Dalits venture into funding to help community with Rs 500 crore fund

BANGALORE: India's Dalit businessmen are pooling together risk capital to set up a venture capital fund for their brethren, the first initiative of its kind in the country. The Rs 500-crore fund, being championed by the Dalit Indian Chamber of Commerce and Industry, will be registered with capital market regulator Sebi by the end of the year.

It will open for business in the middle of 2012. The initial corpus for the sector-agnostic fund will come from the community's business elite, a group which includes Ashok Khade, chief executive of the Rs 500-crore Mumbai-based Das Offshore Engineering, and Rajesh Saraiya, chief executive of the $400-million (Rs 2,000-crore) UK-based steel trading firm Steel Mont, who will anchor the fund as Limited Partners, or LPs.

"The current funding mechanisms are largely collateralbased, which means they are out of bounds for a number of Dalit entrepreneurs," said the chamber's Chairman Milind Kamble, explaining the rationale for setting up the fund. Dalits number about 200 million, or one-sixth of India's population, but control only 1% of the country's wealth because they own very few assets, according to D Shyam Babu, a Dalit scholar and activist, who is researching the community's economic progress.
The Dalit business community has traditionally faced major hurdles in accessing capital despite the creation of government institutions such as the National Scheduled Caste Finance and Development Corp. "The amounts disbursed are too small - barely Rs 5 lakh - and even that is doled out in instalments. There is no denying the government programmes are designed to help, but they fall short," Babu said.

The fund will be run as a regular risk capital entity but will need to balance social good with commercial interest as the aim is to broaden the availability of capital for Dalit businessmen. "But this fund is not a charity; it will be run as a business," Kamble said.

Prasad Dahapute, MD at Varhad Capital, a boutique investment banking firm involved in setting up the fund, said they are seeking at least 30 members to contribute Rs 5 crore each. A number of well-known Dalit businessmen have been asked to contribute to the fund and many have agreed, he added.