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SEAF India Agribusiness Fund closed fundraising at over $40M, aims 3 more deals by year end 

The fund, which targets small-sized deals of up to $5 million, will be deploying half of its total corpus by the end of this year.

Small Enterprise Assisted Fund (SEAF), an emerging markets-focused investment firm targeting SMEs, closed fund raising for its maiden India focused fund SEAF India Agribusiness Fund at Rs 230 crore last year ($38.6 million by current forex rates and around $42 million based on rates last year), a senior executive of the firm told VCCircle.

The firm had earlier made a first close for the fund at around $33 million (around Rs 155 crore then) three years ago. It was originally targeting to have a total corpus of around $75 million (around Rs 375 crore back then).

Hemendra Mathur, managing director, SEAF, said the firm marked its second and final close for the fund in 2012. “The total amount raised is Rs 230 crore and we are not in a fundraising mode now. We have raised money from the same LPs in the second round. Broadly, 50 per cent is raised through domestic LPs and 50 per cent through foreign LPs,” he said.

The LPs which participated in the first close of the fund were Life Insurance Corporation of India, Omidyar Network Fund, Inc., Sarona Asset Management, Small Industries Development Bank of India, Syndicate Bank, Unigrain and Union Bank of India.

The fund, which targets small-sized deals of up to $5 million, will be deploying 50 per cent of its total corpus by the end of this year.

It has invested in three firms to date. In April this year, SEAF India Agribusiness Fund, along with Sarona Asset Management, acquired a significant minority stake in Khyati Foods Pvt Ltd, which processes organic cotton and soybeans. Other investments made by SEAF in 2011 include cotton seed processing firm Abhay Cotex and Tropilite Foods Pvt Ltd (TFPL), a Gwalior-based food ingredients company. In 2012, the company did not do any investments.

According to Mathur, a few deals are already in the advance stages and are about to be closed by SEAF. “We will be closing three more deals in this quarter or by the beginning of the next quarter. We will deploy all of the fund by 2014 end. From this fund, we will be doing a total of 10 deals,” he said.

“We usually invest in companies that have Rs 50-250 crore top-line. We invest in the range of $2 million to $5 million and we feel SMEs are a sweet spot in the food and agri space,” said Mathur.

According to him, only 5 per cent companies would be above $100 million revenue range in the food and agri market. The total food and agri market, which includes food retail, restaurant chains and FMCG, is $250 billion in India, according to him.

Mathur said SEAF is a conservative fund house and believes in investing in companies that have high margins; this is one of the reasons that the fund has not touched the dairy space till now. “Dairy companies are top heavy and do not have profitability margins and in case of QSRs, they have high capital expense,” he said.

He said SEAF usually invests in companies where there is a clear path to strategic sale of the business after three-five years of investing. “Companies that do not have high capital intensive business, but have a good working capital cycle attract us. Such companies need money in Rs 15-30 crore range to add a new plant, enter new states or for distribution,” Mathur said.

He said SEAF encourages B2B companies in the poultry, farming and processed foods space. “B2B companies also have better margins and valuations; such companies are not capital intensive. We encourage companies spending on distribution, hiring the right talent at top and entering new states or regions,” he added.

(Edited by Joby Puthuparampil Johnson)

SEAF India Agribusiness Fund is a private equity fund managed by Small Enterprise Assistance Funds with $75 million assets under management. It provides growth capital to companies operating in India. The fund seeks to invest in early stage businesses in underserved market and agriculture sectors.