Rabo Equity Advisors has agreed to invest Rs 140 cr (US$21 million) in Indian organic food company Nature Bio Foods Ltd. (NBFL), a wholly-owned subsidiary of LT Foods.
The investment, which is being made through the India Agri Business Fund II, will be made in tranches, which are subject to the fulfillment of certain conditions set between the parties, however, the stake acquired by fund was not disclosed.
Launched in 1998, NBFL produces lines of organic products including rice, oils and oilseed products, grains, nuts, sweeteners, and spices, among others, generating 90 percent of its business through exports which are mainly focused on the U.S. and European markets.
Through this business, NBFL posted revenue of Rs 361 cr (US$54.3 million) for its 2017-18 year, reflecting a growth rate of 44 percent between 2013 and 2018.
Since its launch, NBFL has forged relationships with 80,000 farmers, or 12.4 percent of all organic farmers in India, reports Equity Bulls. The company has built out an extensive infrastructure including sourcing, processing, and selling, which all comply with global certification.
“Today we are in a position to leverage the world-class infrastructure that we have created in the backend,” said Mr. Ashwani Arora, managing director and CEO, LT Foods. “We will utilize this equity infusion to fuel the next leg of growth as we will build/strengthen our ‘EcoLife’ brand in India and globally as well.”
Headed by chairman and managing director Rajesh Srivastava, Rabo Equity Advisors is the first private equity fund in Asia to be dedicated to the food and agribusiness sectors.
Through its first fund – India Agri Business Fund I, Rabobank invested approximately $120 million in 10 companies. Its second fund – the India Agri Business Fund II – saw a close of $100 million toward a targeted $200 million in late 2014. More recently in October of last year, the fund announced its plans to double its investments in the country, aiming to raise $400 million from global institutional investors. Driving this push is actions that have been taken by the Indian government in support of its farming sector including enhancing crop insurance programs, which in turn will mitigate the risk associated with agricultural production in the country.
“We have started preparing for this new round of fundraising ($400 million),” Rajesh Srivastava, chairman of Rabo Equity Advisors, told ET. “We expect many global investors to participate as we will conclude it in the next calendar year. The food processing sector, which is likely to grow 12-15 percent CAGR (now 8.50 percent) in the next five years, will be a large focus of our new fund. You will not find such exponential growth in any other industry in India.”
Reflecting this growth and the role that LT is playing in the maturation of the Indian food sector, in March 2016 LT Foods acquired Hindustan Unilever Limited (HUL), the Indian unit of Unilever, for Rs 25 crore (US$3.08 million). In business in India for more than 80 years, HUL began exporting Basmati rice to markets across Europe and the Middle East in 1985 under the Gold Seal Indus brand, and is the largest Fast Moving Consumer Goods Company in the country.
For LT, who’s flagship brands include Daawat, Heritage, Royal, and Ecolife, this deal for HUL represented an opportunity to expand its presence into the markets of Qatar, Oman, and Bahrain, and strengthen its footprint in export hubs such as Saudi Arabia, the UAE, and Kuwait.
For Nature Bio Foods, the infusion of capital from Rabo will support the company in meeting its goals of global growth.
“I am very pleased with how Nature Bio Foods has scaled up over the years as a leading supplier of organic ingredients internationally,” said Arora. “The approval from our Board towards equity investment by Rabobank’s India Agri Business Fund II will help us carry out our strategic vision for this business, which is to develop an extensive branded portfolio with a continuous growth in ingredient business as well.”
-Lynda Kiernan