NABARD would be making contributions to Alternative Investment Funds (AIFs) with one or more of the following objectives:
- To complement and broad base the existing Refinance and Co-finance products and other developmental initiatives of NABARD.
- To encourage entrepreneurship in existing or new activities leading to agricultural and rural development.
- To facilitate development of model units for emulation by rural people.
- To encourage investment in innovative, high-risk, sunrise activities in agriculture and rural development sectors.
- To assist units which are unable to scale up their operations for want of equity support.
- To support units that would lead to infrastructure development and/or generate, directly or indirectly, employment in rural areas.
The AIF should have been registered under SEBI (Alternative Investment Fund) Regulations, 2012. Funds classified under Category I and II of the above regulations will be considered.
The Fund should have a maximum life period of 10 years
NABARD would invest mainly in agriculture, agro processing and rural area focused funds. For this purpose, sector agnostic funds would be considered as eligible if it agrees to invest at least 200% of NABARD’s commitment to the Fund in projects that would help agriculture and rural development, which broadly includes sectors such as Food Processing, Animal Husbandry, Fisheries, Supply Chain Management, Farm Mechanisation, Biotechnology, Waste Management and Renewable energy. In the event of non-fulfilment of stipulation, entire contribution of NABARD shall be returned with an annual compounded interest of 18%. The stages of compliance shall be mutually agreed to by NABARD and Investment Manager at the time of entering into Contribution Agreement.
The portfolio companies to be supported by the AIF may preferably be set up in rural areas as defined in NABARD Act, 1981 and if the units are set up outside such area, the goods and services produced by them should be benefiting the rural areas either directly or indirectly.
The Investment Managers (the company) should have been in AIF activities for at least 5 years in India and shown good progress in its earlier fund investments.
In the case of new AIF (Investment Managers who are approaching NABARD for its first or second fund) with less than 5 years of existence, the promoters of the Investment Manager (the company) should have experience in VCF/AIF business for at least 10 years and demonstrated good performance. Such Funds should have fulfilled the following criteria before approaching NABARD.
- Should have mobilised commitment not less than 25% of the proposed corpus, from contributors other than sponsors (Sponsor commitment will include commitment from Investment Manager & Sponsor company/Group)
- Should have achieved first closing
- Provide for first loss provision of at least 5%.
The structure of the AIF Trust (Trust) / Asset Management Company (AMC) of the Fund shall be in compliance with various regulatory and statutory requirements. The structure of the fund will also be examined from tax angle to ensure that investors are not exposed to adverse tax consequences due to structural inefficiencies
The proposal should contain the following documents
- Copy of SEBI Registration Certificate
- Private Placement Memorandum
- Past performance details - IRR generated by the Fund in case fully exited; in case of partial exits, the IRR of exists so far and valuation of unexited portfolios
- Copy of commitment letters received from other investors
- Details of investments made so far and deals in pipeline