Rabo Equity Advisors, the private equity arm of Rabobank, has reached an agreement to invest a total sum of Rs 48.7 crore ($10 million) in LT Foods and one of its subsidiaries. The PE firm, through Indian Agri Business Fund and Real Trust, will pick up a 14.7% stake in LT Foods for Rs 25.4 crore in a preferential issue. The remaining amount has been invested in its subsidiary Daawat Foods Ltd for a 26.2% stake.
The deal is subject to approval of the shareholders and execution of definitive agreements, which will be decided at LT's extraordinary general meeting (EGM) on October 26.
This is the second deal from Rabo Equity Advisors in last one week. Earlier it announced a 26% stake buy in oil seed company Geepee Agri.
LT Foods is the third largest Indian exporter of basmati rice cereals. Around 80% of its income comes from exports to more than 35 countries across the world. The BSE- listed firm reported sales of Rs 694.40 crore with a gross profit of Rs 52 crore for FY09.
The funds will be used by LT for its capital expansion. While the parent company will use the funds to setup a plant in Punjab, the subsidiary will put up a plant near Bhopal to produce rice snacks, said Rajesh Srivastava, chairman and MD, Rabo Equity Advisors.
With its foray into processed foods through the snack plant, the company is increasing its focus on the domestic consumption story. "They are increasing focus on domestic play because as the retail market gets more organised, there will be more branded play in food items," said Srivastava, who will be joining the board of LT Foods.
Indian Agri Business Fund has managed to raise $95 million in commitments, with an option of raising upto $120 million. The firm is focusing more on investments at this time rather than fundraising, said Srivastava. Parent firm Rabobank also has an option to invest another $25 million in the fund.