Rabobank, the Dutch bank with special focus on food and agriculture worldwide, has today announced the first close of India’s first private equity fund focused on food and agribusiness. The first closure of the fund is at $85 million, while the target corpus is $100 million with a green shoe option of upto $120 million.
As part of the first closure, Rabobank, the sponsor of the fund, has invested $25 million. The lead investors of the fund are International Finance Corporation (IFC), the PE arm of World Bank, Dutch entrepreneurial development bank FMO, and DEG, a part of German KfW banking group who have invested $20 million each. The remaining amount will be raised from private investors. According to the bank officials, the fund was raised in record five months considering it’s a first of its kind fund for agricultural sector.
The fund, registered in Mauritius and managed by India registered Rabo Equity Advisors, will target SMEs in food and agricultural companies and will make investments in the range of $3-10 million each in a company. They will take up majority or significant minority positions in the investee companies. The fund plans to invest in 12-15 companies who have revenues between the range of $30 million to $200 million.
The fund plans to invest in more than 38 sub sectors of food and agribusiness identified by Rabobank which includes food processing, dairy, poultry, cold storage, seeds, renewable energy (biomass) among others.
The fund is led by Rajesh Srivastava, Chairman of Rabobank Equity Advisors, who has worked with Rabobank for the past 10 years and has led food and agribusiness research team of Rabobank in India for last five years. The size of the private equity team will be 8 members.
The fund expects internal rate of return of about 20 per cent, which is modest compared to traditional private equity funds. Says Srivastava, “This sector needs a lot more patience. We will be content with 20 per cent IRR to start with.”
The fund is actively considering 3-4 proposals and will make its first investment soon. They have already got some 20-odd proposals to be considered for investment. Rabobank has similar agriculture focused funds also in Australia and New Zealend. Interestingly, Yes Bank, in which Rabobank has 20 per cent stake, had announced last year that it was raising a $100 million food and agri fund. That was never closed though.