Washington-headquartered investment firm Small Enterprise Assistance Funds (SEAF) is in the process of raising a $75 million fund targeting Indian agriculture-related businesses, a top official told VCCircle. SEAF launched this fund in February this year and expects a first close at $30-35 million in May.. It's looking at a final close by 2009-end, SEAF co-founder Bert van der Vaart said in an interview to VCCircle. He is also moving to New Delhi from Washington to lead the SEAF team.
Agriculture is becoming hot sector sector among private equity investors given its recession proof nature. There have been a slew of investments in the space since the end of last year. Another similar sector dedicated fund is $100 million Food & Agriculture fund managed by Rabo Equity Advisors.
Till now SEAF was investing in India with Kotak Private Equity through a $160 million India Growth Fund. It now wants to go on its own and has decided to start with food and agriculture fund, said Hemendra Mathur, Managing Director of SEAF India Investment Advisors. The firm has already zeroed in on six firms and may invest in atleast 2-3 of those. The first set of two deals may be signed by May-June.
SEAF's agriculture fund is looking to fully invest its corpus in 2-3 years timeframe. The fund will be investing $2-6 million in each firm whose revenues can vary between Rs 30-300 crore. The fund is seeking to invest in various segments of agri business in India including agricultural inputs like seeds and agrochemicals, supply-chain firms, commodity exchanges, food processing and food and retail services.
Agriculture Sector Under-Served
"Agriculture business sector is under-served in India," said van der Vaart. SEAF is banking on the fact that there is a huge untapped potential in Indian agriculture space both in terms of efficiency and scale and also in value addition. Although agriculture accounts for just about one fifth of the country’s national income it involves two out of three of its workforce.
Also private equity funds in India have till now mostly invested in areas of urban demand. Limited partners (LPs) are also now looking for funds making allocation to the opportunities in the rural space. "Food and agriculture has become attractive for LPs too," said Mathur.
Mathur adds that most food companies like Nestle and Danone have beaten the market forecast and outperformed the markets. This is also true for Indian companies like Britannia.
Agricultural Back End
While there have been a number of investments in the space, most of the deals are happening on the front end, feels Mathur. But there are also back-end opportunities like integrated cold chain management and logistics & distribution.
Another partner at SEAF India is Partha Chaudhry, who has earlier worked with Yes Bank and Rabo Bank. Two decade old SEAF provides growth capital and operational support for SMEs largely targeting emerging market. It has done 286 deals across the world with a presence in Central and Eastern Europe besides Latin America, and Asia.