India’s National Bank for Agriculture and Rural Development (NABARD) announced the launch of a Rs 700-cr (US$105 million) venture capital fund that will concentrate on investments in rural, agriculturally-focused startups.
Although NABARD has contributed to other funds in the past as a limited partner, investing Rs 273-cr (US$41 million) across 16 alternate investment funds, this launch of a fund is a first for the bank.
The bank usually backs funds that have had a first close, and that have a maximum term of 10 years. Last year NABARD invested Rs 45-cr (US$6.8 million) across three venture funds: Aavishkar Bharat Fund, and Orios Partners and IFMR Fimpact Long-Term Fund, with the goal of fostering technological innovation and adoption within the agriculture and rural development sectors, reports Deal Street Asia.
The fund, launched by NABARD subsidiary Nabventures, (NABVENTURES Fund I) has received a cornerstone investment from NABARD, and has a proposed corpus of Rs 500-cr (US$75 million) with a Rs 200-cr (US$30 million) greenshoe option.
Financial details indicating the size of NABARD’s anchor investment, or the identities of any other limited partners were not disclosed. However, the bank has stated that the investment will be committed to startups engaged in agriculture, food, and rural development.
Scores of Crore
Over the 32 years to 2012, India’s agricultural gross domestic product (GDP) increased at a rate of 3 percent per year, according to the report, India as an Agriculture and High Value Food Powerhouse: A New Vision for 2030 by McKinsey & Company.
The country’s vast and growing population, combined with increasing affluence and socio-economic shifts, are expected to see the country’s overall food consumption increase by 4 percent per year to 2030, while per capita food consumption is expected to increase by 3 percent per year. Consumption in rural areas is expected to climb by 2.5 percent, while food consumption in urban areas will see double this growth at 5 percent.
Based on these projections, and the expected growth in the country’s agricultural production, processing, and exporting activities, McKinsey foresees India’s agricultural industry growing at a rate of between 5.2 and 5.7 percent over the next two decades.
Numbers such as these are driving the launch of domestic social impact and venture capital funds such as NABVENTURES Fund I, and outside investors, such as Acumen, which announced in April 2017 that it was raising a new fund to focus on the agriculture, water, education, housing, and healthcare sectors in India – and Belgian investment manager Incofin, which launched the India Progress Fund, an $80 million fund dedicated to investments in India’s food and agriculture sectors, in June of last year.
“We are going to become more and more focused on India,” Ajit Mahadevan, India director at Acumen, told Live Mint at the time. “We have been focused on investing in India, but we will get much deeper in connecting with the right set of people who can further the opportunities for our companies. So we will look at corporate partnerships and raising funds in India.”
-Lynda Kiernan