India Agri Fund

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26768
Company name	India Agribusiness Fund Limited
Country	India
Sector	Collective Investment Vehicles
Environmental category	FI
Department	Private Equity and Investment Funds
Status	Active

Date SPI disclosed	April 16, 2008
Projected board date	May 16, 2008
Previous Events	Signed: July 17, 2008 Approved: July 9, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed India Agribusiness Fund (IAF or the Fund) is a $100 million sector-specific fund that will invest equity in small and medium-sized companies in the Indian food and agribusiness sector. Its target industries will span the agricultural value chain, ranging from contract farming at the primary end and key elements of the agricultural supply chain (e.g. cold storage chains) to food processing and rural retail, with expected deal sizes of $3-10 million per transaction. The agribusiness sector in India is currently marked by several small to medium companies of which few have made the transition to global scale and competitiveness. IAF’s specialized sector focus and expertise is expected to aid and improve the scalability, operational efficiency and strategic and business development initiatives of these companies. The fund will seek significant minority stakes with investor rights and active board participation.

Anticipated development impact of the project

Agribusiness is an identified priority area for the India region for IFC direct and funds investments. Notwithstanding strong and robust growth in the services and manufacturing sectors in the last two decades, the Indian economy is still dominated by agriculture, which also employs a majority of the population in rural areas. However, growth in the agricultural sector has significantly lagged that in other sectors, thereby not only dragging down the overall growth rate but also widening income and social inequalities. Investments in modernizing the agricultural economy are urgently needed and will have a direct impact on reducing poverty.

The Fund is expected to have a strong development impact as a result of its focus on value-added investing in the Agri-business sector in mid-market companies and SMEs. It is expected to reach companies that IFC would otherwise find difficult to access - many of the investee companies will be located in non-metro locations, and fall below the revenue threshold for IFC direct investments. The Fund Manager’s strategy is take an active role in the management of mid-sized companies in the agribusiness space, including corporate governance improvement through board participation, strategy setting, helping professionalize management, and improving financial and operational performance. The growth and the success of the investee companies will have positive benefits for their financiers, their employees’ skills and livelihood as well as on economic opportunities for suppliers of goods and services.

IFC's expected development contribution

- Catalytic role mobilizing foreign institutional and private capital:

IFC’s commitment will help Rabobank establish its first emerging markets fund, help a new management team reach a critical size, provide added credibility to IAF and strengthen its ability to raise additional capital.

Provide input regarding fund structure and terms:

Drawing from previous experience with Indian and international funds, IFC will work with the fund manager to adopt best international practices and terms that will attract additional private capital.

Improve corporate governance:

Through its participation on the Fund’s Advisory Board, IFC will play an active role in assisting the Manager to adopt best practice corporate governance and environmental and social standards at the Fund and portfolio company level.

Access to agribusiness expertise:

IFC will contribute its regional as well as sectoral expertise and knowledge to the fund, e.g. through access to its in-house industry specialists.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the fund’s expected portfolio and sectors of investment and determine the Applicable Performance Requirements if any, that would include a combination of:

- the IFC FI Exclusion List and/or
- the applicable National Social and Environmental Laws and regulations and/or
- the IFC Performance Standards

IFC will also review, if required, the capacity of the fund to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). IFC may suggest Supplemental Actions to address any gaps in the SEMS if required.

The fund manager will be required to:

- Develop an, or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC
- Identify responsible, qualified persons to manage and implement the SEMS
- Commit to implement the SEMS to ensure that its investments/activities are in compliance with the Applicable Performance Requirements
- Submit a periodic report to IFC as per a format to be provided by IFC

For all Category A subprojects, the Fund will need to satisfy IFC prior to investing, that the subprojects are in compliance with the Performance Standards or have a satisfactory action plan to bring the subprojects in to compliance within a reasonable time frame.

Additionally, IFC will also review the implementation and performance of the Fund’s SEMS for the first few projects, prior to investment by the Fund, to ensure that the Fund’s SEMS is robust.

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