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Agri-focused Rabo Equity to invest $40 mn in two deals by March

The firm will also exit investments from Fund I, raise the third fund by 2018-end or early 2019

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Rabo Equity Advisors, which is currently investing from its $150 million India Agri Business Fund II (IABF-II), is planning a slew of fresh placements in the coming months.

The agri-focused private equity (PE) investment firm, in which 51% is held by Rabobank, will also be looking to exit a few investments from the India Agri Business Fund I (IABF-I). The firm is likely to hit the road and raise money for its third fund sometime towards the end of the calendar year 2018 or early 2019.

Rajesh Srivastava, chairman and managing director, Rabo Equity Advisors, told DNA Money the investment firm has already committed approximately $52 million from Fund II so far.

"We should do at least two more full deals of $20 million each, taking the total to about $90 million by March 2018. If we are able to go ahead with more such deals in the coming months, then automatically, we will have the rights for new funds," he said.

Srivastava, who also owns a large portion of the balance 49% stake in Rabo Equity, said that in later part of 2018 or by the third quarter they should be in a position to look for a new fund. "But not now as the investor would want us to deploy 70% odd (from the existing fund)," he said, adding that their investment pipeline is very good.

Just last month, the PE firm picked up 40% stake in a fine/casual dining restaurant chain Olive Bar & Kitchen, investing around Rs 110 crore. Future placements, Srivastava said, will also be focused on investing in the expansion and growth of Indian food and agri-business companies.

"It would be agri-food only as we are looking more into agri now. We have done a food service front-end and we must do something at the back-end as well. We are looking into few agri deals and I think we should be able to close them. Unfortunately, we don't have such interest that we should do only front-end, branded restaurant chain; it's not like that. We are more proficient into the agri side," he said.

As for exits being planned from IABF-I, Srivastava said, there are few potential exits, but at a too early stage. "We have a packaging company to exit; another one is the rice company Daawat (LT Foods). I guess there will be three exits at least. Most of it will be secondary sales or on market sales for the listed companies," he said.

On internal rate of returns (IRRs) from these exits, Srivastava said, "On an average, if you make something like 25% IRR in this kind of a fund (first part) we had in India or anywhere in Asia, I guess we would have done well. If everything goes well in the first fund, we should be returning approximately two-and-half times of interest rate overall."

About the current status on the 2:20 practice for managing funds raised from limited partners (LPs) and whether it has recovered from the decline to 1% in the past, he said, if you raise a big fund then they charge a lesser fee. "If I also raise $1 billion fund then the investors will bargain that we must take 1% only, which we will see. In the business of $100 and $200 million fund, who would bargain?," he said.

AGRICULTURE PUSH

  • The firm will also exit investments from Fund I, raise the third fund by 2018-end or early 2019
     
  • It is looking to make three exits at least; one, a packaging company; the other is rice company Daawat (LT Foods)
     
  • Most of the exits will be secondary sales or on market sales for the listed companies
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