GVFL Ltd, a Gujarat-based venture capital firm, is targeting a corpus of Rs 1000 crore for its infrastructure fund – Golden Gujarat Growth Fund. The state-run fund has already received commitments of 20 per cent (up to Rs 200 crore) from the Gujarat state government.
Golden Gujarat Growth Fund is the seventh fund from GVFL which was formerly known as Gujarat Venture Finance Ltd and provides seed, early and growth-stage capital to small and medium-sized unlisted companies in India. The firm seeks to invest in information technology (IT), software development, media, medical devices and telecommunications sectors. It invests between $1 million and $2 million in its portfolio companies, and acquires minority stake.
While the Gujarat government is contributing 20 per cent to the total fund size, the venture capital fund is also receiving 20 per cent in anchor commitments from banks.
For the remaining 60 per cent, the fund is essentially looking to tap insurance companies and pension funds. “As per the IRDA (Insurance Regulatory and Development Authority) guideline, insurance companies can only invest in infrastructure funds. Ours is also an infrastructure fund and we are mainly focusing on LICs and GICs, and other insurance companies,” said H C Pattnaik, executive director and CEO of Golden Gujarat Growth Fund.
According to GVFL, the LPs in the firm’s previous fund have been quite satisfied with the returns. “As per our December, 2010, audit report, we got 26 per cent annualised internal rate of return (IRR) for the existing SME fund in the investment phase. We are yet to deploy the fund for another 2 to 3 years,” said Pattnaik.
Apart from raising domestic capital, GVFL is also planning to raise funds from the deep pocket international institutions. “We are going a little systematically on tapping the international market. After the first closure, it will allow us to do a couple of investments among which two or three are already in the pipeline. We will then do road shows to international investors,” confirmed Pattnaik.
The fund, which is promising 20 per cent return to its investors, will mainly invest in high-end small and medium enterprises to mid-corporate firms. The firm has kept the ticket size of its investment from Rs 20 crore to Rs 100 crore, which is a little higher than its SME fund size.
The fund will also specifically focus on the solar power energy sector. “Gujarat and Rajasthan are best known for the solar power sector. There are many areas which can be best utilised for solar power generation. Although the cost of alternative energy is quite high, there is a huge growth opportunity in this sector, especially in states like Gujarat and Rajasthan. So we are focusing on solar power,” explained Pattnaik.
According to Pattnaik, another SME fund is also on the cards. “There is a lot of demand for SME funds. So we are now planning a second SME fund which we have already internally decided. We will come out with new SME fund in another 5 to 6 months,” he added.
In its earlier investments, GVFL has infused Rs 11 crore each in Sahajanand Laser Technology Ltd, eInfochips and E-Cube India Solutions Ltd. In 2009, the firm picked up stake in FairTech Engineering Services Ltd, a Bangalore-based design and consulting service provider to the aerospace industry, for an undisclosed sum. This was the fifth investment of GVFL from its SME Technology Venture Fund, which was launched in 2008 with a target corpus of Rs 450 crore. Also in 2009, GVFL invested Rs 11 crore in iNurture Education Solutions Ltd, a Bangalore-based company which offers animation courses to colleges and universities.