India has the third-largest startup ecosystem in the world. It is also the third largest hub for unicorns (companies valued at over $1 billion), behind the US and China. Several startups have gone on to list on the stock exchange in the last 2-3 years, across sectors from fintech to food delivery and logistics. Many of the older companies are also betting big on technology and innovation across diverse areas.
SBI Mutual Fund, the country's largest asset manager, is now looking for such companies focused on innovation through its new fund offering.
SBI MF had Rs 9.88 lakh crore in average assets under management in the April-June quarter, according to the Association of Mutual Funds of India. It has already launched several new thematic funds this year. If it was the energy opportunities fund in February, it was the automotive opportunities fund in May. Now, the AMC is launching a new Innovative Opportunities Fund, which will invest in equity and equity-related instruments of companies that seek to benefit from the adoption of innovative strategies and themes.
"A thriving startup and funding ecosystem, and strong digital infrastructure along a large consumer market provide favourable tailwinds for our country to become the next big leader on the innovation horizon. The SBI Innovative Opportunities Fund is a good opportunity for investors who would like to invest in companies which are innovating to gain a competitive edge and changing the way we do things to enhance value in their offerings," said Shamsher Singh, MD and CEO of SBI Funds Management Ltd.
The fund will target businesses adopting automation, artificial intelligence (AI) or sustainable practices in their processes that lead to cost reductions, improved efficiencies and value enhancements. It will also look at companies with a proven trend of launching successful products and services, reflecting their ability to innovate and capture market share. It will also focus on companies, which allocate a significant portion of their revenue to research and development, and strategic partnerships.
SBI Innovative Opportunities Fund will invest at least 80 per cent of its net assets in companies falling in the innovation theme. Up to 35 per cent of the assets will be invested into global stocks that are aligned with the innovation theme. The overseas investments will, however, largely depend on the Reserve Bank of India raising the limit on the amount mutual funds can invest overseas.
The $7 billion limit available for the mutual fund industry to invest in overseas markets has been exhausted for almost two years now, but the RBI is yet to increase the same. D.P. Singh, the deputy MD and joint CEO of SBI MF is hopeful that the cap will be increased soon.
The new fund offering will be a diversified portfolio investing across sectors and market caps. While the fund house has curated a list of over 100 such companies, the fund will aim to have a portfolio of 35-40 stocks.