MTDC to streamline funds, have equity option

KUALA LUMPUR: Malaysian Technology Development Corporation Sdn Bhd (MTDC) plans to streamline all its funds by the first quarter of next year with an equity option for MTDC to take up a stake in recipient companies.
MTDC manages six funds amounting to RM1.8 billion, specifically the Commercialisation of R&D Fund (CRDF), Technology Acquisition Fund, Business Start-Up Fund, Business Growth Fund, Bumiputera Expansion Fund and Halal Development Fund.
MTDC CEO Datuk Norhalim Yunus said among the six funds, only CRDF does not have an equity option for MTDC currently.
“All our other funds are in the form of equity and promissory notes and only CRDF are in the form of grant. It is natural that we streamline all our funds to have options for us to take up an equity position, in line with all our funds. It’s not something drastic, only 12.5%,” he told a press conference at the MTDC Road2Funding Central Region 2016 event here yesterday.
CRDF gives out grants of up to 70% of funding requirements. Starting this year, CRDF recipients are required to give back 12.5% of the funds they receive in kind to MTDC.
“If they get RM1 million, 12.5% or RM125,000 are given back in kind whether in the form of CSR (corporate social responsibility), products or time as a mentor to our entrepreneurs. But we plan to change this. MTDC as the fund manager wants to have the first option to convert 12.5% value of the fund into the form of equity,” said Norhalim.
He said the 12.5% in the form of promissory notes allows MTDC two options, firstly if MTDC decides not to convert this into equity, recipients will need to pay the 12.5% cash to MTDC. Secondly, if the recipient company is successfully listed, MTDC can sell its shares in the open market and the money can go back to the fund.
“These are possibilities that we are evaluating to add value to the fund and to contribute to a longer lasting relationship between us and the entrepreneurs,” said Norhalim.
He said the move would be good for the fund recipient companies, as having an established corporate investor will be helpful when they want to raise funds or when dealing with overseas partners.
“We add value into the company by being their shareholder and they contribute back to the public money because they have got the funds.”
Through this, MTDC expects to have closer collaboration between recipients and MTDC as well as between recipients themselves.
MTDC is a wholly owned subsidiary of Khazanah Nasional Bhd and has been the key player in commercialisation and management of government funding since the 7th Malaysia Plan.
MTDC approved RM102.35 million in funds for this year, and aims to approve another RM45 million by year-end. It has an allocation of RM900 million under the 11th Malaysian Plan until 2020.
Besides fund management, MTDC also provides an integrated support services for technopreneurs, which includes advisory services such as mentoring, soft-landing, branding, fund raising, international collaboration and networking.
MTDC’s commercialisation ecosystem has provided funding and assistance to over 500 technology-based companies that are involved in a wide range of activities ranging from the agricultural sector to ICT.