The International Finance Corporation (IFC) is proposing investment of $10-$15 million in Aavishkaar India II Company Ltd., a fund that will finance early-stage enterprises focused on the “fundamental market needs in rural and semi-urban areas in India.” The fund will likely have a corpus of $100-$150 million of which a maximum of 20% will be held by the IFC. BY PALLAVI S

The fund is targeting a corpus of $100-150M; Deal marks IFC’s 9th India investment in a quarter.

International Finance Corporation (IFC), private sector investment arm of World Bank and one of the most prolific and consistent investors in Indian companies over the past few years, has disclosed proposed investment of $10-$15 million in Aavishkaar India II Company Ltd (a successor fund to Aavishkaar India Micro Venture Capital Fund), its ninth investment commitment in India in just about three months of 2011.

Aavishkaar India II is expected to have a corpus of $100-$150 million and will focus on financing early-stage venture enterprises that target fundamental market needs in rural and semi-urban areas in India. IFC will restrict its investments to a maximum of 20 per cent of the total corpus.

The fund will focus on scaling up affordable models that target the ‘Bottom of the Pyramid’ in healthcare, water and sanitation, education, agriculture, renewable energy and other emerging sectors.

It will continue to support the investment themes of its predecessor fund, including a strategic focus on low-income states in India with current pipeline being approximately 40-50 per cent deals from these regions.

The predecessor four-year-old Aavishkaar India Micro Venture Capital Fund was an MSME-focused fund of $14 million, which is fully committed. It has invested in 23 companies of which a little over a third have direct operations in low-income states while others are focused on underserved India across healthcare, education, dairy, technology, agriculture and handicrafts, with an outreach of over a million disadvantaged people. These investments include GV Meditech, B2R (Business to Rural) Technologies, Saraplast Pvt Ltd, Milk Mantra, Vortex Engineering and Waterlife.

The new fund is initiated by Vineet Rai-led Aavishkaar Venture Management Services Pvt Ltd that has backed three funds earlier. While it is the advisor to Aavishkaar India Micro Venture Capital Fund, it is also associated as sub-advisor to Aavishkaar Goodwell India Microfinance Development Company (AGMIDC I with a corpus of $18.3 million) and AGMIDC II (that achieved its first closing in November 2010). These two funds are a joint venture between Aavishkaar India and Dutch micro finance organisation Goodwell.

For IFC, the proposed investment in Aavishkaar India II marks over half a dozen investment commitments since January 1. It has proposed to invest in Gujarat-based SEWA Bank, microfinance institution Bandhan, education-focused private equity fund Kaizen, Simran Power Projects Ltd, Shalivahana Green Energy Ltd, PTC India Financial Services Ltd, Exim Bank and a just-announced $30 million loan to Kalyani Gerdau Steels Ltd, a joint venture between the Gerdau Group (Gerdau), a leading Brazilian steel producer, and the India-based Kalyani Group.