Photo: Bloomberg
Photo: Bloomberg

Govt to launch Electronics Development Fund on Monday

The fund will primarily help start-ups developing new technologies in the area of electronics, nano-electronics and information technology

New Delhi: The government will launch the Electronics Development Fund (EDF) in collaboration with Canbank Venture Capital Fund Ltd on Monday, the department of electronics and information technology (Deity) said in a statement on Friday.

EDF is an initiative of Deity to create a “fund of funds" which will work with venture capitalists (VCs) to create funds, known as “daughter funds", which in turn will provide risk capital to companies developing new technologies in the area of electronics, nano-electronics and information technology (IT).

The idea is that the EDF will put in 20% of the capital in daughter funds and the rest 80% will be invested by VCs. The daughter funds will then invest in companies, primarily start-ups.

Communications and information technology minister Ravi Shankar Prasad will formally announce EDF by handing over the letter of commitment to the first group of daughter funds. Prime Minister Narendra Modi had launched the EDF policy during the inauguration of Digital India Week on 1 July 2015. However, the idea of creating EDF was first proposed in the Draft National Policy on Electronics 2011.

Last September, Deity had appointed Canbank Ventures as the fund manager to house EDF.

“We expect EDF to have a corpus of around Rs. 10,000 crore over a period of time, of which 20% will be invested by the government," said a senior official at Deity earlier this month, declining to be named. “The initial corpus is going to be 2200 crore, but it will dependent on the market condition and the demand. In case there is more demand, we can increase the corpus."

The EDF is different from 10,000 crore micro, small and medium enterprises (MSME) fund which was announced in budget 2014 and the recently announced 10,000 crore start-up fund, the official said.

The CanBank Ventures, which evaluated about 30 funds who had so applied to become the daughter fund, will shortlist about six funds in the first phase, the official said. “This will be an ongoing process. As and when VCs come forward to partner with the EDF, we will evaluate them," he said.

With the launch of the fund, the government aims to develop the electronics system design and manufacturing sector to achieve “net zero imports" by 2020.

While promoting innovation, research and development, and product development within the country in the specified fields of electronics, nano-electronics and IT, the daughter funds “will also support acquisition of foreign companies and technologies for products imported in India in large volume" as well as “focus on developing domestic design capabilities, thereby creating a resource pool of IP (intellectual property) within the country in the specified fields," said the Deity statement.

The ministry is seeking participation by venture fund, angel fund or seed fund and will take applications till March 2017, as per the ministry’s website.