop to their full potential. With government assistance, the SRI Fund programme would be able to direct various range of financial resources into neglected MSMEs and take care of the needs of thriving and highly expanding MSMEs. This article will help you out with SRI Fund Meaning, Structure of Self Reliant India Fund Scheme, and Objective of Self Reliant India Fund Scheme in MSMEs.

SRI Fund Meaning

Self Reliant India Fund, is a fund of funds that intends to provide growth capital to Micro, Small and Medium Enterprises, was established by the Indian government (MSME). The SRI fund will help MSMEs grow more quickly, igniting the economy and opening up job prospects.

Why there is a need for Self Reliant India Fund Scheme in MSMEs?

• The lack of sufficient cash is one of the greatest issues MSMEs in India must deal with. Because so few players offer early stage equity funding, MSMEs have limited access to external equity.
• Due to higher transaction costs and management fees for equity investors caused by smaller investment sizes per company, this market sector is generally less appealing.
• Entrepreneurs’ worries about management and control. The likelihood of a non-linear return is low, which discourages venture capital (VC) funding.

For all of these reasons, it is imperative that the government take steps that will benefit MSMEs. This programme assists the government in encouraging more business owners to register MSMEs and contribute to the economy of the nation.

Objective of SRI (Self Reliant India) Fund

The SRI Fund, which will take the shape of a Category II Alternative Investment Fund (AIF), will be focused on supporting the Daughter Funds with cash so they can provide growth capital to MSMEs in the form of equity or quasi-equity for the following purposes:

Structure of Self Reliant India Fund Scheme

Instead of making direct investments, the Fund is an investment strategy that involves holding a portfolio of other investment funds. A Fund of Fund is an AIF (Alternate Investment Fund) that invests in another AIF when speaking of AIFs.

As a result, the SRI Fund will combine mother and daughter funds, leveraging private equity and other funds to increase the impact of the initial budgetary infusion. Only the Daughter Funds under the Fund will receive funding from the Mother Fund for future investments as growth capital; all further investments in MSMEs will be made by the Daughter Funds.

The Mother and Daughter Funds will each be properly registered with SEBI as Alternative Investment Funds (AIF). The Daughter funds would be Category I or II AIFs registered with SEBI in order to give the Daughter funds flexibility in providing both equity and debt capital to the MSMEs.

Outlook for SRI Fund

Below are the points that will explain the government Scope and Target for the Self Reliant India Fund Scheme for MSMEs (Micro, Small and Medium Enterprises):

• Since MSMEs are dispersed around the nation, the Fund should be distributed to ensure that an impact is made and that organisations in the most remote areas of the nation can receive this funding.
• The MSMEs with a high potential for growth who are unable to do so because their need for growth capital has not been met would be the target category for funding under the Daughter Funds. They lack market access, and getting debt financing is challenging due to high borrowing costs, an inability to offer security, excessive leverage, etc. To overcome these problems:
  • All currently operating and interested qualifying MSMEs that are determined to be viable, whose growth trajectory is positive, and who have a clearly defined business plan for expansion suggesting positive money flow would be eligible for the funding. Potential for growth will be given appropriate weight in addition to the previous three years’ CAGR (Compound Annual Growth Rate).
  • The financial inclusion sector, NBFCs, SHGs, micro-credit sector, non-profit organisations, and other financial intermediaries are not eligible for consideration.
  • In order to ensure the non-linear returns expected from venture capital funding, the fund will actively support various term sheets. Additionally, non-financial factors such as employment, a decline in regional disparities, overall economic growth, and the creation of supply chains with depth and durability will be taken into account.

Source: Financial Assistance to MSMEs During COVID

Conclusion

According to Shri Narendra Modi’s vision, the Honourable Finance Minister of India announced on May 13, 2020, the establishment of a Fund of Funds (FoF) for Micro, Small, and Medium-Sized Enterprises (MSMEs) as part of the Atmanirbhar Bharat package to address the severe difficulty MSMEs are currently experiencing in obtaining growth capital. With the introduction of this scheme, it will help MSMEs to boost their efficiency in the Indian market.