46 XX | Enlightener Series | B. Central Government Schemes | B.18 Venture Capital Fund for Scheduled Tribes

Disclaimer….before you read ahead!

The information contained herein is of a general nature and for information purposes only, with the intent of raising awareness around various resources, schemes etc. available for women entrepreneurs in India. It is not intended to address the circumstances of any particular individual or entity. It does not purport to be all-inclusive or necessarily contain all the information that may be relevant for the reader, and may be subject to updating, revision or amendment. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to remain accurate in the future. The reader, therefore, is required to exercise their discretion; and not act on such information without appropriate professional advice after a thorough examination of the particular situation.

Furthermore, we are not a lender and are not authorized by the Reserve Bank of India to act as one. By disseminating the information contained herein, we are not soliciting any borrower or customers for the company or organization mentioned herein nor do we intend to syndicate any capital for the reader of this article.

About this scheme…

Venture Capital Fund for Scheduled Tribes (VCF-ST) was launched by Ministry of Tribal Affairs (MoTA), Government of India on February 10, 2024 with the aim of promoting entrepreneurship and start-up culture among the people of Scheduled Tribe (ST) community.
VCF-ST is a SEBI registered Venture Capital Fund managed by IFCI Venture Capital Funds Ltd., a subsidiary of IFCI Ltd., a Government of India Undertaking.

How is it being implemented?

Under VCF-ST Scheme, direct financial assistance in the form of loans, equity capital and incubation funding will be given to:
ST owned existing or new business in manufacturing, services and allied sectors including start-ups and units being incubated in the Technology Business Incubators (TBIs) with special incentives to ST entrepreneurs who are women or disabled. Also, atleast 30% of the beneficiaries of this fund is preferred to be women entrepreneurs.

What’s on offer?

I. Product

Debt via instruments such as Non-Convertible Debentures (NCDs), Optionally Convertible Debentures (OCDs), Optionally Convertible Preference Shares (OCPS) etc.
Equity via instruments such as Equity, Compulsarily Convertible Preference Shares (CCPS),
Compulsarily Convertible Debentures (CCDs)
Incubation Funding
Ticket Size:
- Debt or Equity Instruments: ₹10 Lakhs to ₹5 Crores, subject to VCF-ST assistance not being more than two times of the business networth
- Incubation Funding: upto ₹10 Lakhs per year for a period of 3 years, aggregating ₹30 Lakhs for 3 years

II. Purpose:

Acquisition or investment in fixed assets
Working capital requirements
For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below

III. Borrower Type:

Debt or Equity Instruments:
- Private Limited Company, Public Limited Company
- Proprietary Firm, Partnership Firm, One Person Company (OPC), Limited Liability Partnership (LLP) or any other establishment incorporated under any law in force should convert itself into a Private Limited or Public Limited Company before getting assistance under the Scheme
Incubation Funding: Constitution of beneficiary may be flexible. For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below

IV. Security or Collateral or Guarantee or Insurance

Primary Security: Assets of the project being funded or assisted under the Scheme including land, building, plant & machinery and rights on licenses or patents
Collateral Security:
- Debt or certain Equity Instruments:
  - If no mortgage is available in the form of project land, borrower might need to arrange collateral securities
  - Pari-pasu charge on assets with other lender Banks/Fis, on a case to case basis
  - Pledge of Promoter(s) shares: minimum 26% upto 51% of the Issued and Paid-up capital
  - Post Dated Cheques (PDCs) / Electronic Clearing Service (ECS), and Promissory Notes
- Incubation Funding: pledge of shares held by Promoter(s) in the Company
Guarantee: Personal guarantees of the Promoter(s) along with buyback agreement
Insurance: For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below

V. Interest Rate/Coupon Rate

Debt Instruments: concessional rate of 3.75% per annum for women or disabled ST entrepreneurs vis-à-vis 4% per annum for all other ST entrepreneurs
Equity Instruments: Return expectation of 4% per annum or higher at the time of Exit. Please read this along with details mentioned under Tenure, Repayments & Pre-Closures section below
Incubation Funding: For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below

