Nabventures: Fund for Rural Agriculture Startup

• 15 May 2019

• Nabventures, a subsidiary of NABARD, announced its maiden Rs 700 crore venture capital fund for equity investments in agriculture, food and rural start-ups.
• The fund – NABVENTURES Fund I – has a proposed corpus of Rs 500 crore with a greenshoe option of Rs 200 crore.
• NABARD has given an anchor commitment for the fund.
• The fund is registered with SEBI as a Category II Alternative Investment Fund.
• So far, NABARD has been contributing to other funds, but for the first time it has launched a fund on its own.
• The fund will have a high impact as it will provide a boost to investment ecosystem in the core areas of agriculture, food and improvement of rural livelihoods.

NABVENTURES Ltd.

• Recognizing the need for early-stage support for agriculture and rural enterprises and the lack of adequate institutional support, NABARD has launched NABVENTURES Limited, a separate subsidiary to support start-ups.
• It has been incorporated by NABARD under the Companies Act 2013.

Greenshoe option

• A greenshoe option is an over-allotment option.
• In the context of an initial public offering (IPO), it is a provision in an underwriting agreement that grants the underwriter the right to sell investors more shares than initially planned by the issuer, if the demand for a security issue proves higher than expected.
• It provides price stability and liquidity.
• It provides buying power to cover short positions if prices fall, without the risk of having to buy shares if the price rises.
• In risk capital parlance, exercising a green shoe option allows a venture capital or private equity firm to raise capital over and above its original target corpus, having received greater interest from investors, backing its investment thesis or track record.

Alternate Investment Fund (AIFs)

• Anything alternate to traditional form of investments gets categorized as alternative investments.
• In India, alternative investment funds (AIFs) are defined in Regulation 2(1)(b) of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
• It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP), which are not presently covered by any Regulation of SEBI governing fund management nor coming under the direct regulation of any other sectoral regulators in India.
• Thus, the definition of AIFs includes venture Capital Fund, hedge funds, private equity funds, commodity funds, Debt Funds, infrastructure funds, etc.
• Types of AIFs
  
  • Category I AIF are those AIFs with positive spillover effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India. Such funds generally invests in start-ups or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. For example, Venture Capital Funds, SME Funds, Social Venture Funds and Infrastructure Funds.
  • Category II AIF are those AIFs for which no specific incentives or concessions are given. They do not undertake leverage or borrowing other than to meet the permitted day to day operational requirements, as is specified for Category I AIFs. For example, Private Equity or debt fund.
  • Category III AIF are those AIFs that are considered to have some potential negative externalities in certain situations and which undertake leverage to a great extent. These funds trade with a view to make short term returns. These funds are allowed to invest in Category I and II AIFs also. They receive no specific incentives or concessions from the government or any other Regulator. For example, Hedge Funds.