Neev II, a government-backed climate and sustainability-focused SME (small and medium enterprise) fund, is set to reach its final fundraising goal of as much as 2,000 crore by June, its top executive said. “We are targeting between 1,750 and 2,000 crore to be closed in the next six months hrough June. That’s where we will likely end Neev II. We started deploying from that and have deployed about a quarter of the fund already," Akshay Panth, chief investment of Neev Funds, said.

Launched in May 2021, the fund raised around 1,000 crore of the targeted 2,000 crore. In March, VCCircle reported that the fund had received commitments of around 1,500 crore to invest in climate action, sustainability, and social impact businesses.

Neev II (SVL-SME fund) is in early-stage of discussions with multilateral and a couple of institutional investors. So far, its commitments have come from global and domestic investors, including the European Investment Bank (EIB), Japan’s International Cooperation Agency (JICA), Foreign, Commonwealth and Development Office (FCDO); Small Industries Development Bank of India (SIDBI), SRI Fund and the State Bank of India.

Neev funds are run and managed by SBICap Ventures Ltd, a unit of SBI Capital Markets Ltd. The fund is also backed by the UK government. So far, it has deployed capital in four startups, namely, GPS Renewables, emission-control device manufacturing company Chakr Innovation, Blue Planet, and Hygenco Green Energies, which was its most recent investment in October.

Neev II’s investment theme is going to be around sustainable agriculture, waste management, water, circular economy, electric mobility and electric vehicles or EVs at its core. “We have a very strong pipeline of around $300 million across 20 firms over a five-year period which we are sifting through to figure out what and where we to invest…in strategies of climate adaptation and climate mitigation. Those are the two buckets,"Panth said.

“Decarbonization of supply chains, energy efficiency, green hydrogen, and anything which has a positive climate action angle to it is what we would be investing in. Those are the sectors that we will be looking at," he said. The first fund, Neev I, was a smaller corpus fund that invested ₹524 crore in 10 companies, of which it has made its first exit in SunSource Energy with an approximate IRR of 18%.

“We have started exiting from portfolio companies and have announced our first full exit last year and have partial exits in two other companies. We are looking at a couple of full exits shortly," Panth said without disclosing details. While the target IRR (internal rate of returns) from Neev I is 12%, Panth expects to return mid-late teens by the end of the fund term. Neev II’s ticket size per transaction has been increased to 100 - 125 crore, as compared with 40-45 crore from Neev I.

We see a slowdown in the technology space. Just this morning, we were speaking to another tech fund, and they said there’d been a bit of a slowdown in LPs reaching out for their fund or LPs closing their transactions. On the funding environment, Panth said the Indian market is witnessing a bit of a downturn in the technology sectors, particularly in edtech and a “start of a downturn in agritech". “Enterprise solutions, which were sort of SaaS models, which had shot through the roof, are seeing a bit of a slowdown. There are pockets where there is money available. There is money for consumer. There is money for climate (it) has a lot of global capital," Panth further said. Neev funds, he added, prefer to be the largest investor without playing the valuation game.