SEAF India Agribusiness Fund has picked up a significant minority stake in Abhay Cotex Pvt Ltd for Rs 26 crore ($5 million), a top executive with the investment firm told VCCircle.
Majority of the monies raised will be used by the company to open its second processing plant at Dhule, Maharashtra, with a production capacity of 600 MT. It will also use the proceeds to license its proprietary technology.
Abhay Cotex, a cotton seed processing company located at Jalna, Maharashtra, uses proprietary technology to extract four main products – cottonseed meal (de-oiled cake), cottonseed oil, cottonseed linters and cottonseed hulls.
What differentiates Abhay Cotex from other cotton processing companies is its ability to produce de-oiled cake and edible oil from cotton seeds by using a continuous, single-stage extraction process that saves roughly 90 per cent of the water and energy, guzzled by the conventional technologies. Incidentally, the de-oiled cake produced here has double the protein content, as compared to conventional cottonseed de-oiled cake and consequently increases the milk yield of dairy cows by up to 20 per cent within the first four weeks.
“There is tremendous scope for this technology as India is the largest producer of cotton and cotton seeds are easily available. Plus, we also have a large cattle population but the overall milk yield is low. So, this technology can prove to be a differentiator in producing protein-rich de-oiled cake in an eco-friendly manner and increasing milk productivity,” said Partha Choudhury, managing director of SEAF India Agribusiness Fund. He added that Abhay Cotex had recorded revenues of Rs 90 crore last year.
While the company’s main revenues come from the domestic market, it also exports its products to Thailand, South & East Africa, China and South Korea.
Abhay Cotex is a two-year-old start-up, founded by Ashish Mantri, who is also the managing director of the firm. Mantri hails from a business family which specialises in cotton seed production. It all started as a small cotton seed crushing unit in Maharashtra in 1983, but has expanded since and set up a cotton seed processing unit with a capacity of 2,00,000 tonnes per annum.
The company will also produce and market de-gossyploised cotton seed meal (with more than 50 per cent protein content) by 2014.
This deal marks the second investment from SEAF’s India-focused fund, a $75 million fund exclusively meant for food and agriculture-related businesses in India. In May this year, it had invested an undisclosed amount in Tropilite Foods Pvt Ltd (TFPL), a Gwalior-based food ingredients company.
The food and agri fund, which is currently on road to raise the total corpus, is now warehousing the commitments received in its first close.
SEAF’s agriculture fund is looking to fully invest its remaining corpus in 2-3 years’ time. The fund will be investing $2-$6 million in companies whose revenues vary between Rs 30 crore and Rs 300 crore. It is also seeking to invest in various segments of agri business in India, including seeds and agrochemicals, supply chain firms, commodity exchanges, food processing and food & retail services.
Headquartered in Washington, D.C., SEAF is a global fund management group specialising in providing growth capital and business support to growth-oriented small and medium-sized enterprises (SMEs) in emerging markets. SEAF manages private equity funds in these markets through a network of 21 offices around the world.
Of late, food & agri business has been a favourite for PE funds. Rabo Equity Advisors, the PE arm of the Dutch bank Rabo, has raised a $120 million India Agri Business Fund and has closed six deals since its launch in 2008. Aavishkaar Venture Management has earlier invested in food and agri-related companies such as Zameen Organic, a marketing company for fair trade, organic and pesticide-free cotton and Shree Kamdhenu Electronics Pvt Ltd, a company developing technology for the dairy industry.
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