Mumbai: Food and agriculture-focused investment firm Rabo Equity Advisors Pvt. Ltd is looking to raise $350-$400 million for its third fund and is likely to start the exercise in the first quarter of calendar year 2019. The homegrown fund will also be exploring investment opportunities in distressed food and agriculture businesses, a top executive at the firm said in an interview.
Rabo Equity looks to raise up to $400 million for third fund
“We will be ready (for fundraising) by the first quarter of next calendar year. At the moment we do only minority deals but markets are opening up and we are getting more comfortable. So, the firm will certainly do some buyouts from the new fund which would require a bigger corpus,” said Rajesh Srivastava, executive chairman at Rabo Equity Advisors .
Rabo Equity will be reaching out to both domestic and foreign investors for its third fund.
The firm raised $150 million for its second fund in 2014 and has an average ticket size of about $15 million.
So far, Rabo Equity has deployed around 60% of its second fund. “Our investment period is till next year. We will close 3-4 deals and will be fully deployed by next year,” said Srivastava.
Given the market volatility, he said, the firm will not rush into deploying the balance money from the second fund.
“The problem is that if you start deploying too fast due to time pressure, then you might end up buying something which is overvalued. I think that it’s better to be conservative instead of paying crazy valuations for which the returns are not commensurate.”
Asked which segments within the food and agriculture business the firm would like to invest in, Srivastava said that even as Rabo Equity has invested across various sub-sectors like dairy, packaging, food and beverages, kitchen solutions and seeds, there is a lot more ground to cover.
“Food and agriculture is a wide spectrum and there is a lot more to explore with around 35-odd sub-sectors that are suitable for PE firms to invest in. Some of the segments we would like to invest in would be bakery and confectionery, cold chain, micro-irrigation and farm implements,” he said.
Srivastava said Rabo Equity will also explore investment opportunities in the distressed space within the food and agriculture universe.
“At the moment we don’t manage a fund like this but it is likely to be one of the things that we would like to explore. I would be keen on looking at something which is in the pre-NCLT (National Company Law Tribunal) stage,” he said.
The investment firm plans to exit three companies both through listing and secondary transactions. Major investment destinations of Rabo Equity include Cremica Food Industries Ltd, Prabhat Dairy and Olive Bar and Kitchen. In September, it also invested Rs 140 crore in Nature Bio Foods Ltd (NBFL), a subsidiary of LT Foods Ltd known for its rice brand Daawat.
Rabobank owns 51% of Rabo Equity Advisors, with the senior employees of the company owning the balance 49% shares. It has offices in New Delhi and Mumbai.
According to a report released by EY, during the first half of 2018, the number of private equity or venture capital investments in food and agriculture sector stood at 18 compared with 17 during the year ago period. Meanwhile, 10 exits were reported in the first half of 2018 as against six a year ago.