The Fund of Funds (FoF) created by the government for pumping money into start-ups is in need of a fresh infusion.

The Department of Industrial Policy and Promotion (DIPP), which is the nodal department for managing the fund, has asked the Finance Ministry for an additional allocation of Rs 1,600 crore in the current financial year.

The FoF was allocated only Rs 1 lakh in 2017’s budget and the DIPP expects additional allocation in the supplementary demand for grants. The fund, announced by Prime Minister Narendra Modi in January 2016, has a total corpus of Rs 10,000 crore to be released till 2025.

“Considering the fund has to be spent over the next nine years, per year, the allocation should be Rs 1,100 crore…We are hoping to receive funds in the supplementary budget,” a senior government official said.

The FoF has committed Rs 623 crore to 17 alternate investment funds (AIFs) set up under it and these AIFs have further invested in 62 start-ups as on March 2017.

The Cabinet approved the establishment of FoF on June 22 in 2016. The government had provided Rs 600 crore to the FoF in FY17.

The FoF was set up to support innovation driven start-ups and is being managed by Small Industries Development Bank of India or Sidbi.

“As of now, we have committed all funds available to us to AIFs that are waiting for a ripe time to invest in start-ups… It is therefore important for us to ensure a steady fund flow now,” the official added.

The FoF has been created to contribute to AIFs registered with capital market regulator Securities and Exchange Board of India (SEBI), which in turn would invest in equity and equity-linked instruments of various start-ups in early, seed and growth stages. Contributions under FoF have to be invested in start-ups as defined by the government under its Startup India Action Plan. Around 798 applications have been recognised as start-ups so far by the DIPP.

The government has relaxed norms for venture capital funding, allowing them invest a part of their corpus in firms other than start-ups.

Source: The Economic Times