International Finance Corporation (IFC) plans to invest $5 million as part of initial capitalisation for a minority stake in a new rural financing firm being floated by Temasek-backed Jain Irrigation Systems Ltd. IFC is already an existing investor in Jain Irrigation and the new commitment will be for a new Mumbai-headquartered non-banking finance company (NBFC) to finance the purchase of micro drip irrigation and other agri-productivity tools for rural India.
The project will mean a further exposure in rural business for Jain Irrigation that is one of India’s largest integrated agri business players with manufacturing operations in micro irrigation systems, plastic pipes and sheets, besides processed food business such as dehydrated onions and processed fruits.
The financing arm of Jain Irrigation will seek to provide a linkage to rural finance and specially support sales of its own group business through loans to farmers for irrigation systems.
The deal which is expected to be completed in the next few months will mark the 12th proposed investment by IFC in India since January 1, 2011, with total committed capital (equity+debt) of $350 million. The private sector investment arm of the World Bank has been one of the most prolific and consistent investors in Indian companies over the past few years, and has been announcing transactions every fortnight this year.
Most recently, it had committed $15 million to support the expansion project of Hyderabad-based public listed firm Vivimed Labs Ltd, a manufacturer and exporter of specialty chemicals (for personal care and industrial segments) and pharmaceutical products.
Early this month, it had also announced investment of $30 million through a mix of equity and debt in Karnal-headquartered Dunar Foods that is in the business of procurement, processing and supply of basmati rice. It has also struck a deal for a proposed investment of $10-$15 million in Aavishkaar India II Company Ltd (a successor fund to Aavishkaar India Micro Venture Capital Fund) that will have a corpus of $100-$150 million and will focus on financing early-stage venture enterprises that target fundamental market needs in rural and semi-urban India.
IFC has also proposed to invest in Gujarat-based SEWA Bank, microfinance institution Bandhan, education-focused private equity fund Kaizen, Simran Power Projects Ltd, Shalivahana Green Energy Ltd, PTC India Financial Services Ltd, Exim Bank and a just-announced $30 million loan to Kalyani Gerdau Steels Ltd – a joint venture between the Gerdau Group (Gerdau), a leading Brazilian steel producer, and the Kalyani Group.