IFCI Venture Capital Fund for Scheduled Castes and Backward Classes — Government Equity and Quasi-Equity of ₹50 Lakh to ₹15 Crore: Eligibility, Instruments, Promoter Contribution, Tenure and Security
Video Explanation & Insights
IFCI Venture Capital Fund: government equity funding for SC, ST and backward-class 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 (Ministry of Social Justice and Empowerment, launched 2014-15 with an initial corpus of ₹200 crore, now about ₹683 crore) and the Venture Capital Fund for Backward Classes, along with the Ambedkar Social Innovation and Incubation Mission (ASIIM) for incubated startups. Rather than a subsidy or a bank loan, the funds invest in the company — equity, compulsorily or optionally convertible preference shares, convertible or non-convertible debentures, or subordinate loans — and earn their return from the company's performance and eventual redemption or exit. By March 2022 the SC fund had sanctioned about ₹466 crore across 126 companies.
| Fund | For | Ticket |
|---|---|---|
| Venture Capital Fund for Scheduled Castes (VCF-SC) | Companies with at least 60% shareholding and management control held by SC entrepreneurs for the past 12 months; women SC entrepreneurs preferred | ₹50 lakh to ₹15 crore, not exceeding twice the company's current net worth |
| Venture Capital Fund for Backward Classes (VCF-BC) | Companies promoted by backward-class (OBC) entrepreneurs, on the parallel scheme of the Ministry of Social Justice and Empowerment | Same structure of equity, convertible and debt instruments — check the VCF-BC scheme document for its shareholding and size limits |
| Ambedkar Social Innovation & Incubation Mission (ASIIM) | SC-founded startups incubated at Technology Business Incubators | Up to ₹30 lakh equity over three years |
| Above ₹5 crore | Larger projects | Fund share capped at 50% of project cost; the proposal is appraised and part-financed (at least 25%) by a bank or FI, and the fund releases money in proportion to the bank's tranches |
Who qualifies
- •A company (the fund takes shares and convertible instruments) — proprietorships and partnerships must incorporate; an existing business converted into the company can count its history.
- •At least 60% of shareholding with management control held by Scheduled Caste entrepreneurs for the past 12 months, with documentary proof of caste at proposal stage; the promoters may not dilute below 60% until the fund exits without the asset manager's written approval.
- •Projects or units in manufacturing and services that create assets out of the funds deployed; women SC entrepreneurs are preferred.
- •Companies seeking more than ₹5 crore should get the project appraised by a bank or FI first; the bank finances at least 25%.
- •The video summarises the scheme as 51% ownership and ₹20 lakh to ₹5 crore; the scheme document sets 60% and ₹50 lakh to ₹15 crore — the figures on this page follow the document.
Contribution, tenure, instruments and security
| Term | Detail |
|---|---|
| Investment size | ₹50 lakh to ₹15 crore per company; aggregate assistance not more than twice the company's current net worth |
| Funding pattern | Up to ₹5 crore: fund up to 75% of project cost, promoters 25%. Above ₹5 crore: fund up to 50%, bank / FI at least 25%, promoters 25% — e.g. a ₹8 crore project: ₹4 crore fund, ₹2 crore bank, ₹2 crore promoters |
| Tenure | Up to 6 years in a company; moratorium on principal case by case, not more than 36 months from the date of investment; interest or coupon runs from the date of investment |
| Instruments | Equity and optionally / compulsorily convertible preference shares (equity-type instruments capped at 25% of the corpus); compulsorily / optionally convertible and non-convertible debentures; debt and subordinate loans |
| Expected return | About 15% a year on equity instruments; about 10% a year on debt and convertible instruments |
| Security | Charge on project assets (land, building, plant and machinery, licences and patents) — pari passu with banks above ₹5 crore, or a second charge where the bank holds the first; post-dated cheques and promissory notes; personal guarantees of promoters with a buyback agreement; pledge of 26% to 51% of paid-up shares; collateral or corporate guarantees from family, friends or group companies where no mortgage is available |
| Project completion | As sanctioned, within a maximum of 24 months from the first disbursement |
| Exit | Payments from operations, buyback or redemption by promoters, strategic investment, listing or any other exit |
From application to disbursement
- 1Step 1 — Structure: a company in which SC (or backward-class) promoters hold at least 60% with management control for twelve months; 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 (up to six years), moratorium, security; shareholders' agreement, buyback agreement and pledge.
- 5Step 5 — Disbursement against milestones (in proportion to the bank's tranches above ₹5 crore); project completion within 24 months; reporting to the fund until redemption or exit.
IFCI Venture Capital Fund: questions we are asked
Neither — it is equity, convertible instruments or debt from a government-sponsored fund; the fund expects about 15% on equity and 10% on debt and exits within up to six years.
₹50 lakh to ₹15 crore, not more than twice the company's net worth. Above ₹5 crore a bank must appraise the project and fund at least 25%.
Only through a company in which SC entrepreneurs hold at least 60% with management control for twelve months (or backward-class entrepreneurs under VCF-BC), with caste certificates on file.
The 60% holding must have existed for twelve months, so a fresh company normally waits a year; SC-founded incubated startups can use ASIIM (up to ₹30 lakh).
25% of the project cost; the fund gives up to 75% (up to ₹5 crore) or 50% with a bank's 25% (above ₹5 crore).
Charge on project assets, post-dated cheques, promoters' personal guarantees with a buyback agreement, and a pledge of 26% to 51% of shares.
Company and cap-table structuring, the DPR and return case, the IFCI Venture application, and the bank appraisal and co-funding above ₹5 crore.