IFCI Venture Capital Fund for SC, ST and OBC Entrepreneurs — Government Equity Funding of ₹20 Lakh to ₹5 Crore: Eligibility, Instruments, Promoter Contribution, Tenure and Security
Video Explanation & Insights
IFCI Venture Capital Fund: government equity funding for SC, ST and OBC entrepreneurs
4 videos on this topic
Government equity, not a loan
IFCI Venture Capital Funds Ltd, a subsidiary of IFCI (established 1975), manages the Government of India's social-sector venture funds: the Venture Capital Fund for Scheduled Castes and the Venture Capital Fund for Backward Classes under the Ministry of Social Justice and Empowerment, along with the Ambedkar Social Innovation and Incubation Mission (ASIIM) for incubated startups. Rather than a subsidy or a bank loan, these funds take equity or quasi-equity in the company — compulsorily convertible preference shares, convertible debentures or optionally convertible instruments — with the fund's return coming from the company's profitability and the eventual redemption or exit. As the video notes, the funds had deployed around ₹848 crore across sectors from manufacturing and clean energy to startups.
| Fund | For | Ticket |
|---|---|---|
| Venture Capital Fund for Scheduled Castes | Companies with at least 51% SC (or ST) shareholding and management | ₹20 lakh to ₹5 crore as equity / quasi-equity; above that as debt |
| Venture Capital Fund for Backward Classes | Companies with at least 51% OBC shareholding | ₹20 lakh to ₹5 crore |
| Ambedkar Social Innovation & Incubation Mission (ASIIM) | SC-founded startups incubated at Technology Business Incubators | Up to ₹30 lakh equity over three years |
| Corporate / debt window | Companies beyond the equity ticket | Debt of ₹5 crore to ₹25 crore as the video describes |
Who qualifies
- •A private limited (or public) company — proprietorships and partnerships must incorporate; the fund takes shares.
- •At least 51% of shareholding and management control with SC, ST or OBC entrepreneurs, evidenced by caste certificates; a general-category founder can participate by forming a company with a qualifying majority partner.
- •Manufacturing, services and allied sectors including startups; preference to women and divyang entrepreneurs.
- •Operating history: at least six months for assistance up to ₹50 lakh and twelve months above ₹50 lakh — an existing proprietorship or partnership converted into the company counts.
- •A viable project with a return case — the equity instrument is priced to earn at least about 15% a year, debt around 8%.
Contribution, tenure, instruments and security
| Term | Detail |
|---|---|
| Promoter contribution | 25% of the project cost. Up to ₹1 crore the fund provides 75%; above ₹1 crore the fund provides 50% and the remaining 25% comes from the promoter, a bank or another institution — e.g. a ₹2 crore project: ₹50 lakh promoter, ₹1 crore IFCI, ₹50 lakh bank |
| Tenure | Up to 8 years, with a moratorium on principal / redemption of up to 36 months; interest or coupon runs from the date of investment |
| Instruments | Equity shares, compulsorily convertible preference shares, compulsorily / optionally convertible debentures |
| Return | About 15% per annum expected on equity instruments; about 8% on debt |
| Security | Pari passu first charge on project assets (land, building, plant and machinery, licences, patents) with the bank; pledge of at least 26% of paid-up shares in favour of IFCI's nominee; personal guarantee of promoters; post-dated cheques; additional collateral where the project assets are insufficient |
From application to disbursement
- 1Step 1 — Structure: incorporate or restructure the company so that 51% is held by the SC/ST/OBC promoter(s); collect caste certificates and KYC.
- 2Step 2 — Business plan and DPR with three to five years of projections showing the return case, the funding mix (promoter / IFCI / bank) and the use of funds.
- 3Step 3 — Application to IFCI Venture with company documents, financials, project report and promoter profile; screening and due diligence.
- 4Step 4 — Sanction and term sheet: instrument, coupon, tenure, moratorium, security; shareholders' agreement and pledge.
- 5Step 5 — Disbursement against milestones and the bank's share; quarterly reporting to the fund until redemption or exit.
IFCI Venture Capital Fund: questions we are asked
Neither — it is equity or quasi-equity: the fund invests in shares or convertible instruments and expects a return from the company's performance, with redemption within up to eight years.
₹20 lakh to ₹5 crore as equity; amounts above that are structured as debt.
Only through a company in which SC, ST or OBC promoters hold at least 51% and manage the business, with caste certificates on file.
The company needs six months of operations (twelve months above ₹50 lakh); an existing proprietorship converted into a company can count that history. SC-founded incubated startups can use ASIIM.
25% of the project cost; the fund provides 75% up to ₹1 crore, or 50% above ₹1 crore with a bank funding the balance.
Pari passu charge on project assets, pledge of at least 26% of shares, promoters' personal guarantee and post-dated cheques.
Company and cap-table structuring, the DPR and return case, the IFCI Venture application, and coordination with the bank for the balance funding.