BackRabo Equity’s agri-business fund looks to raise $30 mn from ADB
The fund is looking to raise $200 million. It has already raised $90 million and marked its first close at March-end
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Mumbai: Rabo Equity India Agri Business Fund 2 (IABF2), which focuses on investing in food and agri-business companies, is in talks to raise $30 million from the Asian Development Bank (ADB) as part of a fundraising initiative, said two people familiar with the development.
“The discussions are on and it will materialize soon. The fund managers are now looking to raise another $80 million from European and Asian investors," said one of the people. Both declined to be named.
In an emailed response, ADB said it was unable to share information on the matter since the proposal is under consideration.
The fund is looking to raise $200 million. It has already raised $90 million and marked its first close at March-end and is expecting to finish its entire fundraising process by October.
India Agri Business Fund invests in the food and agri-business sector, which is an attractive space for investors because of the huge opportunity for growth, given the Indian consumption story, and a wide array of sub-sectors to invest in.
It is a direct play on the India consumption story and rising disposable incomes as well as the supply chain around the sector, so it is very attractive for investors, said Harish H.V., partner at Grant Thornton India Llp.
“It has been a fairly active sector when it comes to private equity (PE) investments as it holds huge opportunities and there are several avenues such as food processing, agri-logisitics, branded food products, agri-financing, etc., for PE funds to invest in," he added.
In December last year, CDC, the UK’s development fund institution, invested $30 million in the fund. Apart from CDC, its investors include IFU Denmark, French development finance institution Proparco and Dutch banking and financial services company Rabobank.
Rabo Equity Advisors Pvt. Ltd is a 51% Rabobank-held company with senior employees of the firm owning the remaining 49% shares. “The fund could seek few months’ extension for closing but the fundraising environment has improved substantially over last six months," the first person cited above added.
IABF2 will invest in growing businesses across the agri-business industry, including agricultural inputs, food processing, rural retail and cold-chain storage and distribution companies. It plans to deploy the new fund across 12 transactions with an average investment size of $15-17 million each.
“They are evaluating three deals, of which one is supposed to close in the next one month. It is looking at dairy, seeds, agrochemicals, cold-chain storage and non-alcoholic beverage companies to invest in," the second person said.
Apart from the fundraising drive, Rabo is also focusing on exiting investments made from its maiden agri-business fund, the first such fund in India. It raised $120 million in 2008-09 and invested it across 10 firms. It concluded the last investment from the fund in March 2014.
“They are looking to exit their entire portfolio by the end of next year and they have initiated the process to part-exit a warehousing company, Prabhat Dairy Ltd and Global Green," the second person added.
Mint reported on 9 April that commodity warehousing company National Collateral Management Services Ltd had been scouting for investors to raise ₹ 200 crore. During this round, Rabo Equity is planning to sell part of its stake too.
The fund is also in talks to exit its investment in Avantha Group’s Bengaluru-based foods business The Global Green Co. According to a 5 July 2013 report by VCCircle.com, the fund had partly exited the investment in 2013 by selling shares to the firm’s promoters. One of its portfolio firms, Prabhat Dairy, filed its papers with the Securities and Exchange Board of India on 31 March. Rabo is looking to exit part of its investment through the initial public offering.
Although Indians currently spend a significant amount on food, the numbers are expected to grow sharply as the market moves from non-branded to branded products. According to a 2012 report, India Food Guide by Edelweiss Securities Ltd, Indians spend ₹ 17 trillion per year on food. Still, per capita expenditure on food in India is one-sixth of China’s and almost one-sixth of that in the US.
“Only 12% of food is processed, much lower than 40% in China and 80% in Malaysia. Spending on processed food is likely to surge four times by 2020, from the current ₹ 2 trillion," the report said. According to Edelweiss, most categories in the sector, such as packaged staples (18%), snacks (20%), dairy (10%), beverages (14%) and bottled water (22%), are expected to see high double-digit growth.
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