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The plan to set up an agri-focussed fund is a logical extension of more than a century old tradition of backing the food and agribusiness by Rabobank.
Founded as a cooperative of Dutch agricultural banks in the late 1800s, the Rabobank Group has some 175-member banks in the Netherlands and dozens of subsidiaries around the world that focus on the food, agribusiness, and financial industries. This private equity fund is expected to invest in small and medium-sized companies ranging from contract farming at the primary end and key elements of the agricultural supply chain such as cold storage chains to food processing and rural retail. The deal sizes are likely to be in the range of $3-10 million per transaction. The segment of food-processing in India is growing at a rapid pace given the demands from aggressive retail chain roll out being witnessed in the Indian landscape over the past two years. “A third of the agri-produce goes waste in India. Processing is of much importance in the Indian context, more so given the expansion of the retail sector,” an industry analyst noted. According to industry estimates, while India is among the largest producers of food-grains, processed food accounts for merely 2 per cent of total food production in India, which is very low as compared to the western countries. Various research reports further indicate that taking market forces such as the rising income level and changing consumer behaviour due to the rapid economic growth, it is expected to have a growth rate of 10 per cent in 2010 and 25 per cent in 2020. This move by Rabobank to set up a specialised $100 million private equity fund comes at a time when the India’s GDP growth is at 8 per cent, with agriculture sector growing at 3 per cent. “The services and manufacturing sector has witnessed rapid growth in India, while agriculture is lagging. Initiatives such as these will no doubt help this sector,” the analyst detailed. Global and Indian retail chains as Metro Cash & Carry, Wal-Mart, Reliance Retail, Aditya Birla Group are investing significant resources in India to improve the supply-chain from farm to shelf which will enable the farmers to get better returns for their produce, if its suitably processed. |
Source: Business Standard