VI. Processing Fee

For more information around this, please contact IFCI venture Capital Funds via means mentioned below

VII. Margin Money Requirement

25% of the project cost or above will required to be funded by Promoter(s), Government subsidy or bank loans
- Promoter(s) will have to contribute atleast 15% of the project cost

VIII. Tenure, Repayments & Pre-Closures

Tenure:
- Debt & Equity Instruments: Upto 10 years
  - For debentures alone, tenure includes moratorium period upto 36 months
- Incubation Funding: For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below
Repayments:
- Debt Instruments:
  - For more information around the frequency of repayments, please contact IFCI venture Capital Funds via means mentioned below
  - Repayments could be made out of funds from operations, buyback or redemption by Promoter(s) or Company
- Equity Instruments:
  - One shot repayment (Exit) by way of buyback by Promoter(s), strategic investment or IPO within the end of Tenure
  - Exit will be based on the valuation of the Company at that point of time
- Incubation Funding: For more information around this, please reach out to IFCI Venture Capital Funds via means mentioned below

IX. Turnaround Time

Some of the features of this Scheme includes digital application submission, instant eligibility check, all required information at one place, one point submission of details & documents, and fast resolution
The sanction may take about 2-3 months from the time of filing the application subject to
submission of all requisite documents by the Company and its Promoter(s)
For more information around the process & timelines, please refer to Q22, Q24 & Q28 of the FAQs here

Interested? Read ahead to check your eligibility….

I. Do you belong to Scheduled Tribes Community and have a documentary proof?

II.

Are you setting up projects or units in manufacturing, services or allied sector?

Are you a start-up or a unit being inclubated in the Technology Business Incubator (TBI)?

III.

If you are looking for financial assistance of upto ₹50 Lakhs, do the ST entrepreneur(s) in your Company hold atleast 51% shareholding and have management control, since at least past 6 months?

If you are looking for financial assistance of upto ₹50 Lakhs and were earlier incorporated under any law in force as entity other than Private or Public Limited Company, do the ST entrepreneur(s) in the new successor Company (Private or Public Limited Company) hold atleast 51% shareholding and have management control, since at least past 6 months? Also, did the ST entrepreneur(s) in the predecessor entity hold atleast 51% and have management control?

If you are looking for financial assistance of above ₹50 Lakhs, do the ST entrepreneur(s) in your Company hold atleast 51% shareholding and have management control, since at least past 12 months?

If you are looking for financial assistance of above ₹50 Lakhs and were earlier incorporated under any law in force as entity other than Private or Public Limited Company, do the ST entrepreneur(s) in the new successor Company (Private or Public Limited Company) hold atleast 51% shareholding and have management control, since at least past 12 months? Also, did the ST entrepreneur(s) in the predecessor entity hold atleast 51% shareholding and have management control?

For Incubation Funding, is your innovative idea selected by TBIs for incubation funding to cover the cost of carrying out innovation project?

For Incubation Funding, is yours a new Company where at least 51% shareholding is held by first time ST entrepreneurs who have been working in technology oriented innovative projects either:
- with the support of incubation centers at IlTs, NITs, Premier Business Schools, Universities, Institutions, Medical Colleges, NSTEDB under Department of Science & Technology (DST) or supported by corporates, with good potential of commercialization and project is at implementation stage; and / or;
- without the support of incubation centers but are having patent/ copyrights with good potential of commercialization and project is at implementation stage;
- Projects sanctioned by Departments/Ministries of Government of India after due appraisal

If your answers to the questions above are an emphatic YES, you are all set to avail loan under Venture Capital Fund for Scheduled Tribes!

So…how big is this scheme and what has been done so far?

I. VCF-ST is likely to be a fund with a corpus of ₹50 Crores

II. The present corpus of the fund is ₹21.52 Crores of which ₹20 Crores has been contributed by MoTA, ₹1 Crore by Tribal Cooperative Marketing Development Federation of India (TRIFED) and the balance ₹0.52 Crore by IFCI Venture Capital Funds

III. More details of progress under this Scheme do not seem to be available in the public domain