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New USD30m investment into Indian food and agribusiness sector

CDC has announced a new USD30 million commitment to a pioneering investment fund focused on India’s food and agribusiness sector. 

Rabo Equity’s India Agri Business Fund 2 (IABF 2) will invest in growing businesses across the agribusiness industry, such as agricultural input, food processing, rural retail and cold chain storage and distribution companies.

With an estimated total food consumption of USD250 billion for 2013, India is the third largest consumer of food in the world and continues to witness significant increases in consumption, with a doubling of overall consumption expected by 2030. However, there are serious concerns over the levels of supply required to match this demand. 

With CDC as an anchor investor alongside Rabobank, IABF 2 aims to raise up to USD200 million which it will use to back between 12 and 15 small and medium sized companies with equity investment sizes ranging from USD5m up USD30m. Its predecessor fund, India Agri Business Fund 1, which launched in 2009 was the first dedicated agribusiness Fund in India and remains one of the few in the Indian market. It has made ten investments in companies including Super Agri Seeds, Prabhat Dairy and NCML. These companies directly employ almost 5000 people.

Indian agribusinesses is a fast growing domestic market, where increased demand for food products has been fuelled by rapid growth in disposable incomes and demographic and lifestyle change. But the sector continues to face limitations such as poor quality farm inputs and services; shortfalls in warehousing and cold chain facilities, as well as highly fragmented and unorganised retail markets.

Alagappan Murugappan, CDC’s Managing Director, Asia Funds, says: “Agribusiness is a key sector for CDC, in India and globally because of its job creating potential. Investments to modernize and develop food and agriculture businesses are urgently needed and will have a direct impact on reducing poverty. 

“We expect the excellent team at Rabo Equity to have a positive effect on developing the food and agri sector in India and we hope to see a significant share of their investment benefitting the low-income states in India where a large number of agribusinesses are based.

“IABF 2 is being raised in exceptionally difficult fundraising conditions for Indian private equity. Without CDC and Rabobank’s investment the fund would have struggled to exist, and we are pleased to see other investors joining us in making commitments at first close.” 

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