Private equity fund to finance SMEs

By Sanjeevi Jayasuriya

NDB Capital Holdings PLC and Zephyr Management launched the Emerald Sri Lanka Fund, a US $ 50 million private equity fund to finance small and medium enterprises (SMEs) in the country.

The fund will create a vibrant and sustainable SME sector and is an integral part of overall funding in Sri Lanka. It will give tremendous opportunities for SMEs to obtain funding. This sort of private equity is important as the fund partners not only provide funding, but intellectual capacity, NDB Capital Holdings, CEO Vajira Kulatilaka said.

The appetite for funding the eco system is far greater than the Emerald Fund and there is ample room for more private equity funds in the country.

This pioneering venture will bridge the gap between the promoters of capital and SME needs, he said. The Emerald Sri Lanka Fund will invest in significant minority positions of fast growing SMEs in the country. The private equity model has facilitated in developing the SME sector and is considered as one of the methods of accelerating a country’s growth.

"Sri Lanka needs to maintain its strong growth momentum and the macro economic indicators are heading in the right direction. However, the missing ingredients are long-term capital and equity funding related to SMEs," he said.

As the SME sector is an essential component of the country’s economy, it is necessary to create long-term capital, with a low risk factor which will help in creating job opportunities and income generation.The fund will be of benefit to capital efficient businesses with sustainable competitive advantages and having proved business models. The segments that the fund targets are the export sector, process agri business, IT, port services, construction, fast growing food business, healthcare and building services as SMEs are considered the platform that the present economic backbone is been built upon.The fund will focus on a consistent investment approach centered on fast growing businesses with a focus on value addition. It will develop exit strategies along with the entrepreneurs either through an IPO or a trade sale.